Economic Theories on YoYo Pricing


(DarkPirate) #1

So some of us were discussing the upcoming Yeti and Rally release in the Chatroom, and I had an economic thought about yoyo pricing.

I wonder if some yoyo companies intentionally increase the price of their yoyos to give them an economic illusion of greater quality. This would let customers see that one yoyo is priced higher then a different yoyo and think that the more expensive toy is better.
I suppose it doesn’t really matter, since we’ve proven that we are happy to drop $150 for a yoyo, but other less popular companies recently released plastic yoyos that were far cheaper(surge) then the proposed Yeti/Rally price($40/$45)

So, As much as we love CLYW and OD, and I know that making a new plastic is expensive, Is it possible that the proposed price point for the new release is higher then necessary because it will make the new yoyo more desirable?

Yay Economics! ;D


#2

If anything, the Rally and Yeti’s price points make me want to buy a V and Crazy D instead.


#3

Aoda is a perfect example. They sell copies of popular Yoyofactory yo-yos for a fraction of their cost ($5-$20). And they don’t play that bad either. My Aoda PXY plays quite well along side my other metals.

But the thing to remember is that these yo-yo companies are businesses. One of their goals is to make good profits. Again with Yoyofactory, they probably bump up their prices to make profit but, they truly do a lot for the yo-yo community and thus I have no malice towards them. They have to send their players on tours and to competitions, pay their office staff, as well as verify the quality of their yo-yos produced in China. They also provide AMAZING customer service :wink:

As you mentioned, unless players start boycotting, which is highly unlikely, prices will probably stay the same. If one truly looks around and is patient, they can pick up the hobby without having to spend hundreds of dollars. But who knows, maybe some of these other brands are hardly making any profit and the yo-yo is actually priced close to its real value.


#4

I think yoyos are like any other product. You have cheap mass produced stuff: Imperials and butterflies. Then you have more solid midrange mass produced stuff: Surges, Classics, etc. Then you have higher end mass produced stuff: the metals and delrins. And then you have the boutique stuff, made in small batches for real enthusiasts.

Usually, you can get 90% of the products capabilities at the mass produced level, and the boutique stuff is where you can eke out a smaller increase in performance that you can’t always get in a mass produced setting, and the boutique manufacturers have higher labor costs. This happens in high end audio, musical instruments, and many other types of products.

I tend to enjoy the boutique line of stuff, and have 9 YYR metals, 4 TPs, an Anglam and an AnglamCC, a Sakura and a Summit, and I still think the magic yoyo N8 (not the N8s) with a good bearing in it is a solid player that I would not hesitate to recommend to anyone, and I love my classic. Both of these are under $20.


#5

I believe a big reason the CLYW/OD plastics are priced higher is that this is their first entry into the plastic market- Molds are expensive, so they’re trying to recoup costs. And I played a Rally at BAC, it’s in a different league than plastics like the Classic/Surge/Flipslide/etc.


(SR) #6

I would say the Rally is worth the price. Got a chance to play one at DXL, very good, heavier and thinner than I was expecting it to be but very good.


#7

I think they price yoyos at high prices to keep people from buying it. It honestly wouldn’t be that cool if everybody had a collection of CLYW


#8

Yes, because the goal of a company is to have people NOT buy their products.:smile:

I sort of get what you’re saying though. Do you mean they price them like that to make them more collectable?


(DarkPirate) #9

I definitely think that the high price point and the difficulty of getting CLYW, is part of their appeal. Obviously they make a great product, but I don’t think it would be as popular or well regarded if they sold the same equipment down in the $60-$70 range.


#10

Of course pricing extremely high makes things out of reach for most, therefore, something to make you lust. Look at, just about, any other product in any market. Marketing is your life.


#11

why won’t companies share how much $ they are making off of us? lol ;D


(M²) #12

Because its probably not much.


#13

Yeah I doubt it’s that much. Not like the clyw or one drop team pulls up at a meet or contest in a stretch phantom.


#14

I hear yyfben just got a Bugatti…


#15

Like a lot of retail, the ‘standard’ is that the manufacturer sells it to the retailer at a 100% markup, and then the retailer sells it to the public at another 100% markup.

So if a yoyo sells at YYE for $100, YYE bought it for $50, and it cost the company $25 to make.

So no, yoyo manufacturers don’t make much. If they sell $5000 in yoyos, they have $2500 to cover all other costs that aren’t directly related to producing yoyos. The REAL winner in this equation is the retailer. They make twice as much profit as the manufacturer, and they sell all the different manufacturer’s products. Their overhead is presumably a bit more than companies like CLYW, since they need customer support staff, serious server space/bandwidth, etc; but presumably a lot less than duncan/yyf.

EDIT: Thought to add, that’s the standard model, but it’s not universal. Companies like aoda probably make way less than 50% profit, but rely on huge bulk for considerable profit. Companies like CLYW probably make more than 50%, since their yoyos are (economically) identical to a lot of $100 metals, for $150.


#16

The issue with pricing is that there are so many costs that factor into not only making a product, but maintaining a business, that have to be accounted for. Some businesses are a one person sole practitioner operation, others are large companies with numerous staff. Some are working out of their basement, while others have an office and they have to pay bills and salaries and other expenses. Not to mention that if they profit, they may have to pay taxes and put funds aside for the next project. Businesses that cannot keep all that afloat…die off. So, prices are probably reflective, not only of the type of product made, in this case a type of yo-yo, but also the costs of keeping the business going. That varies from business to business, so we will never be able to tell why the prices are set where they are.

While it is not always true, for example, a smaller business may produce less yo-yos, but raise the price per yo-yo to turn a profit. That business likely has less office space, equipment and staff to maintain. A larger business might mass produce a lot of yo-yos and be able to lower their price per yo-yo, but due to sheer volume, they are still able to turn a profit, paying salaries, and expenses for that business. We will never know if some of these businesses took out a loan and incurred debt to start up, which would just be another cost. The fact that we have no idea, makes it impossible to really judge prices and whether they are fair. In order to really know, we would have to know all that goes into making the product, and all expenses of running the business. They will never tell us that information.

I would agree that some companies might set prices a bit higher, to maintain their image as a “high end” manufacturer, in an effort not to cheapen their image. That might be true, but I am not sure to what extent. I guess I would call it pure speculation, because there is no way to know for sure.


#17

For every 1 person that buys a yoyo because it’s more expensive, and therefore should be better, there will be 10 that will chose the cheaper version instead because either they don’t have the money to drop on the big one, or they simply don’t think it’s worth the extra money.
So from an economic point of view, your premise is completely flawed. Businesses increase the price on their products to increase their profit margin, not to make it look better on the views of the consumers. The cheaper they target the product, the more it will sell, what changes is the profit margin.

Obviously, if a manufacturer plans on making 100 items, knowing that they will sell out at $100 each, selling them for $50 is just bad business decision. Selecting product prices is super complicated, but it does not involve getting “status for the high price”, it involves “how high can I target this to make the most profit”.


(WildCat23) #18

The Rally’s price is spot on. The Yeti on the other hand is overpriced IMO.

You forget Aoda hasn’t released a “New” copy of a yoyo in a long time; possibly 3 years now.

Actually, when you look at it, most companies are making a fair profit for the size company, parts cost, etc.

*Most refers to the overwhelming majority of companies. An unnamed company however, price’s of MiC yoyo’s are marked up to nearly the price of MiA yoyos. This I do not like.


#19

I agree that if it happens at all, using higher prices for status, it would be an increase by a small margin. I think one of the main things companies look at to determine prices, is they look at comparable product prices already on the market for similar items. When I took economics in college…in the moments I was paying attention anyway :smiley: there was some interesting discussion about this.

For example, if we set the price range for a plastic yo-yo, from $5 (Duncan Butterfly) up to $75 (delrin?), a company has to ask themselves questions. For example, they have to ask what other products are “most similar” to theirs. If I determined that the closest products to my Delrin yo-yo in material and manufacturing costs, are the Volume (high), Halo (midrange), and Sun (low), I might approach it this way:

Hmmm…my product is also a Delrin like the other three, but it plays better than the Sun, yet costs less to make than a Volume, so…I think it is most similar to a Halo, which is selling for $60. Therefore, I am sure mine will sell at $60 and compete in the same market with the Halo. In fact, I think due to the shape and size people will prefer mine over the Halo.

Now, I’m just using those yo-yos as examples for the thought process. But, one must consider the profit margin as well as the prices of competing yo-yos. Every $100 yo-yo is competing with every yo-yo in general, but especially in direct competition with throws similarly priced at $100. The competition within that spectrum has nothing to do with price…as they all cost $100. Now, the selection of the buyer is based on “preferences.”

For example, you can buy Kellogg’s Raisin Bran, or Post Raisin Bran, but at the end of the day, while they are priced about the same, buyers are choosing one or the other based on “preference.” Some people just prefer one brand in general over the other (been buying Kellogg’s for years), while to others the preference is not a brand specific preference, they realized one has more raisins than the other. The Post cereal might have crispier flakes and less sugar…others might prefer that.

So, same with yo-yos. A $100 One Drop and a $100 YoyoFactory will sell not only due to what the yo-yo offers, but some people will choose one over the other just due to the brand. Nothing wrong with it either way…just how it works. One person might be a loyal One Drop fan and buy the One Drop, while another person likes the fact that YoyoFactory includes extra response or a multitool with the yo-yo, so they will spend their $100 on that. For others…they just like the looks of one yo-yo over the other and none of that dictates.

In prior discussions about this on the forum about prices, I’ve seen people discussing the cost of making the actual yo-yo. I hear nothing about the yo-yo company’s office bills, staff salaries, promotional items, cost to mail yo-yos to and from anodizing and to stores, the cost of packing material, boxes, artwork, web hosting, airfare for team members…taxes. But not only considering all that, they have to look at what other yo-yos are similar on the market. These prices are usually carefully dialed in. The price is dialed in just right so the yo-yos are not sold too cheaply when more money could be made. But, it is also a mistake to price a yo-yo too high, and have it sit on the shelf and turn people off. How many times have you seen that happen?

If I were in the shoes of a manufacturer, I would rather price a tad too high and drop the price a bit if necessary (but do it sooner), rather than price the yo-yo too low and raise the price when it starts to sell. People get really angry when you start off low and raise prices, but they are usually more happy to see a small price drop. As a business, I would approach it that way.

I like the title of this thread…feel like I’m back in college or something. :smiley: Nice thread.


#20

That’s a fine post TotalArtist. I especially like that you prefer Kellogg’s over Post. Post Raisin Bran is not as good by a wide margin.

Also, pricing a yoyo high just to add perceived prestige will not work unless the yoyo competes favorably with other’s at it’s price point. How many posts do you see that say things like: XXX yoyo doesn’t play that great for a $60 yoyo, but would be a great yoyo at $35. I can’t imagine the high end yoyo market is that large, and people need to make a living. Salaries are expensive. Machine shops with CNC equipment are too. Skilled machinists make respectable salaries. Someone has to pay this, and it is us, by buying their products, and these costs are built in. I’m sure the material costs of the yoyo are less than 10% the total cost to produce it.