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# Optical Distortion Notes I. How much is a pair of ODI lens worth to the chicken farmer?

The value for the farmer is value of substitution in use, in other words substitution of the existin method !debeakin ". #o the value of a pair is

## Incremental benefit over debeaking \$ switching cos ts

#o let us consider the benefits to the farmer per bird per %ear. The sources of benefits are &. 'educed chicken mortalit%. (ortalit% reduced from )* to +.,* The present cost of a survivin bird -includin dead birds. is 3ess the new cost with the lens is 0 1.+45-&\$4.4+,. / 0 1.2& / \$ 0 1.,& 666666666 10 cents

1. 7eed savin s 8ssume that the feed depth is reduced b% 9 feet. #ome of %ou mi ht have assumed that the feed depth is reduced b% & foot.
&,251 :#avin s for 9 feet per da%; < &514,444 :savin s per chicken; < &,=51444 :savin s5lb; < >2, da%s

This ives us feed savin s of 11.25 cents. >. #avin s on e production increase relative to debeakin

This could be because of less trauma. ?ased on an one e per chicken per annum. &e < &5&1 4.,> production to be 4.5 cents.

## This ives us a savin s on e

Thus the total calculable economic benefit to the chicken farmer in use over debeakin / 25.75 cents +. Other benefits@ #ome other benefits %ou mi ht have thou ht about@

3abor cost of insertin lenses versus that of debeakin . This can be seen as a wash -1145hr debeakin vs. 11,5hr. lenses.. Increased e production amon lower peckin order birds 3ess dead birds / less trauma for survivors / more e production.

#e mentation In eo raphic terms Aalifornia is the lar est market. 7ollowed b% 7lorida B Ceor ia B Aarolinas. The issue is that ODI is a start up with capital of onl% 0 144D. This mi ht call for a more focused rather than a broad roll out. In terms of farm siEe it is lo ical to do to lar e farms and then medium firms. 3ar er farms are i. better use of sales force, ii. savin s are reater for lar er farms iii. lar er farms are more like a ribusinesses and can be more easil% educated of the economic benefits iv. lar er farms can be !reference accounts" Fricin Folic% Gariable costs@ The variable costs are >.1 cents for manufacturin . The box costs which are variable are 4.&H cents. 7inall%, the inIection moulds cost 0&1,444 for &, mn. pieces and can be thou ht of as variable at 4.4= cents. #o the total variable costs are >.+, cents. 7ixed costs@ One could consider hi h versus low options New world pa%ments 'e . Office and warehouse #alesrep J +4 k Tech repsJ >,k 8d F' Trade shows HK expense Hi 1, &)2 =reps / >14 1reps / H4 14 14 &=+ 3o 1, &)2 , reps / 144 & rep / >, , &4 &44 -for 14 mn pairs.

#o all the above calls for a pricin strate % that is bounded b% a price ceilin -of approx 12 cents. and a price floor of the direct variable costs B overheads. This leads to the discussion of the factors determinin the actual price which we had in the class and as summariEed in the picture below.

## Price Ceiling (Demand Factors, Consumer Reservation Prices)

Competition Risk Preemption Market Penetration

## Price Floor (Cost Factors, Direct Variable Costs)

Fricin Folic% Aonsiderations &. Fenetration versus skimmin considerations. 1. 'isk faced b% farmers. Lhat is the first reaction that man% farmers would have? (i ht not take the product seriousl%. This means that ODI must desi n schemes to credibl% demonstrate the value of its innovation to the farmers -test marketin pro rams..