Week 12: Pledge Manager / Pricing
22. February 2021
- There are still 150 backers who have not filled out the Pledge Manager yet. I will send an email to you if you are one of them 😉
- At the moment we are finalizing the print files. We will submit the files for production most probably next week.
- In this update we will talk about pricing, i.e., how to set the right price for a game.
- Soundtrack of the Week - Stronghold Soundtrack (Do you know this game? 😉)
I hope you had a good weekend. Thanks again for the really positive feedback on my last update about the shipping costs, which means a lot to me. This time we are talking about another "behind the scenes" topic - Pricing i.e., what is the right price for a board game. Unfortunately, I can't write such an update every week, because they are just more elaborate than "normal" updates. But in the coming weeks I will surely go into the topic of Manufacturing and how to make prototypes, which you need for every KS campaign. But before we get to pricing, two smaller but equally important topics.
There are still 150 backers who have not filled out the Pledge Manager. I will contact everyone on this list again today after I published this update. So, if you get a mail from my @gmail.com email address later, you are one of these 150 backers. Please fill out the Pledge Manager, that would really help me a lot! It is not that hard 😉 You can give me these 5min for sure.
Samuel and I will work intensively on the print files for P'achakuna this week and next. If there are any small changes in the production, we will let you know of course. For example, in case that the box would be a little bigger (not much, but a little). But no more components will be added or "deleted", i.e., it is just a matter of small details that come to our attention in the process of creating the print files.
So much from the day-to-day business, we are on schedule and everything is running, now only these 150 backers have to fill out the Pledge Manager, then I'm happy 😉 But now to something completely different...
Besides shipping costs, the price of a board game is always a topic on Kickstarter. Very quickly people say that something is too expensive. But how do you actually set a price? Because only if you include all these following factors you can really tell if something is too expensive or even a bargain. In my MBA I got to know many approaches how to set a price and now I will briefly look at the most important ones with you.
1) Cost based
This is the most classical approach. You start with the costs as a basis and define the price as an x-fold of the costs. But first I have to show you what the costs of a board game actually depend on. Because if we know this, we can easily see if a game is worth its price or not. So, what are the cost factors of a game?
i) Component quality: Absolutely logical, but quality has its price. Black-core cards cost more than white-core cards, thicker paper, bigger cards, better print quality etc. all this has its price.
ii) Number of components: What should also be clear to everyone is that more components also cost more. What is particularly important here is that the cost per piece decreases quickly. Whether we have 8 or 10 punchboards is almost irrelevant. But sometimes there are "jumping" fixed costs. Let us assume that we have a large paper sheet on which 120 cards can be placed. If we take 100 or 110 does not make much difference but the 121st card will make a large difference, because we need a second sheet of paper. Darwin's Choice as an example has over 290 cards (black core, many large cards 10x7cm) that costs a lot even if it is "only" cards.
iii) Component variety: The more different components a game has, the more expensive it is. As said before, the cost per piece usually goes down with a higher quantity, but this also means that for a game with few but many different components, the cost will definitely be higher. First of all, there are no economies of scale, moreover each component has its own production steps and suppliers, each component needs someone on the assembly line to put it in the box, certain components need tools (e.g. wooden meeples) etc. This is something we always consider early on in the development of our games i.e., how can we deliver the same game experience but use fewer different components.
iv) Sustainability: Many board game publishers do not look at this, but we do. But sustainability does not come for free, FSC certification costs extra, CO2 offsets cost, a sustainable production site cost and so on. I have to be honest; the costs are not as high as you might think (that is why I am always surprised that not more board game publishers do it -> maybe because most customers do not care), but of course nothing comes for free.
v) Place of production: This is also related to sustainability, but also to local wages. For example, we could easily produce our games 50% cheaper in China, but we do not want to do that, because then we would just have to ignore point (iv) and that is simply no option. And this means that sustainability indirectly has significant costs.
vi) Quantity: This is especially important, as with the number of components, the whole game scales, i.e., whether I produce 2000 or 10000 or 50000 games makes a huge difference. On the one hand because the variable costs decrease, but also because fixed costs like tools, injection molds etc. are more and more spread over many copies. So small suppliers can never reach the prices of big suppliers because they work with a completely different cost structure.
vii) Something new/special:If you see something totally unusual i.e., something you never see in any other game, then it has its costs. Because it requires new processes, more production effort, more expensive suppliers, etc. Most of the time something is not made because it is expensive and because no one wants it, almost no manufacturer offers it. For example, P'achakuna has 3mm cardboard, which almost no one has because almost no one can die cut it (or another example would be the fair produced bags from Bolivia). The extraordinary always comes with a price tag.
The list may not be exhaustive, but this is how the cost of games is made up and the more criteria are met or not, the cost of the game will be quite different. But now back to the cost-based pricing. In this case, one starts from these costs and sets the price at a multiple of these costs. For board games, a factor of x4-x5 is considered O.K., from x7 you are perfect. In the best case we are just between x4 and x5 (definitely not always). But now you must not forget that this is still far from "profit", because with this multiple of the production costs the wages, the rents, the illustrations, the marketing etc. must still be paid. If you have x2 you are simply not viable. In addition, all retailers want at least 40-45% discount on the price, because they also have to pay their staff, rent, etc. And distributors want 60% discount and more. I.e., below x2-x3 you can forget about retailers and below x4 you can forget about distributors.
2) Markup approach
We never use this approach when setting a price. You simply define the markup, i.e., how much do I want to earn per game. For example, if my costs were 10 and my desired markup was 5, then I would sell the product for 15. This is something we personally only do with distributors; they want to take a huge discount as described above but also many units (several hundred). In these cases, Samuel and I just define a minimum markup and if we cannot make that much per game we are not interested. However, when setting customer prices, such an approach makes no sense.
3) Comparison with competitors/similar games
This is a very logical approach i.e., you look for similar products, write down their prices, take an average and you have a reference price near which your own price should be. I would recommend this to anyone who wants to publish a game, look at what others are doing. Of course, it is just a reference price, because maybe you're more sustainable than everyone else and that's why you have to charge a higher price. But you can simply see from this analysis what is possible i.e., the average and also the range.
4) Customer perception
And then you the backers come into play, and of all the factors you are the most important. Most backers do not compare games objectively, do not have all the facts and do not know the cost factors and their influence in detail. Backers just look at a project, automatically compare it with everything they have seen before, with the prices they felt they paid, with a reference price they have in mind etc. and decide within seconds if the price is too high, too low or just right. You can have the best game, which has huge costs (because of the insane quality), but if the backer does not see the value, then they will not be willing to pay the justified but perceived too high price. In this area of perception, there are therefore many studies, for example, prices ending with "9" are considered cheap, while whole numbers such as 10 appear much more expensive, but thereby also projecting a value. Whereby to set a "9" on KS is almost impossible, because every backer sees the prices in their currency (i.e. the price depends on the exchange rate) i.e. you never have a "9" in all currencies. Also, you usually do not judge price alone but price + shipping as a total bundle. That is why I wanted to cover these two things each in one update, because they have a lot to do with each other. And I am fully aware that these updates will not change your price perception much. But maybe they are food for thought to not immediately judge a product or a shipment as "too expensive", but to try to understand them logically.
And which method is now used in reality? All 4 methods together are used 😊 it makes no sense to use these methods individually. When we set a price at Treecer(atops), we always start with the cost-based approach, compare the calculated price with the prices of our competitors (thereby deciding the possible factor i.e. x3, x4, x5...) and do the fine tuning by incorporating the customer perception. And most of the time Samuel and I discuss until the very start of the campaign if we are "right" or if we have to drop 1CHF.
A complex variable, which I have left out and which is almost impossible to consider when setting prices, is the "financial strength" of the various countries. For example, a price can be normal in Switzerland (because everything is expensive here anyway) and at the same time e.g. very high for Australia (of course, the exchange rate also plays into this again). Sure, it would be nonsense and also not justified to set different prices in different countries (is not possible on KS anyway), but so it is just impossible to please everyone. Especially if you come from a country like Switzerland, where prices and wages are very high i.e. if we want to survive we have to set somewhat Swiss prices and will therefore never be able to shine with rock-bottom prices, but we try to make that go away with quality, sustainability, creativity, best backer service, etc. Just as we Swiss do it with the cheese, chocolate, and watches 😉
That is, it again from this week 😊 I hope you found the topic again interesting and learned something. The update has become just again a little longer, sorry xD If you have any questions, you can always contact me, I am happy to discuss with you in the comments section or by mail ([email protected]). Have a great week and stay healthy.
With best regards,
Marc & Samuel