A look inside the ‘Pricing Room’
There’s been some recent discussion about our pricing on social media and our forum so we thought we’d share some of our policies with you. You’ll be pleased to hear that, contrary to the suggestion in the title, we don’t have a special room dedicated to pricing. But we do spend a lot of time on pricing. As we’ll explain there are so many factors that we have to continually balance, that it sometimes feels like there should be a darkened room with soft walls in which we can bounce around with the topic!
We’re open about our approach to pricing and many retailers and distributors will know that already. It’s easy to be open about our policies because they are driven by a belief that we need to release products to market that are sustainable for us to produce, offer good value to our customers, and treat everyone in the market fairly. “Value for money” is one of the key terms in our Mission Statement and something we’ve focused on from the start.
Overall, the evidence is that we are hitting the mark as far as most customers are concerned. We survey our customers every year and ask lots of questions to find out how we’re doing against goals such as value for money. Ever since we started these surveys four years ago, in the region of 70% of our customers have told us they think our pricing is either “Great” or “Good” so we do feel that the pricing factors we consider are allowing us to consistently hit the mark.
Factors, what factors?
The range of factors that we consider when setting a price might be surprising. Obviously we have to consider how much it costs to produce a product, but we also have to consider how much a customer will be willing to pay for the product. If a model that’s 5cms tall costs £/$500 to produce, it won’t sell no matter how glorious it is because that’s not what people pay for miniatures. That’s an entirely different market. We think about competitors’ products, we think about how the model performs in the game because that determines how many need to be in a box, we think about the impact of other currencies, we think about how retailers will sell the products and what discounts they offer. We also have to factor in costs that don’t directly relate to the model itself. This includes packaging, discounts for trade customers (retailers and distributors) and, in the case of products in the Halo product lines, royalty payments that are made to 343industries/Microsoft Corporation under our license agreement. It’s a long list.
And then you figure out what people pay, right?
We no, actually we rarely determine exactly what people pay! As we’ve said in other articles, the majority of our products are sold through distributors and retailers and we don’t control those prices at all. We publish price lists every month to distributors and retailers. Distributors get a higher discount than retailers and some buy in currencies other than UK £ Sterling, but other than that, our trade prices are the same for everyone and we’re open about that to our trade customers. That’s another of our fundamental principles – treat the whole market fairly.
The only price we control is the price in our online store. The price paid by a customer buying from a retailer is entirely in the control of the retailer and they have all their own factors to consider. Retailers have to consider the price they pay to us or to distributors, in some parts of the world they have to consider exchange rates and shipping charges and then they have their own business drivers. Importers can also sometimes face duties that have to be taken into account. Maybe they have their own darkened rooms with soft walls!
So, at the end of all this, once we have taken into account what a customer wants to pay, design costs, materials, manufacturing, discounts, royalties, tax, etc., etc., and retailers add their layer of factors the price you see in a store or online is decided. Most people are surprised to learn that after discounts, royalties and the like, there’s a surprisingly small amount left for the manufacturer and that we have absolutely no control over market pricing. Often the price from a retailer is less than our online store price, but sometimes the price is more. We don’t control retailer pricing and that’s how it should be – market forces should control prices in an open market, not manufacturers.
Are there ever any exceptions?
Yes, sometimes. Let’s take the Halo: Ground Command Pelican and Phantom dropships. These are large and therefore expensive models and we have had extensive feedback from retailers that it’s virtually impossible for them to stock and sell such high priced items. Therefore, with the blessing of most retailers, we make these available directly through our online store as “web only” products and when we price them, we don’t need to take into account the normal levels of trade discounting. They are still available to retailers, but at a special discount level and retailers typically place a special order for specific customers.
This offers great value for customers because if they were priced using normal formulae, they would be vastly more expensive. But the risk we take is that it makes other products in the line look relatively more expensive. They’re not – it’s just that special models have special pricing and so offer especially good value. That’s good for customers so we’ll run the risk of someone mistakenly thinking other products are expensive when they’re not.
We also have special formulae for a new game so that it’s easier for customers to give it a try. Two-player box sets, for example, offer particularly good value for money. Again, the danger is that it makes the subsequent upgrades appear more expensive comparatively, but that’s just due to the great value the box set gives.
Okay, now I’m starting to see the need for a darkened room!
None of these issues are unique to us or the table top miniatures market. Take any book about business and you’ll see at least a full chapter on pricing. So we don’t do anything exceptionally difficult or anything that all other manufacturers are not doing. But sometimes we think it helps our customers if we explain our approach, and our guiding principles of value for money and a market that’s treated fairly as a level playing field. Those principles are all factors bouncing around in our metaphorical darkened room, but we believe its right that they are there.
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