Sunday 2 August 2009

We can work it out

So, just how does a pricing program come up with the final price?
Well, it uses an algorithm (a set of made-up rules) to produce the answer.
The old two-way table sheet (which some framers still use) is a very simple algorithm - add the horizontal and vertical dimensions together, then go down the appropriate column adding in the various components, add VAT to get the final total.
The algorithms for computer pricing are different for each program. Some are closely guarded secrets and are very complex, while others (such as the Wessex Pricing Programs) are open and easy to understand. Because computers can work out millions of calculations a second it is tempting to make the algorithm and its application complex, in my experience this just makes the program too cumbersome to use in the real world.

I have used basically the same core algorithm in each of the Wessex Programs. It has stood up to the test of time (I'm still in business after 24 years!) so I can see no reason to change it. It is simple because (a) the user can stay in control of the pricing and (b) if the program starts to produce unexpected prices it is relatively easy to work out what's going wrong.

The algorithm I use is this - a base cost is added to the variable cost.
There, I said it was simple didn't I?!!

To put some meat on that idea's bones, imagine a piece of glass (say 10" x 8", that is 80 sq. inches) you've decided that you won't cut any piece of glass for under £2.50, and that you're going to charge glass @ 1 pence/sq. inch. So, the sum is quite a simple one 250 + (80 x 1) = 330 pence. Mounts can be worked out in the same way, while the frame itself can be a base cost + perimeter x moulding cost.
Each component can be worked out in this way, added together with VAT etc., all in a fraction of a second and with no arithmetical errors.
With me so far?

Now, if you think about it, by varying the base cost against the variable cost you can make small frame expensive and large frames cheap (high base cost / low variable cost) or vice-versa (low base cost / high variable cost). Most framers of course, go for somewhere in the middle.

So, not only is this algorithm simple - it's surprisingly sophisticated. Most importantly, however, it means that you, the framer, control your pricing, not the program.

No comments:

Post a Comment