Did you know that Harrelson does not make a profit from our mouthpieces offered on Kickstarter?
It may sound insane, but I personally price our Kickstarter offerings at a loss. I'll share with you why I decided to take this approach and how we can all benefit from this decision.
You see, Kickstarter is a platform designed to help inventors and innovators launch new products. The key word here is launch. When a company, like Harrelson, produces a new product (we refer to them as solutions), we need to find a way to get the product name, concept, and actual hardware in front of the eyes of potential customers (our Harrelson family).
One way is to film a video and make an announcement on our website. Another approach is to combine this with spending money on an ad campaign through Google, Facebook, Instagram, print magazines, etc. And yet a third approach is to sponsor (pay) influential people within the market to endorse the product and brand.
The most common product launch techniques:
At Harrelson, we have a policy against paying for advertising or paying trumpet players for endorsements. You would be surprised how many people make a lot of money selling their name, photo, and a one-sentence endorsement for a product. But how many of those people actually use the product for the reasons you believe they do? Almost anyone would endorse a product for money because it's like getting free money! And the advertised products are usually included as a bonus.
So why don't I offer endorsements? The main reason is because endorsements are misleading and often lack transparency. The endorsing artist is surely not going to say anything critical or negative about said product or brand because, "you don't bite the hand that feeds".
I know this first hand as I have accepted tens of thousands of dollars in endorsements from leading corporations in the CNC machining hardware and software industries. I've been featured on the covers of magazines and in numerous articles in the manufacturing industry and even in publications like Audi Magazine (the German car company) and PBS on television. I have received some of the highest quality machine tools available today for absolutely no money. Now, why would I say anything critical of these companies or their products?
I personally know Bach and Yamaha artists who have received substantial clinic and performance bookings who would walk away from their endorsements in a second if I offered them the same type of contracts. I know because they have asked. In fact, I've had so many requests for endorsements over the past 15 years, that I had to write two previous blog articles on the subject in an attempt to slow down the requests. Would I like to work with these amazing trumpet performers? Yes, of course! But the nature of paid endorsements is the problem, not necessarily the people engaging in this activity.
You may wonder, what's the harm in paying someone to play my products?
Or maybe I don't pay them, but I give them a free instrument or a substantial discount? The problem is that this approach is unfair to You. Yes, you, the musician reading my words right now. I'm talking directly to you! By offering endorsements, my cost goes up, the product price increases and my sales increase. This usually works out to a better profit margin, but not a better price for the consumer. You see, companies charging you full price, while they are endorsing artists, will sell more products at a higher margin, which is exactly what I have been preventing for over 25 years.
My goal is to reduce the margins and offer better quality, more innovation, and a lower price!
This is the exact opposite of the corporate endorsement approach. I do this for one reason. I believe paid advertising is an unnecessarily expensive, and an unfair, way to do business from the perspective of the end user, you.
I'm the rare business owner who is truly customer-centric. This means that the customer is the focal point of all decisions related to delivering my products to create unmatched customer satisfaction and loyalty. My customers go out of their way to help others see why Harrelson stands out from the crowded marketplace because they have experienced this first-hand. Look at our Google and Facebook reviews and you will see people who get excited to play trumpet day after day!
Why have I chosen to take a loss on Kickstarter sales?
I want as many people to have access to my innovations as possible. Unlike many of my competitors, I do not have a board of directors demanding quarterly profits. Jennifer Sandquist and I own Harrelson LLC with no other share holders, meaning we can make decisions quickly, efficiently, and in the best interest of our customers, the Harrelson family. And we believe in sharing our solutions with you at the lowest price possible because we both experienced poverty as children. Almost everything of quality was inaccessible to us until we experienced success with this company.
How much does it cost to make the SpectraTone Series mouthpieces?
This is the transparency you will not find with other companies likely spending 20-30% on advertising and endorsements. The true cost to produce each SpectraTone variation and launch it on Kickstarter includes the cost of our team to achieve the following:
How do you put a price on all of this work?
Combine the physical material expenses with the time/labor costs over the period of time dedicated to the project. This is more difficult to predict, but easy to define after the Kickstarter campaign has ended and all rewards have been shipped.
How much money did we bring in from Kickstarter?
This is determined by subtracting expenses from the gross Kickstarter sales.
How much money did we lose by offering you the lowest price possible?
This is simply the adjusted sales number minus the cost to create, produce, and deliver SpectraTone to our Harrelson family of supporters.
We lost (invested into our clients) over $26,000 by offering SpectraTone Yellow to our Kickstarter backers!
The actual cost per mouthpiece was $304.76, which was substantially more than the $150 pledge that the first 55 backers paid. How can a mouthpiece that only costs $40.48 in materials actually cost $304.76? The answer brings us back to the beginning of this conversation, which is that key word, launch. In order to create a process by which we can deliver the highest quality solution to a relatively large number of people, we had to invest many weeks of time and energy focused on that one very specific goal.
Every time we launch a new product, there is a massive behind-the-scenes undertaking at Harrelson. If we had simply created the new mouthpiece and put it up for sale on our website without Kickstarter, we would have potentially invested 3 to 4 weeks at $7400/week for a total of $29,600 plus material costs just to deliver the first mouthpiece that sells for $350. That approach would have resulted in a $29,000+ deficit on day one. Which is better, a $26k deficit with over 250 mouthpiece sales and 211 customers, or a $29k deficit with one mouthpiece sale and one customer? Well, the goal is to share our solutions with as many people as possible, so 211 customers is better than 1.
We launch a new product or major variation every 3 months.
The average company in the brass instrument industry launches a significantly new or improved design, or product every 3 to 5 years. At Harrelson, we release a significantly new variation or product every 3 months, on average. Over the past 25 years, we have introduced over 100 new products in our industry including 6 major technological breakthroughs. The most important of these include; Standing Wave Efficiency, Variable Performance System, Venturi Gap Receiver, Gap Solution System, 5MM Modular Mouthpiece System, Muse Modular Trumpet, and SpectraTone Mouthpieces. Now imagine how much time and energy was invested in these product launches. Tens of thousands of hours.
How many SpectraTone Blue Mouthpieces do we need to sell to make a profit?
Again, it's not easy to estimate expenses as there could be hidden obstacles along the way, but our goal is to be 15% more efficient throughout the entire process on the current SpectraTone Blue versus the Yellow variation in 2021. Material costs are slightly more expensive due to some inflation, so we're budgeting for approximately $262 per mouthpiece if we sell 250 in this Kickstarter campaign. This brings our break even point to around $72,000 in funding on the Kickstarter campaign. Essentially, we will lose money on this launch unless we pass the $72k mark.
You must be thinking, "this guy is crazy, he's giving us the actual math and still believes this is good for his company?" Well, yes, I do believe this is good for you, me, and Harrelson LLC. My goal is not massive profits, but rather to get my products into the hands of open-minded, devoted, passionate trumpet players like yourself. Since my goal is to share my work with you, this is good! But I still need to make a profit, right? Absolutely! I need profit margins to grow Harrelson, and these exist in all of our offerings except when we launch new products. The regular price of a SpectraTone Yellow mouthpiece is $350 and the Blue variation is $400 due to the red brass upgrade. The same is true of our trumpets. In fact, we did not make a profit for the first two years of Muse MMXX trumpet production as these were all sold below cost, but now customers order them and there is profit to be made.
Will you invest in a SpectraTone Mouthpiece below our cost?
Now that you better understand my perspective, will you support me in launching SpectraTone Blue? This mouthpiece is a special variation of the 5MM system and all parts are 100% interchangeable. We expect to ship all rewards by the end of September. You can make this mouthpiece as warm and dark as you like. And it will transform into the brightest lead piece possible within seconds of changing the cup, throat, and backbore. I'm offering extra variations of throats and backbores below cost as well. Just select the throat and backbore add-ons you want after you choose to pledge for SpectraTone.
I would love to share my work with you. As you can see, I'm 100% committed to gaining your trust by providing effective solutions at more than fair prices. Feel free to leave me a comment or question here or contact me directly at email@example.com or call me at 303.657.2747.
I truly look forward to seeing your playing advance to the next level.
- Jason Harrelson