<p>There's a much simpler explanation: economies of scale. The exact same item of the same quality often costs less if you buy more. You also gain access to techniques of manufacture that have high- up front costs (mold or die-making, say) but low per-peice production costs.</p>

<p>The one-off custom made machine has none.</p>

<p>A unit with a small market segment/target has some, depending on the production run size - hundreds, thousands, 10's of thousands.</p>

<p>A mass-market consumer product made by the millions has many. It's not uncommon to build a whole factory or at least a line of specialized equipment for the job.</p>

<p>Then you can add in the other factors that might be deliberate reductions in quality to meet a price point, or jacking up the price to reflect a name attached to the product.</p>

<p>If you could make a "equivalent" machine for 1/10th the price, you'll probably have an easier time selling it at 95% of the price, at least to the market segment that expects the higher price, and you'll also make a lot more money from each sale.</p>

<p>If you were going to offer this same machine at a lower price to get more sales volume and make more money, you'd make it "different" simply to not rob yourself of the sales at the higher price point, since those buyers would be unlikely to consider a "cheap" machine worthwhile - so your marketing department would make some meaningless changes and roll it out as a budget alternative, and "experts" would "taste" a difference between them...</p>

CC BY-SA 3.0
2017-06-24T02:46:29.390Z
2017-06-24T02:59:43.993Z
2017-06-24T02:59:43.993Z
Ecnerwal
<p><em>Disclaimer:</em> I have no coffee maker designing or manufacturing experience.  This answer is based on internet research and professional experience.  This answer addresses some of the product design challenges and less of the real engineering challenges, but a lead into the engineering challenges. Based on the question and comment I believe OP is interested in designing a coffee maker.</p>

<p>From a business standpoint most organizations strive to service segments of the market that organizations believe they have a competitive advantage. These organizations also try to offer products to meet opening (OPP), mid (MPP) and High (HPP) price points. Also branding place a significant part in product pricing. </p>

<p>Assumption: US dollar = Euro (Approximately, 1 Euro = 1.09 US$) </p>

<p><strong>Coffee Maker Product Landscape</strong><br>
Based on the above I did some research on <a href="http://www.foodservicewarehouse.com" rel="nofollow noreferrer">food services warehouse</a> and selected Grindmaster for this analysis. Base on list price following are the price point classification (Dollars $)</p>

<ul>
<li>OPP: 1000 - 2600</li>
<li>MPP: 3500 - 4700</li>
<li>HPP: 6000 - 10,000</li>
</ul>

<p>Below is a table for OPP, MPP, and HPP price segmentation (April 6th, 2015)</p>

<p><a href="https://i.sstatic.net/zRxCv.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/zRxCvm.jpg" alt="Price segmentation"></a></p>

<p>Lets assume the following as customer segments</p>

<ul>
<li>OPP: Small office break room coffee machine</li>
<li>MPP: Large office cafeteria</li>
<li>HPP: High traffic coffee shop, Panera, Starbucks, Dunkin Donuts…</li>
</ul>

<p><strong>Requirements Analysis:</strong><br>
Flow rate was chosen to keep the analysis simple</p>

<ul>
<li>OPP:  4 - 15 gl/hr</li>
<li>MPP: 15 - 32 gl/hr</li>
<li>HPP:  32 - 50 gl/hr</li>
</ul>

<p><strong>Engineering Analysis</strong></p>

<p><strong>Product Design</strong><br>
Consider the Motor (Rotor, Stator, Casting) or the heating element from the BOM. Each of the price points (PP) most like need a different type of component. The component price to meet the above flow rate specification can be significantly different. Also the product volume is each PP is different thus for HPP or even MPP product it is highly unlikely to obtain volume base pricing that OPP might enjoy. Thus explains the cost of components.</p>

<p><a href="https://i.sstatic.net/nLImt.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/nLImtm.jpg" alt="Example BOM for  coffee Maker"></a></p>

<p><strong>Product Testing, Validation and Manufacturing</strong><br>
The cost of testing, validation and manufacturing will be much higher for MPP and HPP product because the consumer demands for higher quality product compared to OPP products.  Thus the non-recurring engineering (NRE) cost per machine will much higher for MPP and HPP product than the OPP products.</p>

<p><strong>Product Serviceability and Support</strong><br>
An OPP price point product needs very little from a serviceability and after sale support compared to MPP or HPP product. An OPP customer is most likely replace a defective coffee maker with a new coffee make where is MPP or HPP customer will consider maintenance. Also consider a customer like Starbuck or Panera, they demand for high quality, and zero downtime. Therefore the components used in MPP or HPP coffee makers of significantly higher quality than the OPP coffee makers.  </p>

<p>Product Pricing VS BOM price -> General rule of thumb is BOM cost is 1/5 the Product Price. I believe this is a good starting point to figure what take to compete in the intended the coffee maker market. It appears that the coffee maker market is a red ocean. Therefore it important identify the point of differentiation. </p>

<p><strong>References:</strong></p>

<ul>
<li><a href="http://en.wikipedia.org/wiki/Blue_Ocean_Strategy" rel="nofollow noreferrer">Blue Ocean Strategy</a> </li>
<li><a href="http://www.jsedimensions.org/wordpress/wp-content/uploads/2014/12/Meo-Figure-1.png" rel="nofollow noreferrer">Example Coffee Maker BOM</a></li>
<li><a href="http://www.jsedimensions.org/wordpress/wp-content/uploads/2014/12/Meo-Figure-3.png" rel="nofollow noreferrer">Example Coffee Maker Landscape</a></li>
<li><a href="http://www.jsedimensions.org/wordpress/wp-content/uploads/2014/12/Meo-Figure-2.png" rel="nofollow noreferrer">Performance Improvement Analysis</a></li>
<li><a href="https://wiki.ece.cmu.edu/ddl/index.php/Coffeemaker" rel="nofollow noreferrer">Coffee Maker Product Design</a></li>
<li><a href="http://www.foodservicewarehouse.com/commercial-coffee-makers-grindmaster-single-brew/c3414_1696-215_1704-619.aspx" rel="nofollow noreferrer">Grindmaster Single brew coffee maker product offering example</a></li>
</ul>

CC BY-SA 3.0
2015-04-06T02:00:05.873Z
2015-04-21T10:24:55.317Z
2015-04-21T10:24:55.317Z
Mahendra Gunawardena
<p>I am trying to understand what causes a commercial coffee machine to be more expensive than a consumer system.</p>

<p>In essence, a coffee machine consists of:</p>

<ol>
<li>Boiler, for the hot water (around 65 °C).</li>
<li>Temperature sensor.</li>
<li>Pump/motor to get the pressure (around 10 bar). (cost: \$390-\$520 USD)</li>
<li>Valves and pipes (to the boiler, from boiler to extraction point).</li>
<li>Pressure gauge, for the coffee extraction . </li>
<li>Relay, measuring the extraction length (around 25 sec).</li>
<li>Precise Temperature, Pressure and Extraction-Time control, via some kind of embedded system, say micro controller.</li>
<li>Chassis, to hold all the parts.</li>
<li>Coffee Taste(Temperature, Pressure, Extration-Time, Coffee Beam Crop) </li>
</ol>

<p>What is it about the components or implementation that make commercial systems more expensive?</p>

<p>Is there something different about the manufacturing process (and therefore price) of each of the separate components?  Or are there additional electrical components contributing to a higher component price? </p>

CC BY-SA 3.0
2015-04-06T22:39:38.190Z
I am not sure if this question belong here, I think engineering is a better home for this question
Mahendra Gunawardena
CC BY-SA 3.0
2015-04-06T23:07:52.713Z
I would say in simple terms, a home machine is designed to make maybe ten cups of coffee a day, usually one or two at a time. A commercial machine is designed to make hundreds of cups of coffee a day, running almost continuously for hours on end, and often four or more at a time.
Evan
CC BY-SA 3.0
2015-04-07T11:52:26.967Z
@Evan I get the point that high volume production requires high quality machines, however, I still find it difficult to justify the market prices
Ziezi
CC BY-SA 3.0
2015-04-07T12:33:09.597Z
Yeah, fair enough. I'm more of an engineer than a marketer. :-)
Evan
<equipment>
Why are commercial coffee machines significantly more expensive than consumer machines?
Ziezi
# Why are commercial coffee machines significantly more expensive than consumer machines?

(Asked by: username_0 on 2015-04-03)

I am trying to understand what causes a commercial coffee machine to be more expensive than a consumer system.

In essence, a coffee machine consists of:

1. Boiler, for the hot water (around 65 °C).
2. Temperature sensor.
3. Pump/motor to get the pressure (around 10 bar). (cost: \$390-\$520 USD)
4. Valves and pipes (to the boiler, from boiler to extraction point).
5. Pressure gauge, for the coffee extraction .
6. Relay, measuring the extraction length (around 25 sec).
7. Precise Temperature, Pressure and Extraction-Time control, via some kind of embedded system, say micro controller.
8. Chassis, to hold all the parts.
9. Coffee Taste(Temperature, Pressure, Extration-Time, Coffee Beam Crop)

What is it about the components or implementation that make commercial systems more expensive?

Is there something different about the manufacturing process (and therefore price) of each of the separate components? Or are there additional electrical components contributing to a higher component price?

**Tags:** equipment

> **Comments:**
> **username_1**: I am not sure if this question belong here, I think engineering is a better home for this question  
> **username_2**: I would say in simple terms, a home machine is designed to make maybe ten cups of coffee a day, usually one or two at a time. A commercial machine is designed to make hundreds of cups of coffee a day, running almost continuously for hours on end, and often four or more at a time.  
> **username_0**: @username_2 I get the point that high volume production requires high quality machines, however, I still find it difficult to justify the market prices  
> **username_2**: Yeah, fair enough. I'm more of an engineer than a marketer. :-)  

---

## 2 answers

### Answer by username_1 on 2015-04-06. Score: 6 | Accepted answer

*Disclaimer:* I have no coffee maker designing or manufacturing experience. This answer is based on internet research and professional experience. This answer addresses some of the product design challenges and less of the real engineering challenges, but a lead into the engineering challenges. Based on the question and comment I believe OP is interested in designing a coffee maker.

From a business standpoint most organizations strive to service segments of the market that organizations believe they have a competitive advantage. These organizations also try to offer products to meet opening (OPP), mid (MPP) and High (HPP) price points. Also branding place a significant part in product pricing.

Assumption: US dollar = Euro (Approximately, 1 Euro = 1.09 US$)

**Coffee Maker Product Landscape**  
Based on the above I did some research on [food services warehouse](http://www.foodservicewarehouse.com) and selected Grindmaster for this analysis. Base on list price following are the price point classification (Dollars $)

* OPP: 1000 - 2600
* MPP: 3500 - 4700
* HPP: 6000 - 10,000

Below is a table for OPP, MPP, and HPP price segmentation (April 6th, 2015)

[![Price segmentation](https://i.sstatic.net/zRxCvm.jpg)](https://i.sstatic.net/zRxCv.jpg)

Lets assume the following as customer segments

* OPP: Small office break room coffee machine
* MPP: Large office cafeteria
* HPP: High traffic coffee shop, Panera, Starbucks, Dunkin Donuts…

**Requirements Analysis:**  
Flow rate was chosen to keep the analysis simple

* OPP: 4 - 15 gl/hr
* MPP: 15 - 32 gl/hr
* HPP: 32 - 50 gl/hr

**Engineering Analysis**

**Product Design**  
Consider the Motor (Rotor, Stator, Casting) or the heating element from the BOM. Each of the price points (PP) most like need a different type of component. The component price to meet the above flow rate specification can be significantly different. Also the product volume is each PP is different thus for HPP or even MPP product it is highly unlikely to obtain volume base pricing that OPP might enjoy. Thus explains the cost of components.

[![Example BOM for  coffee Maker](https://i.sstatic.net/nLImtm.jpg)](https://i.sstatic.net/nLImt.jpg)

**Product Testing, Validation and Manufacturing**  
The cost of testing, validation and manufacturing will be much higher for MPP and HPP product because the consumer demands for higher quality product compared to OPP products. Thus the non-recurring engineering (NRE) cost per machine will much higher for MPP and HPP product than the OPP products.

**Product Serviceability and Support**  
An OPP price point product needs very little from a serviceability and after sale support compared to MPP or HPP product. An OPP customer is most likely replace a defective coffee maker with a new coffee make where is MPP or HPP customer will consider maintenance. Also consider a customer like Starbuck or Panera, they demand for high quality, and zero downtime. Therefore the components used in MPP or HPP coffee makers of significantly higher quality than the OPP coffee makers.

Product Pricing VS BOM price -> General rule of thumb is BOM cost is 1/5 the Product Price. I believe this is a good starting point to figure what take to compete in the intended the coffee maker market. It appears that the coffee maker market is a red ocean. Therefore it important identify the point of differentiation.

**References:**

* [Blue Ocean Strategy](http://en.wikipedia.org/wiki/Blue_Ocean_Strategy)
* [Example Coffee Maker BOM](http://www.jsedimensions.org/wordpress/wp-content/uploads/2014/12/Meo-Figure-1.png)
* [Example Coffee Maker Landscape](http://www.jsedimensions.org/wordpress/wp-content/uploads/2014/12/Meo-Figure-3.png)
* [Performance Improvement Analysis](http://www.jsedimensions.org/wordpress/wp-content/uploads/2014/12/Meo-Figure-2.png)
* [Coffee Maker Product Design](https://wiki.ece.cmu.edu/ddl/index.php/Coffeemaker)
* [Grindmaster Single brew coffee maker product offering example](http://www.foodservicewarehouse.com/commercial-coffee-makers-grindmaster-single-brew/c3414_1696-215_1704-619.aspx)


---

### Answer by username_3 on 2017-06-24. Score: 1

There's a much simpler explanation: economies of scale. The exact same item of the same quality often costs less if you buy more. You also gain access to techniques of manufacture that have high- up front costs (mold or die-making, say) but low per-peice production costs.

The one-off custom made machine has none.

A unit with a small market segment/target has some, depending on the production run size - hundreds, thousands, 10's of thousands.

A mass-market consumer product made by the millions has many. It's not uncommon to build a whole factory or at least a line of specialized equipment for the job.

Then you can add in the other factors that might be deliberate reductions in quality to meet a price point, or jacking up the price to reflect a name attached to the product.

If you could make a "equivalent" machine for 1/10th the price, you'll probably have an easier time selling it at 95% of the price, at least to the market segment that expects the higher price, and you'll also make a lot more money from each sale.

If you were going to offer this same machine at a lower price to get more sales volume and make more money, you'd make it "different" simply to not rob yourself of the sales at the higher price point, since those buyers would be unlikely to consider a "cheap" machine worthwhile - so your marketing department would make some meaningless changes and roll it out as a budget alternative, and "experts" would "taste" a difference between them...


---

