Pickup Pricing

[jrdamien]

I'm not sure this is a question so much as a conversation starter. I've been making pickups for a short four or five years. It started as a hobby and then, as I got better, progressed to me making pickups for friends at cost. Then, I started selling some at a fairly low cost. Now I am at a point where this low pricing has (as Lollar has predicted for all such businesses) become a hindrance.

How is everyone setting their pricing? Right now I am primarily trying to compete with Duncan, in that they are very well known, very well liked, discussed ad infinitum online, and are affordable.

But mine are handwound and mostly custom.

Anyway, I'm hoping a little discussion will help me.

[Richard]

I'd probably set my prices at least at what the major manufacturers charge. Is that enough for you to make money? I expect to pay $70-100 for a pickup and am happy to pay that to get what I want. If your custom winds offer a better sound I would be willing to pay more but I am confident I can get a pickup in that price range that I like so you are offering primarily a more personalized experience which adds value. I say this as someone who likes to swap pickups, not a winder or retailer. Realistically the raw cost is probably under $10 for a major manufacturer so the majority of what I pay for is reputation and selection and expertise.

[jrdamien]

I'd probably set my prices at least at what the major manufacturers charge. Is that enough for you to make money? I expect to pay $70-100 for a pickup and am happy to pay that to get what I want. If your custom winds offer a better sound I would be willing to pay more but I am confident I can get a pickup in that price range that I like so you are offering primarily a more personalized experience which adds value. I say this as someone who likes to swap pickups, not a winder or retailer. Realistically the raw cost is probably under $10 for a major manufacturer so the majority of what I pay for is reputation and selection and expertise.

Thanks for your insight. I think one of my new concerns is that, while the major manufacturers can charge an affordable price, they can do so because of their incredibly low "raw" cost.

It costs me quite a but more for materials, packaging, etc. The obvious solution is to raise prices but there's a point at which I leave the world of affordable and enter the world of "at that price I mine as well buy ...."

[Mick Bailey]

Retail pricing is usually between 5 and 6 times the burdened cost of production. That's for a manufacturing environment, though. Your final figure may be a different calculation depending how much you pay for raw materials and other overheads. If you're selling direct then that helps you to maintain profitability.

I doubt whether you're actually competing with Duncan, just like if I build a few pedals I'm not competing with Electro Harmonix. A lot of my customers here in the UK buy pickups from small-scale producers in the US. Generally cost is not a barrier - we have shipping, import duty and sales tax (VAT) which bumps up the price way beyond what mainstream producers are selling pickups for via worldwide distribution. Identify what the primary selection criteria are for buying a pickup and I bet cost is not the main consideration, other than for someone replacing a damaged pickup in an imported budget guitar.

If cost is the primary factor in your sales model, then that's a downward spiral and you'll always be scratching round at the low end of the marketplace. If your margins are too slim, you lose incentive and diminish the prospect of growing your business.

[big_teee]

That is a big dilemma with hand made pickups.
If you nearly give them away you can stay busy.
If you charge what the retail is for name brand pickups, a lot of customers will buy the name brands.
At first it is fun, but then without much compensation it becomes a chore.
I live in an economic depressed region, not much money here.
IMO you can make more money doing nearly anything else, paper boy, mowing grass, etc.
T

[Alberto]

It also depends on your business model. Selling directly to customers (usually e-commerce) is different from selling through dealers and music shops. Dealers and music shops buy at a discounted price (-40%/50% I guess), so in order to have the same mark-up you have to almost double your prices.

[Mick Bailey]

There are a lot of people winding pickups, like there are a lot of people making jam at farmer's markets. Other than cost, what would make someone buy yours?

[jrdamien]

Retail pricing is usually between 5 and 6 times the burdened cost of production.

Is this a standard of some sort?

I doubt whether you're actually competing with Duncan, just like if I build a few pedals I'm not competing with Electro Harmonix.

I obviously didn't mean competing in this sense. I meant price point.

If cost is the primary factor in your sales model, then that's a downward spiral and you'll always be scratching round at the low end of the marketplace. If your margins are too slim, you lose incentive and diminish the prospect of growing your business.

Right. That's kind of the premise of the post.

[jrdamien]

There are a lot of people winding pickups, like there are a lot of people making jam at farmer's markets. Other than cost, what would make someone buy yours?

Quality alone. And I'm lucky to be in this position.

[jrdamien]

That is a big dilemma with hand made pickups.
If you nearly give them away you can stay busy.
If you charge what the retail is for name brand pickups, a lot of customers will buy the name brands.
At first it is fun, but then without much compensation it becomes a chore.
I live in an economic depressed region, not much money here.
IMO you can make more money doing nearly anything else, paper boy, mowing grass, etc.
T

It is a big dilemma. Yuge.

I'm absolutely charging enough to stay in business and stay solvent at the level of business I am at. But I am also stalled as a business. The ideal situation is to charge enough that I can afford to get custom baseplates made, bobbins molded, etc. But even that seems like a middle ground that is far away.

And maybe that is how it will remain and so be it. But it's definitely more profitable and far more fun than mowing grass or throwing papers!

[eschertron]

There are a lot of people winding pickups, like there are a lot of people making jam at farmer's markets. Other than cost, what would make someone buy yours?

Quality alone. And I'm lucky to be in this position.

So you have an effective marketing strategy that persuades potential buyers that this is true? If so, you are very lucky!

[jrdamien]

So you have an effective marketing strategy that persuades potential buyers that this is true? If so, you are very lucky!

Is word of mouth considered a legit marketing strategy?

There are a TON of custom pickup makers. I hear from a lot of people who have bought a custom pickup and hate it/think custom pickups are a waste of money/wish they'd bought something more well known. I tell them I'll give them one of mine for free and if they don't love it they can just give it back. If they do love it, they pay me.

A lot of this, I think, is psychological. I know it is.

[Mick Bailey]

The production-to-retail is rule of thumb, not a standard. It's something I came across early on in business development seminars.

A lot of people do buy custom pickups and dislike them, often from A-list winders. But then again, people buy from mainstream manufacturers and dislike those as well. It is psychological - but then again, that's the whole basis for music. I have some customers with an endless churn rate for pickup replacement; I fit pickups one week and swap them out a month later for something else. These are pickups from reputable makers, too.

Within the parameters of a specific design, there's only so much variation unless that particular format has some innovative aspect. I think many players expect too much with a pickup swap. I have one guitar that's had three sets of Strat-type pickups in succession. Apart from the labels on the boxes they could have all been made by the same person, and they all sound pretty similar. But the customer is endlessly seeking some indefinable improvement.

The killer for me was I got sent a set of Strat pickups, hand-wound in China. I still have them fitted on one of my guitars and have no intention of swapping them out. The trade price on the set was £17 and they sound as good as anything. Now I just do rewinds for a few regular customers.

[kayakerca]

There are a lot of people winding pickups, like there are a lot of people making jam at farmer's markets. Other than cost, what would make someone buy yours?

Quality alone. And I'm lucky to be in this position.

Totally agree. . .

From my limited experience as a very small time boutique winder (doing local area sales only), I find if you are a small guy, reputation and world of mouth are king.

My favourite Luthier and best customers once told me he had a set of mine he had just put in a customer Strat and he also had a Strat with a set of Abigail Ybarra Custom Shops. He told me preferred the tone of mine better, all day long. I think I sell more pickups to this one luthier/guitar tech than any other. He's a very driven and talented young guy. He's in the midst of having a MONSTER spray booth installed so he can do Nitro. He also has one of the 3 Plek machines in Canada and is the tech rep for maintenance and installation on all Canadian Plek installations going forward. Talented enthusiastic youth and half my age. Arghhhh. . . But hey, I can get out fishing any day I want now.

I've thanked him many times for the complement, but told him I wasn't reducing his dealer pricing because of it. Tone is a very personal thing.

[eschertron]

I think I sell more pickups to this one luthier/guitar tech than any other. He's a very driven and talented [snip]...

That's the kind of business relationship that can lift both parties! Congrats!