Average Retail Price....ARP

M

MikePerrin

Joined
Feb 26, 2001
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Jeff and I are all about the consumer. We have broken from most of the industry rules to better take care of customers and our dealers have always benefited from that. So in that light we intend to depart from the industry rule of quoting an 'MSRP' (manufacturer's suggested retail price) which is totally misleading to the end user. We will begin looking at the average retail price of our current products already in the marketplace and develope a perecentage mark up that better represents what you (the customer) can expect to find a particular product for in the marketplace. MSRP means nothing to a person looking for a knife or backpack in the real market. If anything it harms the sale of a product by scaring off a customer before they even do the research on pricing.

So that's the plan. And since we have also made it a practice to listen and incorporate customer feedback into our company we now look to YOU, our customers (dealers too), to give us feedback on what you would like to see incorporated into this new ARP pricing. Mike
 
Finally! I've been ignoring MSRP for a long time now knowing it had nothing to do with how much something is actually going to cost me. Thank you for bucking "tradition" and helping your customers better.

As far as feedback from us... what did you have in mind, how can we help?
 
I some ways I appreciate the pricing strategy of companies that require a fixed price. Oakley, for example, you know you are going to pay the same no matter where you go. That said, I know it also keeps the price higher.
I bought my Izula then found it much cheaper immediately after. It was quite a disappointment. Knowing the average price and trying to shop under it would have made me look a bit more before taking the plunge.
 
Well, there are a couple of ways I think to arrive at the ARP. One way is to survey the market prices for a particular product and generate a true average incorporating ALL prices found. Anther way is to kick out the lowest and highest prices and generate the average based on the remaining field of prices. This second way removes the anomalies created by say one retailer selling for less than what they buy it for just to attract attention which does not reflect anything about the average retail price in the marketplace. You guys have any other suggestions? Any business/math majors out there?

The 'fixed' pricing you mentioned is known as 'MAP' (manufacturer's advertised price) and is indeed against our free market philosophy:)We hve considered using it on a very limited basis to establish a product in the marketplace for the first few months or so. But it really has no place in our market system for the long term. There was recently a well know knife company that went to MAP pricing and I have heard noting but bad comments and lost business from dealers and consumers.
 
I'm not a dealer and this might sound naive, but shouldn't the ARP begin at your price point and then ascend a certain percentage?
For example: Say it costs ESEE $100 to produce an RC-4 to include overhead and your profit margin. Shipping and dealer profits would $20 per knife. So add 20% for that product.
I know this is probably oversimplifying things, but why wouldnt that work?
 
We also have to take into account that international dealers and distributors have to pay a higher pirce for our product since they have customs charges and taxes that we don't have in the States. So, in the end we will look to find a way that it will be beneficial, information-wise, to the consumer no matter where they are.
 
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milani74, You are looking at the wrong thing. What you are looking at is a cost-plus price that tops out (so essentially MAP pricing) at a certain percentage. What we do is sell the knife for cost plus our profit margin then turn it loose in the marketplace. THEN what dealers do is sell for whatever their profit margin needs to be avove that. Some are high and others are low and still others might sell something for less than what they paid for it (for awhile but not forever) to get attention. So you cannot assign a flat 20% or any percentage accross the board because the percentage may vary a great deal from one product to another. This may sound absurd but in fact even though most dealers and manufacurers try to adhere to a certain percentage profit they may from product to product move away from that percentage in order to make a product more attractive or so it doesn't conflict in sales with another product they already have out there.

SO look at a new product coming out. We do not know what the average retail price will be but we can get an idea by looking at similar products we have put out in the past by polling prices and generating an average. THEN after that new product has been out for 6 months-1 year maybe we have to take a look at what it is actually selling for and adjust our earlier guess at the ARP. The end result is we start out with a new product saying "This is what we think the ARP" is going to be then a bit later we adjust it and say "This is what the actual ARP is". It is about giving the customer the best available information we have on what they should expect to pay.

What Jeff said earlier is important about overseas dealers. Taxes and shipping are hard on overseas dealer' prices. It is a lot in some countries. So we are trying to figure out a way to report the information and also put the European and Asian pricing into perspective for folks. For a lot of Europeans it is still better to buy from a distributor or dealer in UK or Thailand or Canada or other out of the USA dealer we have there. Support local or close to home dealers and you will insure their remaining in business and get closer to home customer service. There is a lot more thinking to put into this so we are looking for input into how to set up this and remain fair to our out of USA dealers too. If you don't want to post it here feel free to email me at mike@eseeknives.com .
 
R.A.T. said:
We also have to take into account that international dealers and distributors have to pay a higher pirce for our product since they have customs charges and taxes that we don't have in the States. So, in the end we will look to find a way that it will be beneficial, information-wise, to the consumer no matter where they are.
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That is exacty why I do not mind spending a little more to have a nearby dealer and the convenience of ordering in my own country. The mark-up is not extraordinarily higher than U.S. prices.

My only wish is that the dealers here carried more accessories , spare sheaths , and other Esee paraphenalia. I will mention it to them next time I speak with them , as it's probably just a question of them ordering it.

Thanks Jeff and Mike for considering the end user in your products , and constantly trying to improve things. That , I believe , is why you have a loyal and happy customer base. :thumbup:
 
Since I have a pretty poor understanding of economics (and most other things in general) I don't know that I should offer advice on pricing, but I will share something that was very helpful to me.

When I purchased my ESEE 4 a month or so ago, it was absolutely imperative to me that I purchase one (including shipping and handling, taxes etc) for UNDER $100. This might sound arbitrary, but when your wife lets you have EXACTLY $100, "and that's still too much for a knife" :rolleyes: it was very important to me that I find an ESEE 4 at that price, otherwise I couldn't have one.

This same sort of situation came up when I bought my Izula over the summer, since $47 was still under $50, it was not as big of a deal.

I'll be damned though if that hasn't been the best 150 dollars I've ever spent! :D
 
It isn't so bad for Canadian dealers. Europe is really bad when it comes to taxes, particularly Eastern Europe. I have heard of Polish customer spending 3 weeks paycheck to buy one of our knives! We need to set this up so that it reflects the different economics of different countries/continents. I think it will probably end up being a different ARP for different Continents.
 
I think it's a great idea, it means that the retailers can compete in different ways. So I might look at the average for a Junglas, and see that out of my three best options I have one canadian store, and two in the US, then I can decide if the difference is a few dollars, if there are other benefits, ie, not crossing the boarder, faster shipping, other products I want to add to said order. New stores will have a base-line from which they can gauge customer expectation, and customers without the benefit of google-fu will have a better idea of expected price. Although I don't think there are too many people left who can realistically "shop around" for knives in real life. I think that the only people who would see this as "unfair" are those who have been marking up the product because they can get away with it, not because they need to.

I think MSRP is a lot like mattress sales, make it for 500, list it for 5k and then mark it down as a "huge" discount.
 
Thanks for this. MSRP has always annoyed me for at best being useless and at worst resulting in additional effort to google around for prices and compare them, hoping the sites found are representative of the prices on the whole.

I'm curious to see how the ARP is going to be calculated. How big is the dealer network nowadays? I imagine it will be somewhat difficult.

Maybe you could say you'll put a dealer up on your webpage as long as they give you their prices--free advertising (in a sense) in exchange for going out of their way to provide you with the data for the ARP.

As for the math part of it, if you went with the median average , you wouldn't have to worry about a few rogue dealers underpricing certain items because the median is just the middle value if you took them in a list from low to high. The reason some statistician would use the median over the mean is to get rid of outliers, in fact. For the consumer, the median will show that there's an equal number of dealers selling the knife at a higher price as there are dealers selling at a lower price, which, I'd argue, characterizes the market well. The mean, on the other hand, is going to be skewed by outliers.

edit: I should mention the reasons I suggest the median is that the dealer and distributor network is moderate in size, and pricing seems to be within a moderate range with a small amount of outliers. If I'm wrong about any of that, the median could be the wrong choice. A real statistician or modeler would first collect the data and then throw it in SPSS or another statistical software package to play around with it. In other words, without the actual data, coming up with the best average is basically guesswork.
 
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Interesting concept, I'm looking forward to see how it works.
When researching a product for purchase, I generally look at MSRP and divide by 2, then add 30% for shipping and profit margin and start looking for dealers in that price range, obviously looking for those on the low side of the estimate.
Say a knife has an MSRP of $185.
half of that is $92.50. (wholesale price)
130% of $92.50 is 120.25, so I look for prices under that.
(for the math geeks out there, yes, this is the same as taking MSRP times .65)
 
I live in Hungary, and even though $100 would be quite a lot of money for a knife, I still regard it as an acceptable price, however, by my calculations, if I ordered an ESEE-4 from a certain US retailer at a price of $109.95, I would have to pay $186.17.
 
I think it's a good idea. I already use Google Shopping to search the web for the lowest prices that vendors offer knives for. Sometimes with ESEE knives it can be hard to get accurate comparisons though because of all the different ways they are sold; micarta handles, the knife alone, the knife with the sheath, the knife with the survival kit, and in multiple colors.

If you are good enough with your search terms you can get it narrowed down quite a bit. http://www.google.com/products?q=bl...ent=firefox-a&um=1&ie=UTF-8&sa=N&hl=en&tab=wf

To me it seems like the average price to pay for a black izula with the survival kit is $60.
 
the only thing that's good about MSRP is for insurance value.
Jeff & Mike you two are out of the box!who would have thought,even more honesty & realism.
I love it!!
 
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