“You get what you pay for” is an old saying that suggests quality is a direct reflection of price. Although this cost to quality relationship may hold true for some items, it is most certainly not true to all. In fact, in many industries, production cost may be significantly less than unrelated costs, such as advertising.
Consider: The production of a pack of cigarettes costs an average of 22 cents. In Wisconsin, the average consumer price is over $8.00!
If you familiarize yourself with Mike’s Mix you will notice that our products cost significantly less than our competition. Our mission has, and will continue to be, to keep the majority of consumer cost paying for the ingredients that constitute the product. While some related expenses can’t be avoided, such as packaging, freight and other production costs, we have found that many others, such as advertising, can be.
High Quality Ingredients
Although we have been known to pinch a penny, we feel strongly about purchasing quality ingredients and are willing to pay more for the best. Our whey protein is a prime example of this. After sampling over a dozen different proteins, we chose the whey we currently use because there was a noticeable difference in taste and mix-ability. Additionally, we continue to be impressed by the manufacturer who patiently answers our never ending product questions, has been a great resource for product development and always provides a certificate of analyses*. The analyses is important because it assures that each batch of protein is free of heavy metals and other contaminants. Our protein manufacturer charges a little more than the competition but, at least with wholesale protein, you get what you pay.
*I share these batch analyses with customers, Contact Us, for a copy.
Paying to tell people about your product is expensive and must be adjusted into the consumer price. A fairly large percentage of the average cost of most well-known products goes directly to advertising. Magazine ads, which can cost as much as $20,000 or a 30 second TV commercial campaign for $100,000 will definitely help brand and sell a product, but at what cost to the consumer?
Even before launching our first product, an important part of the company mission was to keep customer pricing relative to production cost. We made the decision to forgo advertising with hopes that our competitive pricing would generate enough word of mouth to support sales…. and it has worked!
Word of mouth marketing is just another tactic for sales and although we will probably never be a nationally recognized brand, we have a loyal and solid customer base who keep making the decision to tell a friend about our product instead of paying the markup for advertisements.
You don’t see Mike’s Mix in a lot of retail locations and you most likely won’t. Why? We looked into it and this is what we learned: We can’t sell our products at the same price online if we choose to be available to retailers.
If we chose to be available to large retailers we would have to go through a distributor. Distributors mark up the price and sell to retail locations. Retail locations then mark up the price (usually 50%) or more for the final purchase. There is nothing wrong with this system as both distributors and retailers have operating expenses to cover, i.e. rent, employees, utilities, etc. They are not out to screw the consumer, it’s just that the consumer must end up paying for the convenience to purchase goods at a nearby location.
A couple of years back when Mike’s Mix started to take off a bit, we spent a fair amount of time in discussions with several distributors and retail chains that were interested in selling our products. We encountered a major roadblock. We would have to raise our prices online.
By the time we figured in distributor mark-up, freight and retail mark-up, the consumer price was 172% above wholesale! Meaning, if the retail price is $59.99 and we are selling the same product on our website for $26.99, there is a definite conflict of interest. Most companies get around this by either not selling products directly from their sites or matching retail. It was a hard decision to make but in the end we decided to forgo this path even though it most likely meant limiting our growth rate.
Although it troubles me when a potential customer assumes that the quality of our products is inferior to our competition because of the price discrepancy, in the end, I believe in our company mission and will keep product pricing in line with ingredient cost. Although this means we will likely stay a small business, Melissa and I are making a modest living and we are happy. We have complete control of the business and we are able to make a product that we are proud to call our own. Thanks for keeping Mike’s Mix affordable. Tell a friend!