The Price is Right
"To be good and lead a good life means to give to others more than one takes from them."
— Leo Tolstoy
People sometimes wonder why our mugs, at $40, give or take, cost twice, or more, what other travel mugs cost. The simple answer is that there’s a lot more to them, but product pricing is something that I’ve thought a lot about, and I’d like to elaborate a little here on my pricing philosophy. I’m not naturally a businessman, but someone left me in charge of the Joeveo show for now, so I’m free to do what seems right to me instead of what business schools would consider best practice.
We ran a Kickstarter campaign in 2013 to raise money to launch Joeveo. We offered our (not yet in existence) products, Temperfect travel mugs, as rewards. The most difficult part of the campaign, by far, was getting the right price on the rewards. Getting it right required first a detailed design, then factories for parts, suppliers for incidentals, costs for consultants, shipping, duty, assembly and fulfillment costs and overhead, etc. Bringing that all together required years of work (and for an example of the drama that can result when that price is wrong, see the story of the $13M Coolest Cooler Kickstarter campaign—coolers were $185 on Kickstarter, currently $450 on Amazon).
Once a manufacturer knows what their cost for a product is, an industry-specific multiplier can be used to estimate the required retail price. From what I understand, the multiplier is 4 to 5 in this industry, so an item that costs $10 all-in to make would retail for $40-$50. The difference pays the costs involved in running the business, profits, the distributor if there is one, the shop that sells the product (which might get half of the retail price). This all makes sense: all these players in the supply and distribution chain add value, and they all need to be paid.
But there’s a lot in retail pricing that doesn’t make sense. If I understand this article right, Yeti, a distant competitor (if that word is appropriate for a brand that is a thousand times bigger than Joeveo), uses a 10x multiplier in pricing their products. How can they do that? I don’t know, but their customers love it. Lexo, our closest competitor, recently rebranded as Burnout and multiplied their prices by 2.5. What’s going on there? I don’t know either. Marketers' price-setting hijinx are evident just about everywhere there are marketers, but nowhere more than in the fashion industry, as this StyleZeitgeist article on "premium mediocre" fashion demonstrates.
And then there are the pricing shenanigans that we are all familiar with, like pricing a product at $39.95 instead of $40. I’m sure we’re leaving money on the table selling our mugs for $40, but I hate the idea of manipulating people. It’s forty bucks one way or the other; if that’s too much for your budget, $39.95 will be too, and I don’t want to be the one to leave your account overdrawn at the end of the month.
There are the sales: On sale! Was $60, now only $29.95! Half off! Today only! Buy one get one free! How do they do that? Either they’re losing money (that’s sometimes a ploy), or the retail price is inflated to be able to make a profit even at 50% off. But why should some customers pay twice as much as the lucky sale-price customers? I know, they’re all standard marketing tactics, and they do work to increase sales, but I’d rather sell a product at a fair price always than rely on tricks to sell more. And “free” shipping? I actually like free shipping too, just because it simplifies the price to a single number with no hunting for shipping costs and no math involved. But we all know shipping isn’t free, it’s just included in the number. Why not say that? Also, does your favorite brand donate X% of profits to their favorite charity? That apparently improves sales as well, but I prefer to leave that money to you to donate according to your own inclinations.
Anyway, we don’t inflate our prices to be able to reduce them for sales, we don’t pretend that shipping is free, we don't charge you extra to support our charitable causes, and we don’t have retailers or distributors to pay since (almost) all our sales are direct to our customers.
Instead we have the fairest pricing we can manage for everyone, every day. It's based solely on our materials, production and other costs. It takes into account that our mugs are considerably more complex than standard stainless travel mugs and that they are partly made in the USA where costs are higher. It's pricing that’s calculated to allow Joeveo to thrive as a business while leaving as much of your money in your pocket as possible—calculated to give you more value than we take from you. That, for me, is the right price.