Odin’s Opinion (7): Fuck Value-Based Pricing!

A long time ago, somebody told me that perception is reality. The way in which people perceive the world defines the way in which they act in that world. Perception precedes action.

More recently, someone told me that price reflects perceived value. As the price of Item A is higher than the price of Item B, this must be the result of Item A holding more value. That’s the perception, it seems.

The two paragraphs above quite nicely summarize how we screwed up part of our marketing, here at iStill. Let me explain that by highlighting some of the value that we bring to the industry:

  1. Only the iStill can make any spirit on one and the same machine;
  2. Only the iStill can mash, ferment, distill, and age in one and the same machine;
  3. Only the iStill combines the advantages of the Maillard Reaction and on the grain distilling for 25 and 20% more flavor respectively;
  4. Only the iStill can reproduce a recipe perfectly;
  5. Only the iStill is fully automated, robotized, and has air pressure corrected cuts as well as a spirit library;
  6. iStills need 0.2 FTE to be managed and operated, versus 1.2 FTE for other stills;
  7. iStills have the best build quality, which is reflected in our industry-leading warranty terms;
  8. iStills come with the best support and service;
  9. iStills come with the iStill Distilling University, the industry’s best educational program;
  10. iStills are three to four times more energy efficient than “traditional” stills.

Ten points to make a point. And I could easily add ten more to the mix. The point being? As far as stills and distilleries go, iStill offers the best value by far.

So … where do we screw up? Is it our pricing policy? Our pricing is consequently too low, potentially negatively affecting the perceived value our stills and distilleries offer.

Why is perceived value important? Because if distillers that use iStills take our amazing innovations for granted, they run the risk of taking themselves and their amazing spirits for granted. If value perception does not reflect value delivered, there is a big risk of reputation erosion. What’s valuable makes one proud, what’s considered worthless makes one indifferent at best.

So again … where do we screw up? Is it our communication strategy, maybe? Our communication about pricing has always been open, contrary to the accepted rules in our industry. But maybe we haven’t highlighted enough how much we offer, given our pricing, and why we choose to try and keep our prices as low as possible?

How do we solve these problems? I think there are basically two routes we could follow. The first one is easy and obvious: iStill raises its prices! The second one is less obvious, slightly more subtle, and requires your help: let’s raise the awareness as to the amazing equipment you run!

Here is a first attempt. I hope you find it thought-provoking:

  • Your iStill 100’s intrinsic value easily exceeds 50k;
  • Your iStill 500’s intrinsic value easily exceeds 100K;
  • Your iStill 2000’s intrinsic value easily exceeds 200K;
  • Your iStill 5000’s intrinsic value easily exceeds 300K.

Proof? There is nothing out there that comes close to – for example – an iStill 2000 at under 200K (or at 400K for that matter). And EUR 200K as established intrinsic value is a very, very conservative number. Especially when adding efficiencies, savings on labor, and savings on installation costs to the already impressive and futuristic technology-mix.

How much does hiring an additional 1 FTE in workforce translate to? Around 40 to 50K annually. And if you save 250 kWh per run on energy costs, while performing 250 runs annually, that’s another saving of around EUR 10.000,-. Over a period of just 10 years, the energy and manpower savings alone amount to 500 – 600K. How would it feel to look at your bank statement and see that kinda money staring back at you? If you want to know how that feels, you need to buy an iStill!

Now, since the iStill comes ready-to-run, and does not need a steam boiler (so 1867!) or extensive piping and tubing, add another 100K of savings to your calculations. Do you see where this is going? Exactly, establishing the intrinsic value of an iStill 2000 at 200K is way too conservative.

Doing the above math really helps establish a more correct assessment of what your iStill’s value is. Much better than establishing its value via our prices, because those are based on us wanting to help you take the battle to Big Alcohol.

“Distilling made easy” is our north star and lower prices help us equal a very biased playing-field. Put differently: investing in iStill equipment is more than “just” investing in state-of-the-art, hyper-efficient technology. Investing in iStill equipment is also an investment in a company that is invested in the craft distilling industry’s long term success, opposing Big Alcohol.

With all that in mind, shouldn’t we be a little prouder, while manufacturing, selling, purchasing, and running those +100K, +200K, or +300K iStills? I mean, if we were to pursue value-based pricing, and really raise our prices, we (iStill) might win in the short run, but we’d all lose to Big Alcohol in the long run. So here’s the management summary on value-based pricing:

Fuck value-based pricing …

download

http://www.iStill.com

One thought on “Odin’s Opinion (7): Fuck Value-Based Pricing!

  1. I watched a few videos of iStill and this blog , trust me you are really disrupting the traditional brewing . You have successfully chosen and marching ahead on un-trodden path. Congratulations

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