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Pen Views

March/April 2010

Who Sets the Price of Pens?

 

A regular question asked is who sets the price of fountain pens? Have the prices gone too high? I started to do a comparison of pen prices from 208 to 2010. Yes there are some significant price jumps this year, but the price increases are not consistently across all lines. That goes against the thought that the cost to produce is the primary driver.

I reflected on my visits with leaders of various pen companies, my review of annual reports and other business documents and I concluded that market forces we are the primary reason there are such high pen prices. We as consumers are part of the market forces.

We by our buying actions define what the market will bear in terms of the price of a fountain pen. If no one would pay $1,000 for a fountain pen, then manufacturers won’t market pens at that price. Obviously, that is a hypothetical example, as pen prices have gone well above that point for some models. But why?

Cost to Produce

Retail prices are driven on a number of factors. The cost to produce is just one of the factors. I have visited a number of pen factories and I am always impressed at the detailed production steps and the time it takes to manufacture a fountain pen. Celluloid has long baking times, is fragile in some of its states. Lacquer finishes involve the application of many coats in sophisticated negative-pressure rooms to prevent dust from wrecking the final product. Individuals parts of a pen are cut for exact measuremetns, coated and polished. There is a considerable amount of hand work in a high quality fountain pen. But this is only part of what sets the price of a fountain pen.

Marketing Strategy

The price point is a combination of marketing strategy and market acceptance. Manufactures set price points to help determine the value and status of the pen.

I think Dante del Vecchio of Visconti pens put this challenge in perspective. I visited with him a few years ago at their headquarters in Florence. He started with the decision one would make to by a Ferrari. No one needs to spend that amount on a car. But when one wants a Ferrari, because of what owning a Ferrari means, then the decision moves from a need to a want. While no one needs a fountain pen that costs $600, when the individual moves from the perspective of need to want, then the price is more based on the value the individual holds in owning the particular pen.

Brand value and perceived value of ownership are avenues to maintain price points and support demand for the product. The marketing strategies of companies such as Newell Rubbermaid, owners of Waterman and Parker, or Richmont Group owners of Montblanc all use brand value as a key part of their marketing platform.

Newell Rubbermaid outlines the strategy to maintain and increase the value of the brand as part of its strategic focus in their Annual Reports and other corporate documents. "Waterman – Luxury accessories to express yourself with uncompromising sophistication and imaginative style" is the caption for the product line. The transforming business model is to move from manufacturing products, to the "marketing of brands that matter".

The Richmont Group, owners of Montblanc and other high-end pen companies has proven expertise at maintaining a high perception of brand value. Montblanc is known for its messaging of quality. The company sets specific showcase standards for retail stores and does not allow web sites to include prices of their products. No ability for retailers to undercut each other and and have an influence which can bring the value of the product line down. Montblanc has been very successful.

Delta 2010 DemonstratorBut in the end, we the consumer set the price. That is why I found a recent sale of a fountain pen on ebay very interesting.

A demonstrator pen by Delta fetched a relatively high price. Demonstrator pens have clear body segments so that the inner workings of the pen are visible. Here was a fountain pen that rather than having a celluloid body, which is time consuming and costly to make, has basically a tube for a body in which the nib section sits, and the threads for the cap to be attached. This pen sold for $415. The seller noted there was a suggested retail price of $795. Really? (To mimic the name of a skit from the TV Show Saturday Night Light.) What would make that pen worth $795? Not the nib section and cap?

The answer of course is that Delta has only created 100 of the pens and there is a market for "demonstrator models". (I was to visit Delta last year but unfortunately the visit had to be cancelled. I hope to visit the Delta factory this September and this pen will be included in my questions. There may be more to making the pen than I am giving it credit.)

The Motivation for Buying the Pen

I guess in the end it comes down to the motivation for buying a pen. Limited Edition pens are an example of where there is a limited production, and the perception of increasing value, sales will follow. For those who buy "regular production" pens, it is the value one has from owning and writing with the pen the dictates the price point.

I have talked with numerous pen retailers who can speak to how a particular line of pen was just priced wrong. For the same or slightly more, the person could buy "x". In some cases the "x" was not necessarily a better pen, but one that held a better perceived value.

So keep your eyes open on pen prices. Be vocal to let retailers know when a price point has "crossed the line". The stores are a valued communication line back to the manufacturer. In the end, sales speak the loudest, but comments back from the consumer are always important.

In May last year I asked the question and placed an on-line poll on the site. What is your price point? The majority indicated the $200 or $400 range. with the next should price point, $600 or $100 also receiving a fair number of comments.

 

Enjoy your pens! Your pen, an expression of you.