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The Importance of Tag vs. Inlay Pricing

Forbes yesterday reported in an article on RFID that tag prices are currently at 7.2 cents in quantities of 10 million. In fact, the 7.2 cent pricing is for inlays. This editorial from RFID Update editor Will Smith explores why this common mistake can have a detrimental effect on the industry.
Nov 02, 2005This article was originally published by RFID Update.

November 2, 2005—Forbes published an article on RFID yesterday that discusses the state of the industry. There is not much new for regular RFID Update readers, but what caught my attention was something that will no doubt raise the hackles of RFID vendors across the industry: "The RFID industry target for a practical tag has been 5 cents in volume purchases. The closest anyone has come to date is SmartCode, which has recently announced a Gen2 tag for 7.5 cents in quantities over one million and for 7.2 cents for volumes over ten million." Of course, SmartCode's 7.5-cent product is its inlay, not a completed, ready-to-use tag. That is a huge difference; the process of converting an inlay to a tag doubles or even triples the final price. This is probably one of the most common and problematic misunderstandings by prospective RFID end-users. The cheapest actual tags announced to date are sold by SATO. They use the Avery Dennison Gen2 inlay and cost 14.9 cents in single-roll quantities. Impressive pricing indeed, but still at least a year from the 7.5-cent pricing that Forbes misreported.

There are three reasons I believe that erroneous price reporting is detrimental to the RFID industry and why we all should be diligent in eradicating it. (Yes, I have contacted the Forbes article author.) First, misinformation comes at a cost to the industry. When a prospective end-user sees "7.5 cent tags", he may get excited and call a vendor for more information. The vendor then has the unfortunate task of educating the caller on the difference between tags and inlays, thereby deflating his probable excitement at the prospect of super-cheap tags. An unpleasant experience for both parties, not to mention a waste of time. One might argue that educating the customer is part of any sales process, a mere "cost of doing business." True, but in this case the customer was re-educated with correct information, and the whole thing should have and could have been avoided.

This costly, wasteful process of re-education causes another negative side effect. Imagine hearing the following: "Actually, tag prices are significantly more than what you saw reported, which won't be possible for at least another year." You would come away feeling that RFID technology is still very expensive, that the industry's products are still quite immature. By some definitions, you would be right. But a negative impression would belie the reality that, in fact, industry progress has been phenomenal. I shy away from cheerleading, but it's fair to say that the industry-wide strides made in pricing, technology improvement, and standardization over the last few years are laudable and impressive by any standard.

Perhaps the biggest concern when it comes to pricing accuracy is the relationship between RFID vendors and end-users. There has already been some minor behind-the-scenes grumbling by end-users that certain RFID vendors' marketing messages are too aggressive in what they claim and that there exists a discrepancy between what they advertise and what they can actually provide. Misreported pricing could contribute to this sentiment that vendors are somehow misleading end-users, which is simply not true in the vast majority of cases. In an industry as young as this one, in which the vendors themselves are often charged with doing the end-user education, information integrity and trust between buyer and seller is key.

Thus, let us all be diligent in maintaining the accuracy of the pricing information we share and pass on to others. Put simply, it's for the good of the industry.
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