Pricing in the New Year

[adam]

Hi folks,

It's been a while since we've had an open discussion about our pricing here at PBG, but, with the dramatic fall of the Aussie dollar (against the US), I think it might be time to hear what you all think.

Firstly, some facts: We buy our kits in US Dollars. When we started PBG in August 2012, the Aussie dollar (AUD) was on parity (or better) with the US Dollar (USD). From memory our first order was paid for with one AUD = 1.05 USD.

The other day I paid for our Jan/Feb shipment and was fortunate to get $0.8125. That represents a 20% increase in the factory cost (FOB) of our kits.

The other mitigating factor is that pricing on guitar kits was originally set by Guitarworx, the Australian guitar kit company that eventually went down the toilet, and the prices have stayed pretty much at the same level since they were around. In my opinion, they have always been too cheap. Sure, you can buy a Chinese Strat copy for $99 if you shop around on eBay, but have you ever played one of those? They are awful.

We also have two Aussie "DIY" sites that stock a limited range of kits and are keeping their prices just below ours. In fact, the business model of one of them seems to be "copy everything PBG do (down to creating a Forum with a My Build Diary thread) and undercut them by $10".

I guess what I'm getting at is this: we can change our business model and reduce our selection of kits to around a dozen (like our competition does) and compete on price and service. Or, we can continue offering the biggest selection of kits (in stock, ready to ship) in the world, but put our prices up to keep the business viable.

I am very interested to hear peoples thoughts. What do you think of the current prices? Are we too cheap or too expensive?

[ultpanzi]

Hi Adam. Im a student on minimum wage and I think the prices are reasonable. PBG has something the other companies cant possibly have. Theres a great forum here ready to help, great quality kits thanks to your strict checking and to top it all off, the best customer service of any online company I've ever interacted with. If you need to increase the prices to keep the show running, Ive got absolutely no complaints. The wide range of kits you stock keeps a lot of us interested due to the wide variety of musical genres that we come from. For instance, I mostly play metal so a superstrat or a lp is great for me, but a strat just isnt my thing. Someone who plays blues might love the strat. Etc. Keep up the great work.

[Scott J.]

I don't think anyone would ever complain about something being too cheap! :D but I also don't think any of us would say that Pit Bull's kits are too expensive!

... but if it gets to the point of having to choose between upping the prices or running the risk of a great Aussie company like Pit Bull going bust - then I'd much prefer to see you up your prices.

... maybe we could find an easy way to sabotage the US dollar and bring things back our way (I'm really liking that idea on a number of different levels! :D )

[ultpanzi]

Sabotaging the US dollar sounds like something Im ready to be in on...

[michael]

As the resident (?) Yank here, my perspective is different, but I will say I'm only here because PBG's stock was so vast; this was the only reputable site in the world I could find a bass kit that wasn't a four-string J- or P- bass copy. I originally was looking for a five-string (non P- or J-) and found the IB-5 via Google. Looking further in your stock of basses, I found, and purchased, the IB-6S.

With the favorable US/AUD exchange rate, the IB-6S kit, with AU$60 shipping, was still a reasonable cost for me. If it was $50 more, I probably would have still bought it, however. I also know that my build thread on TalkBass has generated a lot of interest from non-Australians, so having a wider range of basses in stock could be good for PBG (and my next planned build is a RC-4, which I can only get from PBG).

I'd rather pay a few extra dollars to order something unique from halfway around the world, rather than not have that opportunity.

[ihasmario]

A store in Perth called Headphonic had similar issues at some point, both with the Aussie dollar falling and a rival company effectively undercutting them on their most popular models - which they could do as the rivals didn't have a brick and mortar store.

Variety and customer service kept me a loyal Headphonic shopper. Plus the cool benefit that they support RTR FM ;).

Regarding Pricing;
1) I'd be happy to see the price on some models increase, less happy on others. I would still buy a Tele/SG/Strat/LP if it went up in price. I'd be less inclined to buy an ES-335 type guitar, if the price went up.
2) I think you could decrease the effective cost to ambitious builders by including the option to buy the kit without hardware, without the need to email you in advance. In my TL-1A build, I spent a lot on extra electronics, and I didn't use any of the stock items.

Regarding Variety;
1) I think you could increase revenue from non-kit related purchases by offering simple lutherie, such as widening the pickup route to suit humbuckers when purchasing, rather than through email.
2) If you are dealing with flamed/quilted/spalted caps, I think it would be good to list them individually and price them based on how the caps look. If you get a really good cap, I think you could squeeze some extra dollars from it, which would mean you don't have to push up the price of kits as far. In fact, I'd be more inclined to shell out for a spalted top if I knew I was going to get an absolute cracker than I am just kind of gambling.


Another option, which you've said you didn't want to do, is that you could create revenue through ads on the site.


If I had to choose between a price rise or a drop in variety... I'd choose variety. If you get rid of the variety, I'm basically stuck buying from the states if I want to build something that isn't a tele.

[Scott J.]

@ Michael ... hope I didn't offend with the "sabotage" comment mate (certainly wasn't intended)

@ ihasmario ... great suggestion about the option for a "blank kit" (i.e. the no hardware option) ... I think a lot of us take the same route with upgrades (p/ups, pots, etc) once we've built a couple ... and interesting idea about the "grading" the caps

[wokkaboy]

Ads I have no problem with a price rise to keep the large range, its been a while since the last price rise so don't change the excellent range, I think the prices represent very good value

[WeirdBits]

Adam, the fact that you're actually asking your customers for input says it all. If maintaining the range and quality means bumping the prices a bit to compensate for the declining dollar, so be it. Looks like we're headed for .75 US, so it's only wise to start thinking about that now. If we want to risk bargin bin kits and worse service we can take our chances elsewhere.

I like the idea of trying to minimise any increase on the lowest and on some of the upper priced kits, if possible. That way the low priced starter kit can still tempt the first time builder into taking a chance and having a go, and the upper priced kits remain within reach of those who could never otherwise afford their 'dream guitar'. But, the mid-range best sellers will only be able to absorb so much, so do what you need to do. I certainly don't plan on going anywhere else.

[Fretworn]

Adam, none of us want to see you going bankrupt. Prices will clearly have to rise due to the movement in the exchange rate, but I can see the wisdom of also switching some models over to "custom order only" status if that can help keep costs down.

[andrewdosborne]

Adam, swings and roundabouts with the fx, when it drops in value only appropriate to offset with price increase.

On the other side of the coin worth ramping up marketing efforts in the US as cheaper for them!

Also an idea is to offer additional services and products during the check out process, ie offer bone nuts, fret jobs, Dingotone etc.

On stocking non standard kits this is a tricky one, maybe special order as previously suggested. It's a fine balancing act between holding slow moving stock and tyeing up cash vs availability and diversity of offerings.

Seems PBG is the market leader with others following so worth leveraging on this! Customers are generally happy to pay a premium for exceptional customer service and support.

[bargeloobs]

I reckon you should keep all the prices the same, bar the BC-1, BG-46, GD-1, IC-1, KH-1, SH-1 and the WL-1 which you should actually increase to $500 per kit, because if people actually think these guitars are cool then they should be made to pay....lots.
Ahhh, of course I'm just teasing, at the end of the day Ads it comes down to what's best for the business, and if that means bumping up prices across the board to compensate for a declining dollar, keeping your stocks in good supply and retaining your customer base it's just something that has to be done, plain and simple.
I know (as does everyone else on here) the quality of these guitar kits, and truth be known, I'll never buy a big name guitar brand again... ever. Fact is, you don't need to.

[ihasmario]

I'll never buy a big name guitar brand again... ever. Fact is, you don't need to.

Here, here!

[stan]

In choice vs Price - I pick choice
In price increase vs PBG suffer - I pick price increase

I love the idea of paying for graded tops/caps

I love the idea of bare bones kits, sans hardware (this would also increase PBG spares stocks, which could be sold separately)

[kells80aus]

Simple economic management. Supply & Demand. You do hold the high ground in that you supply the widest range at a resonable price.
As in all businesses, at the end of the day you need to generate a gross profit. If your costs exceed your income you are doomed. you must increase your prices.
But at the same time you need to continue to generate sales. What generates your sales is your diversity. you may well have to trim one or two items from the lineup, but I would certainly not cut any further than 1 or 2 items. You may find that there are items on the list that have very low sales and if you need to cut anything it would have to be those, perhaps moving them to a special orders set up where you only order them when some one puts in an order. In order for that to work you would need the buyer to put down a deposit of 30-50 percent. If the buyer is really interested they should be happy to do that. You know that when I have put in special orders I have stummped up 100% of the cost, My personal view on special orders is that you want it you pay for it up front.
I would also go through the kits and look at the types of variations. If there are kits that vary only in hardware then maybe you consolidate them into one item with the variation offered as options. ie a tune-o-matic verses a flaoting bridge, then the floating bridge becomes an optional extra.
To me this is no problem as 9 times out of 10 I swap out the original hardware for different hardware I either have or have bought.
Maybe that's part of the answere you buy in the kits without hardware, and get hardware packs separately and offer a few varieties.. or pick and purchase hardware.

Whatever your choice is Adz, I'll still be here buying kits from you as they are good kits.

Cheers PK

[adam]

Thanks for all the great feedback guys, plenty of excellent ideas to mull over the Christmas period. We'll see how this January shipment lands before we look at any changes in price. One positive is that this will be our first full container load of kits, so we should save a ton on freight and port charges per kit. That will at least partially offset the poor dollar.


Sent from my iPad using Tapatalk

[Rob L]

PitBull is the only place I've been able to find a rick copy so far that seems to be high quality. I'd gladly pay more for it if I have to.

[dave.king1]

Always an interesting conundrum.

I found Pitbull on youtube when looking for ideas on what finish to do on a Tele kit that I got from another supplier and since then have purchased PBH-4 and STA-1 kits, all three of these kits have either received aftermarket pups and bridges or will do because the STA isn't here yet but will be getting some very nice Seymour Duncans that I have sitting on the shelf.

The STA is a birthday present, my kids asked me what I wanted and I said money because I was going to try and hunt down a CV Squier Strat when OS in March but decided to go the kit route again so that I didn't waste time searching for something that may not even be in stock over there.

Bottom line is that with each of these kits I have exactly what I wanted at a more than fair price and have the pleasure of playing something that I made myself which has been set up physically and sonically to suit my taste.

In the case of the STA it is on special so for $150 + finish and the pups I already own so I will have something that would have cost over $500 if I could find that Squier CV. ( which still would have got the SD pups )

Next cab off the rank will be a GR-1SF which is an absolute bargain even if I do splash out on a set of TV Jones pups when compared to a genuine Falcon.

The market is what it is and ultimately it will dictate a price which hopefully will allow PBG to remain solvent to support our addiction.

Happy New Year all.

[Tim]

I don't mind paying extra . Your service is great ,your product is great. Roll on more Bass kits :)

[keloooe]

After a long time away I think it's time for my input.
Personally I don't want PBG to go down the drain. The quality of kits compared to the prices is really high, the Strat so far hasn't failed me.
If I were to change it up, I'd make certain kits that have a lot of variations (mainly LP, ST and TL styles) in a smaller range but have the others still available as a custom order.
As for price, an increase doesn't bother me. The quality of the products, the service and the community that surrounds it will still be around and wont change, all we have to do is dig a little deeper into our pockets.

[Fretworn]

Looks like Pest has his internet privileges back.

[keloooe]

It was from too much use of the Strat!
:D

[robin]

I'll keep buying kits from Adam no matter what happens, value and customer service second to none.

But I am in the camp of "bare bone" kits. I seem to upgrade bridges, pups, pots etc on most of my builds, so if selling a kit without these major components works for Adam and keeps the kits price competitive, they'll get my vote.

rob

[Rob L]

I'm with the bare bones camp as well. Soon as I can I'll be getting the Rick kit. I've got all the upgrades lined up which is pretty much all the hardware and electronics.
If it saves you money Adam and makes it easier I'm all for it.

[DrNomis_44]

@ Adam, I think it's a case of "you've gotta do what you've gotta do", lets hope this year (2015) is a good year for all of us.

[flowman33]

Newcomer here and a Texan, I hate the word Yank, but working closely with a sales driven company in the oil and gas market here is my opinion.

When margins are sagging there are two fixes, raise prices or increase volume. Raising prices is always the riskier of the two as it may inhibit sales. Increasing volume is always a better idea, if you can identify a way to raise your volume.

So here is my experience and I will explain as I go how as a new consumer I felt about the process. My oldest daughter and I have been taking guitar lessons for a year. In August I was in a thrift store and there was an SX strat copy in there for $50, I bought it and being the electrical engineer I am stripped all the electrical guts out of it and replaced them. I actually don't like playing it much and prefer my acoustic. My daughter on the other hand loves it and wanted her own for Christmas.

Being that I sit in a lot of meetings where I have nothing to do for hours on end and I have always been a builder (models, R/C Planes, Golf Clubs, Guns,,,,) the first thing I started researching was guitar kits. It didn't take me long to find that the majority of the kits out there had horrid reviews and the last thing I wanted was a fight on my hands from the start. The kits I did find that people raved about were so high that it made just buying a guitar from the store the only option. While searching Ebay I found some Pit Bull kits. I started some investigation and couldn't find anything really bad being said about them. I also found the website and lurked on the forum a bit.

So there is the background, here is the actually buying experience. I wanted an LP kit, those were out of stock, I looked at other kits it seemed like everyone I looked at was out of stock. I went back to Ebay and looked at what was selling on there, not much but there was a PRS-1TS. I made the purchase and negotiated with Adam to sell it without the hardware and he made things right on shipping.

Wrap it up Flow, what's your point? My point is, I settled for the PRS it is not the guitar I wanted for my daughter. Luckily I am patient and wanted the best chance for success on a first ever build. Your typical American consumer is not going to be that way. It is a big turn off going to a site to find everything out of stock. It really makes me wonder how many sales you are missing. It will also make a lot of store visitors not being return visitors. Their first impression of the store is big selection, little actual inventory.

My opinion, formulated with no knowledge of your capacity, is that there are guitars that would be your bread and butter stock (ST, TL, LP,,,) that I would never want to be out of stock. I would work with suppliers to make sure that I always had those versions on hand to keep volume up and as a gateway into repeat business. I would also have my boutique side but those guitars would be very limited stock or had a fixed lead time upon order.

I think you could definitely increase your business in North America, but being out of stock is a killer especially when your not going to be the least expensive. The PRS you sold me was without hardware and that was the tipping point of making you competitive against typical ebay kits here in the states, especially with shipping costs. Also using google here in the states your three pages in when I search "Guitar Kit". A lot of folks here won't go that deep in google, you might want to look at having an American ISP entry to your store and work on bumping up your search rank so your on the first page and your visits will skyrocket.

Well my meeting is almost over and I have rambled enough. Good luck!

[adam]

Hi Flowman33 thanks for devoting your meeting time to providing such excellent feedback. I agree with all your points. It drives me nuts that we are out of stock of so many models.

Last year our factory in China moved ( without warning us) and that set all our orders back by 3 months. This has significantly impacted our business and, you are right, we are missing out on sales hand over fist.

Anyhoo, we have a full container load of kits which is due to arrive mid February. Once that lands we will have good stocks of all the most popular kits.

When these goods arrive we will also introduce a No Hardware option on all the kits we offer. We're just working out the most efficient way to do that in our e-store.

That's interesting about the Google ranking in the US. We are right at the top or near the top in Australia and I assumed it was the same everywhere. I will get onto that as Googke search is our leading gateway.

We are in for the long haul, so even if it takes us a while to get the stock balance right, I think we're on the right track.

Thanks again ain for taking time to let us know your thoughts.

[wokkaboy]

that's awesome news Ads that you will be selling no hardware kits in the future, sure there's many builders now that want to upgrade the hardware and don't end up using much of the supplied hardware

[metalhead]

Kits without hardware sounds great, I would be keen for that option too. Would that mean you might have options for no hardware or different hardware colours when purchasing, as opposed to the current arrangement where you buy the hardware pack additionally and end up with a bunch you don't need?

[wokkaboy]

Metalhead, not sure what Ads has planned. Maybe he will expand the hardware upgrade packs, where he now has LP, ST and TL in black and gold. At least it means for the small price reduction of the kit you can put it towards some nice hardware

[adam]

Hey Metalhead, pretty much, that's how it should work. Just working on our eStore software now to see how we can do this. Hopefully have this up and running in the next week or two.

[fatmunkey]

I'll add my two cents worth here.

Towards the end of 2013 I wanted a semi hollow guitar, but couldn't afford one. I'd heard about kits, and so got a cheap ES-335 kit off of eBay. I put in as much effort as I could, but it still wasn't quite right. The scale length was about 10mm too long using the predrilled bridge post holes, and it sort of intonates up to around the seventh fret. Looks pretty. Dog to play. But what can you do, it's eBay.
In the course of working out how to build the first kit I stumbled across this site, the forums really, and found something pretty unique: a group of kit builders putting together good gear from good parts, and a guy that made sure good kits were supplied. So when I got some spare cash together, I ordered a TL-1 and an IB-5, and was impressed with the service, the speed, and the quality.
I got inundated with work, and so the TL-1 sat half sanded for a few months, but is now underway. And it's awesome. Very happy :)

TL;DR: You're not competing with the crappy kits of the world, these are actually good bits of gear, and not too dear. A small price rise is the way it has to be. I think there's an opportunity to sell a complete range of upgraded parts as well, along the lines of the Emerson prewired rigs, and some tools like radius sanding blocks.

[dave.king1]

I'll add my two cents worth here.
I think there's an opportunity to sell a complete range of upgraded parts as well, along the lines of the Emerson prewired rigs, and some tools like radius sanding blocks.

My thought on this and particularly the tools, the good stuff is expensive and for mine the overhead on slow moving stock could be a lead weight and detrimental on the cash flow.

On the other side of the coin I've given PBG & Forum a bit of a push over on Pistonheads.com and myself and others ( happy birthday for today Shane D ) have mentioned the kits on Ozclubbies.com ( closed forum ) and also TDPRI.com

[bargeloobs]

I'll add my two cents worth here.

I think there's an opportunity to sell a complete range of upgraded parts as well, along the lines of the Emerson prewired rigs, and some tools like radius sanding blocks.

That's actually a really good idea. I mean there's a few different online luthier suppliers around Aus, but really if you want exactly what you're looking for unfortunately most of the time you have to bend over and let Stew Mac give it to you, and that hurts!!
e.g $10 (aus) for a tiny bottle of super glue then another $30 just to get it here, etc etc:-(
I know you'd be entering into a whole new realm stocking specialist tools, but the way the site, the community, and by default the business are growing I don't think you'd have a problem shifting stock.
Even if you started with basic fret leveling kits, say a notched straight edge, leveling beam, fret rocker, crowning file that sort of thing, then progress to your fretting tools, router bits, inlays and binding and the list goes on...
Shit, I know if I had the choice when shopping for luthiery tools who I'd rather give my money to.
Why not make PBG the one stop shop for everything guitars.

[TC1600]

Absolutely agree with Barge, if I can get a set of fret levelling tools of decent quality at a good price, I would snap them up! You are supplying extras other than the kits now, why not expand!

[metalhead]

Sounds awesome (being able to choose between hardware). I think there would be a number of people who would be interested in tools and especially in hardware. If you could offer something similar to guitar fetish I think you would get a lot of Australian sales, even among people not purchasing kits. But as said, I recognise that trying to drown yourself in stock isn't the way forward either.

[Nickosaurus]

I think the no hardware is a good compromise on cost vs volume.

However I do feel this might also impact your total sales volume as most consumers will be light buyers - and as such most light buyers will go for the cheapest item irrespective of brand. If they see a hike in price for the same item (reasons aside) it will be a strong deterrent.

My .2c aside, love the idea of luthier tools being available. We Aussies desperately need a local source for luthiery tools and maybe this could be a hole in the market for you to fill.