The cost of pedals

Philtre

deano said:

I still reject the notion that a pedal's tonal mechanism - the electronic components - are worth more than a few pounds. They could be put in a cheap enclosure with cheaper knobs and still sound exactly the same as the ones with the gold-plated enclosure with those £20 knobs on.

No problem, sir! Our "Race to the Bottom" range of pedals are housed in recycled cardboard for improved cost reduction and, as a bonus, our labour charges are free!

deano

So no marketing goes on in the holier-than-thou pedal building industry? It is a bastion of little artisans, all crafting boutique pedals with nary a thought given to maximising revenue, profits and resales? I stand corrected. You have, one and all, converted me.

Except for that one Vertex guy of course, who did use those techniques. But he was outed, and nobody else does.

Okay.

Moving on, the phrase "reasonable definition" of few quid was used, which turned out to be £3-£5 pound out of my £50. So Sporky has worked out that between 6% and 10% of the pedal is for the components. I didn't come up with those numbers. I said a few quid.

Now it may well be that the cost of components in a pedal is 10% (as was said, I wouldn't know). But if that is the case, is someone going to confirm that the "MXR 5150 Overdrive EVH Signature Drive Pedal" available at Andertons (I know, I couldn't resist) for £220 contains £22 worth of MXR-purchased electronic components?

I think the difference we are talking about is the small artisan maker and the bigger companies like MXR. A smaller company might well use components that are expensive to start with, and because of reduced purchasing power they have to pay even more for them. Which means they have to have a high retail price for the pedal.

But the component was built by the manufacturer for 20p, but retail them depending on volume for say 50p for 10,000 or more. Now MXR buy 10,0000 from the manufacturer and get them for £5,000 (50p each). A trade re-seller company (Mouser for example) goes along and buys the same 10,000 and again gets them for £5,000.

An independent pedal builder goes along to the trade re-seller and buys a hundred but the re-seller has added their bit on so he ends up paying £4.00 for them because his costs for stocking, warehousing and so on are higher than MXR because they just put them straight into a hopper and they go onto a pedal and out of the door. So our independent spends £400. Now of course he has to build the pedals, and so that component now has to go up to say £8.00 once it goes into the pedal, contributing to the higher cost of the pedal compared to MXR's use, which might by £1.00 when they put them in their pedals.

Have I made an error in working out the basic premise?

Hopefully not. So I come along and say there are no components that cost more than a couple of quid. Sporky and other's take offense. But the component cost the manufacturers 20p. not £8.00. Its price got inflated due to the original company's retail pricing structure combined with the re-seller's pricing structure. But it is still only truly worth 20p. Not even the 50p.

The components in pedals, when you work out the cost of producing by the manufacturer them, are much cheaper than what they end up being priced at when put into a pedal. The in-pedal price is different to what it truly cost for a whole raft of inflationary reasons.

I stand by my comment that the true cost of the components in a pedal is genuinely a few pounds. What individual pedal builders have to pay depends on their size and ability to bulk purchase.

Okay, you might complain that the original manufacturer deserves their profit and of course they do, but guess what! Texas Instruments and TT Electronics, and the like (a) manufacture in low cost countries anyway and (b) use the same marketing strategies to inflate their prices to people like MXR and the re-sellers, and the re-sellers use the same marketing strategies to inflate their prices to the independent builders. So the true cost should be somewhere between the 20p and 50p and given the marketing strategy inflation runs at much more than a few percent, will be closer to the 20p.

The marketing strategies add on large percentages, which escalate up and up as the component passes through hand after hand. I am self employed, as are many on here, and marketing inflates costs much faster than VAT does, and we all know how quickly that increases.

Somebody said I am offering opinions on something I know nothing about. I would like clarification on that if I may, do I know nothing about (a) pedal building, (b) economics, or (c) marketing?

Because this thread isn't about (a). It is about (b) and (c) and their impact on (a). We have to look at the entire pricing chain, strip out the inflation due to marketing, and then we get to the true "worth" of the component. Again I stand by my statement about there being only a few pounds worth of electronic components in a pedal. All of the rest of the costs is due to the supply chain inflation.

Now some of you are complaining that it is not fair to compare like that because you don't have the opportunity to purchase directly from the component manufacturers, which is true, but only due to the way economies and companies have structured themselves, to take advantage of manufacturing processes. If Texas Instruments used their size to build pedals using components they make themselves, they would probably be able to build a pedal at such a low price (those few pounds I keep harping on about) that most pedal manufacturers would go broke overnight given they couldn't compete economically. The reason they don't do that is because they focus on making components for others to use, because they know how to extract the most profit out of those components, and do not know how to go about marketing pedals and extracting the maximum amount of profits from those (and it's too small a market for them anyway). But those components are only really worth pennies in and of themselves. Supply-chain inflation takes care of the rest.

deano

ICBM said:

deano said:

Okay, fine, I have to admit I know nothing about your pedals. I am sure they are very well made and use reliable components. But when was the last time you saw an advert for a pedal that focused on the fact that it was reliable?

https://www.rolandcorp.com.au/blog/boss-pedals-pros

"When it comes to performing on stage in front of thousands of people…..two things are paramount: great tone, and bulletproof reliability. BOSS has earned its stripes in both of these areas which is why they are still the go-to pedal of choice for guitar heroes worldwide."


There are a huge number of pedals that contain more than "just a few quids worth of components" too. Many of them are mass-produced and use ICs that would have cost tens, if not hundreds, or thousands of pounds to develop and are only cheap per unit because tens or hundreds of thousands of them are made. Even the custom enclosures used by a lot of the big companies cost much more than that, possible even after the economies of scale are included.

Price how much it would cost to make a Digitech Whammy and see if your argument still holds.

No. My argument is price up how much it would cost Texas Instruments to make a Digitech Whammy.

RaymondLin

deano said:

So no marketing goes on in the holier-than-thou pedal building industry? It is a bastion of little artisans, all crafting boutique pedals with nary a thought given to maximising revenue, profits and resales? I stand corrected. You have, one and all, converted me.

Except for that one Vertex guy of course, who did use those techniques. But he was outed, and nobody else does.

Okay.

Moving on, the phrase "reasonable definition" of few quid was used, which turned out to be £3-£5 pound out of my £50. So Sporky has worked out that between 6% and 10% of the pedal is for the components. I didn't come up with those numbers. I said a few quid.

Now it may well be that the cost of components in a pedal is 10% (as was said, I wouldn't know). But if that is the case, is someone going to confirm that the "MXR 5150 Overdrive EVH Signature Drive Pedal" available at Andertons (I know, I couldn't resist) for £220 contains £22 worth of MXR-purchased electronic components?

I think the difference we are talking about is the small artisan maker and the bigger companies like MXR. A smaller company might well use components that are expensive to start with, and because of reduced purchasing power they have to pay even more for them. Which means they have to have a high retail price for the pedal.

But the component was built by the manufacturer for 20p, but retail them depending on volume for say 50p for 10,000 or more. Now MXR buy 10,0000 from the manufacturer and get them for £5,000 (50p each). A trade re-seller company (Mouser for example) goes along and buys the same 10,000 and again gets them for £5,000.

An independent pedal builder goes along to the trade re-seller and buys a hundred but the re-seller has added their bit on so he ends up paying £4.00 for them because his costs for stocking, warehousing and so on are higher than MXR because they just put them straight into a hopper and they go onto a pedal and out of the door. So our independent spends £400. Now of course he has to build the pedals, and so that component now has to go up to say £8.00 once it goes into the pedal, contributing to the higher cost of the pedal compared to MXR's use, which might by £1.00 when they put them in their pedals.

Have I made an error in working out the basic premise?

Hopefully not. So I come along and say there are no components that cost more than a couple of quid. Sporky and other's take offense. But the component cost the manufacturers 20p. not £8.00. Its price got inflated due to the original company's retail pricing structure combined with the re-seller's pricing structure. But it is still only truly worth 20p. Not even the 50p.

The components in pedals, when you work out the cost of producing by the manufacturer them, are much cheaper than what they end up being priced at when put into a pedal. The in-pedal price is different to what it truly cost for a whole raft of inflationary reasons.

I stand by my comment that the true cost of the components in a pedal is genuinely a few pounds. What individual pedal builders have to pay depends on their size and ability to bulk purchase.

Okay, you might complain that the original manufacturer deserves their profit and of course they do, but guess what! Texas Instruments and TT Electronics, and the like (a) manufacture in low cost countries anyway and (b) use the same marketing strategies to inflate their prices to people like MXR and the re-sellers, and the re-sellers use the same marketing strategies to inflate their prices to the independent builders. So the true cost should be somewhere between the 20p and 50p and given the marketing strategy inflation runs at much more than a few percent, will be closer to the 20p.

The marketing strategies add on large percentages, which escalate up and up as the component passes through hand after hand. I am self employed, as are many on here, and marketing inflates costs much faster than VAT does, and we all know how quickly that increases.

Somebody said I am offering opinions on something I know nothing about. I would like clarification on that if I may, do I know nothing about (a) pedal building, (b) economics, or (c) marketing?

Because this thread isn't about (a). It is about (b) and (c) and their impact on (a). We have to look at the entire pricing chain, strip out the inflation due to marketing, and then we get to the true "worth" of the component. Again I stand by my statement about there being only a few pounds worth of electronic components in a pedal. All of the rest of the costs is due to the supply chain inflation.

Now some of you are complaining that it is not fair to compare like that because you don't have the opportunity to purchase directly from the component manufacturers, which is true, but only due to the way economies and companies have structured themselves, to take advantage of manufacturing processes. If Texas Instruments used their size to build pedals using components they make themselves, they would probably be able to build a pedal at such a low price (those few pounds I keep harping on about) that most pedal manufacturers would go broke overnight given they couldn't compete economically. The reason they don't do that is because they focus on making components for others to use, because they know how to extract the most profit out of those components, and do not know how to go about marketing pedals and extracting the maximum amount of profits from those (and it's too small a market for them anyway). But those components are only really worth pennies in and of themselves. Supply-chain inflation takes care of the rest.

That 1 product has to cover.

1 - parts
2 - labour
3 - R&D
4 - rent/mortgage
5 - utility
6 - equipment
7 - marketing
8 - tax
9 - profit

You are thinking as a DIY person, with NO consideration of everything else so your argument is utterly pointless unless you think all those things are free? that people will work for free, tax man don't come to collect his share, testing and designs just appears out of nowhere and profit will just be the lottery win every week.

not_the_dj

There are many ways of costing a product and defining the sell price, and you can be sure that with numerous companies producing and selling pedals that pretty much every method will be used.

Some will look at simply at component cost, plus labour cost, plus a proportion of R&D, then add a mark-up and that's your sell price.

The other side of the coin if market value, or "whatever you can get away with", and you can be sure that there are pedals being sold for much more than the physical worth of the bits.

timhulio

Let me give a rough breakdown of a one-off build I did recently. This is a hand-wired effect with a couple of PCBs, one for the effect, one for the power/switching. I may complete a small batch in future, once assembly is smoothed out a little.



Component cost:
Enclosure: £15 (at a quantity of 25+ this is £8 ea) - for comparison, Hammond/Eddystone will machine a BB enclosure to your specs and powder coat it for about £7-8 (@ qty 150)
Pots x 4: £4 + £3 p&p because these are non-standard
Switch: £2
Knobs: mini Eagle £4
PCB: £1
Resistors: 10p
Capacitors: 50p
Wire: 50p
Transistors: (NOS East German) £1
Jacks: Lumberg £3
LEDS: x 5 = £1
TOTAL: £35.10

Now, TIME!
PCB design: 2 hours
Component sourcing: 2 hours
Assembly: 3 hours (admittedly this is an extreme case)
For production pedals, I'd spend longer on PCB design, and far less on assembly, but it all takes time, which needs to be charged for or justified.
So yeah, add £70 at a paltry £10 an hour for time.

Sporky

deano said:

Moving on, the phrase "reasonable definition" of few quid was used, which turned out to be £3-£5 pound out of my £50. So Sporky has worked out that between 6% and 10% of the pedal is for the components. I didn't come up with those numbers. I said a few quid.

You are misrepresenting what I said, which is right up there in the second post:

Sporky said:

It would help, however, to know what you mean by "a few pounds". £3-5? 

I asked you to clarify what you meant by "a few quid". Are you saying that you meant £50? If so I would suggest that "a few" does not equate to "50" in most peoples' minds.

deano said:

Sporky and other's take offense. 

I have not taken offence. I have pointed out that you were wrong. There's really no need to make ad-hominem remarks.

You have now started to swing away from your original argument - as far as I can tell you're now saying that you are defining "cost" by the original cost of manufacture of the components. Again, what you actually opened with was:

"There is no pedal in existence that contains more that a few quids worth of components"

It would be helpful if you could clarify what you mean by "pedal", "few", and "worth" in this context, as they don't seem to correlate with normal use of those terms.

lewism

This thread is just proof that you can know the price of everything but the value of nothing.

Teetonetal

A pedal is a product that enables a company to continue its existence.

the margin on a pedal is what allows that to happen, but even then relies on quantity of sale.

i actually find it mind blowing that any pedal company makes enough money to design, manufacture, pay employees and make a profit or reinvest.

component value to selling price might be high, but I doubt any pedal makers are “rolling in cash”

Paul7926

Next the OP will argue that a mahogany body on a guitar 'costs' only a few $ because a 1kg bag of seeds can be had for about $180 and with that you can grow loads of them.......

FatPete

Paul7926 said:

Next the OP will argue that a mahogany body on a guitar 'costs' only a few $ because a 1kg bag of seeds can be had for about $180 and with that you can grow loads of them.......

@Paul7926 is moving towards why the OP is right but doesn't take his argument far enough back up the supply chain. (That can be uncomfortable without practice and lubrication.)

All physical products are just stuff + time. All that germanium and silicon etc. is just sitting in the ground where god or something put it for people to make pedals from, so it's free. Likewise time is an abstract concept and you can't charge people money for those.

Sporky

FatPete said:

Likewise time is an abstract concept and you can't charge people money for those.

Now, this isn't my specialist subject, but I thought entropy proved the existence of time as a real thing, fundamental to the universe?

RaymondLin

FatPete said:

Paul7926 said:

Next the OP will argue that a mahogany body on a guitar 'costs' only a few $ because a 1kg bag of seeds can be had for about $180 and with that you can grow loads of them.......

@Paul7926 is moving towards why the OP is right but doesn't take his argument far enough back up the supply chain. (That can be uncomfortable without practice and lubrication.)

All physical products are just stuff + time. All that germanium and silicon etc. is just sitting in the ground where god or something put it for people to make pedals from, so it's free. Likewise time is an abstract concept and you can't charge people money for those.

Of course you can, your time on earth is finite, it is not infinte and every hour,  minute, second has its value.

FatPete

Sporky said:

FatPete said:

Likewise time is an abstract concept and you can't charge people money for those.

Now, this isn't my specialist subject, but I thought entropy proved the existence of time as a real thing, fundamental to the universe?

I apologise unreservedly it's our measurement of time that's abstract,or at least relative.

Just wait until the hyper-evolved, non-corporeal aliens get in on the boutique effects trip; I hear their pedals are the schniz.

Sporky

FatPete said:

Just wait until the hyper-evolved, non-corporeal aliens get in on the boutique effects trip; I hear their pedals are the schniz.

Especially the time-based effects.

(see what I did there?)

UnclePsychosis

Dear OP

Rather than type out all those really long posts filled with misunderstandings, inappropriate assumptions, and just-plain-wrong statements, it would have been much quicker to just write the following sentence:

"I don't understand anything about manufacturing or the finances of the guitar pedal industry, could anyone explain it to me?"

Little efficiency savings like this will come in handy when you set up your boutique pedal business and your customers expect you to value your time at nothing.  

ThorpyFX

Obviously I build pedals.... if you can find me a way of making a pedal that uses only a few £'s worth of parts.... Ill be over the moon. Any product made in the UK or the WEST will cost more than an equivalent pedal made in the East.

Factored into the cost of my pedals are:

cost of parts:

enclosure (bespoke design, colour and silkscreen)
switch
PCB
Resistors
caps
Opamps
transistors
leds
led surround
jacks
dc jack
wire
solder
potentiometers
Knobs
Labour
boxes
stickers
manuals
guitar picks

amortised into margin:

rent
electric
water
test equipment
R&D
WASTAGE
Corporation TAX
VAT
Dealer Margin
litter collection
demo product
wages
telephone bill
fuel for transport
show costs
advertising
cardboard shipping boxes
tape
packing material
postage
sundry parts (pens, pencils, batteries)
software licenses (CAD, photo editing, video editing, accounting)
camera equipment
accountants fees
etc etc etc....


obviously it is VERY unlikely you can achieve the price point you mention.... and even if i were to only consider the cost of the parts (that would leave the business to fail) in generating my unit price cost.... it still wouldn't be anywhere near what you suggest... trust me.

FatPete

UnclePsychosis said:

"I don't understand anything about manufacturing or the finances of the guitar pedal industry, could anyone explain it to me?"

I don't think the OP is very interested in that. You could probably distil his post down to a simple statement along the lines of:

For my own purposes and tastes, I don't see the value in expensive effects pedals.

The appropriate response being: No problem; each to their own.

juansolo

I'd just like to say, this thread has kept me greatly entertained.

meltedbuzzbox

I want the op to become the finance minister. 
We will be rich