Re: [CR]Situation Desperate--Frame prices and demand Part Deux

(Example: Framebuilding:Tubing:Falck)

From: "Taz Taylor" <taztaylor@mindspring.com>
To: <brianbaylis@juno.com>
References: <20040228.103857.3575.656918@webmail17.lax.untd.com>
Subject: Re: [CR]Situation Desperate--Frame prices and demand Part Deux
Date: Sun, 29 Feb 2004 20:12:01 -0500
cc: classicrendezvous@bikelist.org
cc: classicrendezvous@bikelist.org

Brian,

You don't need to correct my understanding of the time it takes to build a frame. The time is immaterial to the point I was making. Whether you (or anyone) builds a frame in 6 hours or 6 months, the same economic factors apply when you market (sell) your services.

Your craftsmanship, or artistry if you prefer, creates a Demand (big D) for your frames. Your willingness to build frames and sell them (let's say at Peter's rate of 4 per year) creates the Supply (big S). If your frames cost $4000, eight people want to buy them. If your frames cost $6000, four people want to buy them and if they cost $8000, nobody wants to buy them.

If you price your frames at $4000, you have eight people trying to buy 4 frames. You've created excess demand (your waiting list). Let's say I'm the first person on your backlog of orders (lucky me). When you build my frame, I'm going to pay you $4000 and then I'm going to turn around and sell it to Chuck for $6000 and get back in line. I'm going to be $2000 better off and that money could have been yours. The next guy in line is one of the four that would have paid $6000. Since your price is $4000, he will pay you $4000 and think he got an incredible deal then spend his $2000 on gold plated carbon fiber parts to put on your frame. Again, that's $2000 you could have had. I know you said 'it's not about money', but when many people want to buy an item that's scarce (your frames), it is about money. The market forces will work to raise the price of your frames toward $6000 whether you want to charge that much or not. It's just a question of whether you will reap the full economic reward for your effort or will someone else.

Why is this relevant? Well Peter responded to your original post that (paraphrasing here) 'if you have more work than you can handle, that means your prices are too low.' After some others dissented on this advice, you wrote, " it is not my nature" and "is there really room to raise my price?" My first post below was an affirmation of Peter's advice (plus some Economic mumbo jumbo) and a suggestion where the price should be. I guess the point of this post, other than to clarify that I was talking about price and demand, is to say that the market will determine the price, it's up to you to benefit from it.

With regards to the time and skill it takes to build an artisan frame and how to identify those qualities in a completed frame - I'm an eager and attentive student. Maybe I can buy you a beer at Le Cirque and we can talk about both.

Taz Taylor
Atlanta, GA


----- Original Message -----
From: brianbaylis@juno.com
To: taztaylor@mindspring.com
Cc: classicrendezvous@bikelist.org
Sent: Saturday, February 28, 2004 1:38 PM
Subject: Re: [CR]Situation Desperate--Frame prices and demand



>
>
> Taz,
>
> There are a few things that I must correct in terms of what you understand regarding the time it takes to build a frame. The build times of various builders are not "standarized". There seem to be two basic and distinct catagories. The typical effecient long time professional framebuilder is shooting for a 15 to 20 hours MAXIMUM build time. The are lots of ways to achieve this using "modern" framebuilding parts and methods, even amongst lugged steel builders. A feame is generally constructed in a 2.5 to 3 day period.
>
> The other catagory, which is not well recognized, are in fact the "art builders" whose general production takes AT LEAST 60 hours to complete; and can often reach 80 hours and over for something custom designed and unique. I can rarely even get in that much effort over the period of a month, even if I had nothing else to do. It is not routine work and requires motivation and a focused mental approach. The methodology and the primary purpose of each of these catagories of frames/framebuilders differs as much as the build time does. And there are in fact a few "Zen-like" builders out there. It IS NOT about the money. That is not to say that there is no money involved; there most certainly is, but these builders have other sources of higher monitary returns per hour that the framebuilding. These people severly limit their production and produce special works in small quanitity, as opposed to trying to make a more profitable product in enough volume to make a good living. A more comprehensive explaination may be forthcomming from me on this, but it is to appear on the framebuilders' list. These distinctions have existed for a long time, but the list of actual "zen-like" builders has dwindled to a fairly small number. I was just talking to Peter Johnson about this just last night. He plans to build about 4 per year.
>
> So some of this does not fit with the traditional business/economic guidelines. Zen-like framebuilding is outside that box.
>
> Brian Baylis
> La Mesa, CA
> I can dig the Zen thing; but mountain top cave framebuilding is out!
>
> -- "Taz Taylor" <taztaylor@mindspring.com> wrote:
> Grant,
>
> This is the other side of pricing your work below it's true market value.
> Time=money, so if someone is waiting six months or three years for a frame,
> it's true cost is greater than the dollars they pay to the builder.
>
> Certainly, the allure of owning a Weigle or Baylis is partly from the
> exclusivity, but I don't think waiting increases its desirablity. It may
> make the owner more emotionally invested if they waited a long period of
> time.
>
> Although you can't pop into Richard's or Brian's shop and leave with a frame
> immediately, I think you could get one back in 1 or 2 weeks. (I believe
> that's how long they've said it takes them to build one frame). It's a
> question of how much you're willing to pay. If a builder builds frames for
> a living and not as a hobby, they will move you up the waiting list if
> you're willing to pay more.
>
> If a builder doesn't respond to the offer to pay more by accepting or
> raising his prices, he's going to create a gray market (or scalper's market)
> where people buy his frames just to turn around and sell them for a higher
> price, capturing the excess value for himself that the builder left on the
> table. This is more difficult for bicycle frames than other items since
> they are customized to the buyer's specific body dimensions but it can still
> happen, or the scalper can sell his place in the queue when it nears the
> top. Bicycles are not immune from market forces.
>
> I think you are shedding some light on this with your question about wait
> times for various builders.
>
> I'm reluctant to post this to the list because it's moved pretty far
> off-topic and some people get insulted when you suggest they are influenced
> by money. I'm not, it's a very rational influence. Not to suggest there
> aren't others. But anyone who says it's not an influence is either being
> dishonest or irrational (or achieved some Zen-like state where nothing
> beyond actually building the frame exists for them :-) ).
>
> Taz Taylor in Atlanta, GA - going for a ride...
>
> > Date: Fri, 27 Feb 2004 09:54:00 -0500
> > From: Grant McLean <Grant.McLean@SportingLife.ca>
> > To: "Classic Rendezvous Mail List (E-mail)"
> <classicrendezvous@bikelist.org>
> > Subject: Re: [CR]Situation Desperate--Frame prices and demand
> >
> > Taz, Lou, whoever is still following this thread,
> >
> > Imagine what the demand for frames from small custom shops would be
> > if you could walk into a frame shop, buy one, and go home with it.
> >
> > Leaving aside the physical impossibility of filling out an order form,
> > being measured, picking out your lugs and paint jog, and having
> > Brian or E-Richie pop into the back of the shop, and return a few
> > minutes later with your completed frame!
> >
> > The fact that it takes, on average, a few YEARS to get one, certainly
> > reinforces the commitment of the customer! At that point, does it
> > really matter what it costs? You are willing to wait, or you're not.
> > Plus, you've got all that time to save up, come up with an explanation
> > to your spouse, and build that extension on the garage!!
> >
> > The internet has made so many high end items available at only a few
> > clicks away, most people just don't want to wait for things anymore.
> > Maybe that's part of the allure of a Baylis or a Weigle, since you're
> > joining a club when you own one, a club with very patient members!
> >
> > Grant McLean
> > Toronto.Ca
> >
> > O \O/
> > _< \_ _< _
> > (_)>(_) (_)>(_)
> >
> >
> > Peter wrote:
> >
> > > > If you have more work than you can possibly handle, that, by
> definition,
> > means that your prices are too low.
> >
> > Lou replied:
> >
> > > I disagree. The basic assumption is that you have efficient output and
> > that you are working at a sustained and consistent efficiency. In other
> > words, if you were able to build 10 frames per month, but now your
> > efficiency has dropped to 5 frames per month, that doesn't necessarily
> mean
> > you should raise prices just because you can't keep up with your workload.
> > On the other hand, if you are still building frames at 10 per month and
> you
> > have orders that would sustain 20 per month, you have to determine whether
> > the reason you have those orders is because of your lower price compared
> to
> > the competition. Raising prices may drop demand. If you can raise prices
> > without dropping demand, you are certainly in a good position. How to do
> > that is a difficult business decision. Lou Deeter, Orlando FL
> > >
> >
> > my 2 cents:
> >
> > As my econ professors kept beating into my head - changing the price of
> > Brian's frames does NOT change demand - it changes the Quantity demanded.
> > Changing some aspect of Brian's frames (like outsourcing the paint) may
> > cause a decrease in demand.
> >
> > For example: if Brian charges $1.00 per frame, then I would buy one (maybe
> > even two) and so would many other people. If Brian charges $100,000 per
> > frame, then only Chuck would buy one ;-). At $100,000 I still want one so
> > the demand hasn't change but I can't afford it, so only the quantity
> > demanded has changed.
> >
> > Now say Brian decides he will only make frames out of paper mache'. I
> don't
> > want any at $1.00 or even $0.01 so there is a change in demand.
> >
> > As far as where Brian should price his frames, that price point would be
> > where the quantity demanded equals the quantity that Brian is *willing* to
> > supply and leaves no one with cash in hand saying "I'll pay that price"
> > without getting a frame. That's assuming of course, that Brian's goal is
> to
> > maximize his economic gain ($) instead of other objectives. Production
> > efficiency doesn't play a role in demand. (Marginal revenue and marginal
> > cost on the other hand...)
> >
> >
> > Taz Taylor - looking for that $1.00 Baylis frame in Atlanta, GA
> >
> > (I knew an Econ degree would come in handy someday...)