Carragee Consulting

My college newspaper analysis

I dabbled in writing for my college newspaper.

In 2005, gas prices were averaging close to $4/gallon and the Toyota Camry was one of the first cars to have both a hybrid and a gas engine alternative version. I wrote up a life-time cost of ownership analysis and tried to estimate if the ~$5K premium you paid upfront for the hybrid option was financially worth it.

I didn’t own a car at the time, I was making state minimum wage and I had only recently been paying less than $1/gallon to fill up the tank of the extremely low powered, but fuel efficient Ford Escort I drove in high school.

One of the biggest factors which would offset the upfront purchase price of the vehicle was how many miles per year or over the ownership period the driver planned to use the car. I looked up used Camerys for sale and found that hybrid drivers were not putting more miles on their vehicles than those selling equivalent vehicles of the same age. (Selection bias? Maybe the ones who were putting on a lot of milage weren’t selling?)

At the time of my college newspaper analysis, it didn’t seem like most hybrid owners were making a financially optimal decision.

Today, gas prices, especially in California, are back up again and there are new subsidies that make the purchase of an electric or hybrid vehicle a much more compelling choice.

For anyone interested in trying to apply value based pricing to their business its worth checking out the Edmonds TCO calculator: https://lnkd.in/gzeMtCxN

This tool helps you to connect the feature — “hybrid engine” to the economic decision factors used in the purchase decision:
– initial purchase price
– annual fuel expense
– expected maintenance
– annual depreciation/resale value

Different customer segments care more or less about each of these categories so the calculator is only a jumping off point. Imagine if your parents are paying the upfront price of the car, but you’ll be filling up the tank. Or you kinda like changing your own oil and rotating your tires.

I didn’t own a car the last two years. Between WFH and the extremely temperate conditions in the South Bay it seemed like an unnecessary expense. This summer, back in Minnesota, schlepping building materials, appliances and furniture around I decided to buy a mini-van for my property management business.

Within the van category I viewed there were only two reasonable options for me — either a Pacifica or a Caravan. For me the purchase decision was narrowed by the singular feature of the Stow N Go seats.

One of the best things about having a value based pricing calculator tool on hand during sales cycles is that customers will often tell you where the assumptions in your model are wrong much more willingly than they would if you asked them as a blank slate “what are the key factors in your purchase decision”.

Anyone else have a good value based pricing calculator example?

https://lnkd.in/gUJENTNV