24 September 2013 | 46 Comments
I stood in line in the sweltering heat for what felt like hours. It was the middle of August, and the AC was broken at the St. Louis Division of Manufacturer’s Suggested Retail Price. Just my luck.
The paperwork in my hands–filled out in triplicate by typewriter, per the instructions–was sticky with sweat by the time I reached the the front of the line.
“Next!” called out the lady behind the counter. She was wearing those pointy horn-rimmed glass that went out of style in the ’50s, and her hair was in a bun so tight that her lips were pulled into a permanent grimace.
I slid the completed forms under the bulletproof glass and waited while the lady–Ms. Tennyflower, MSRP Administrator, the nameplate read–reviewed them. After a few minutes, she pointed the tip of her pen at page 4, section 3.
“You checked two boxes here. It says to choose one.”
I was prepared for this. “Yes, thank you. You see, it’s a winemaking board game–Viticulture–so I wasn’t sure if I should put it in the “games” category or the “wine” category. It has a little bit of both, so–”
“Is there wine in the game?” she asked, peering over her glasses.
“Well, like, wine tokens. But no alcohol.”
She was already scratching out the incorrect answer and stamping her approval on all three sets of forms. “It’s a game. Take these to Room 942. Your MSRP hearing begins in 2 minutes.”
Two minutes! I grabbed the forms and sprinted down the hall. The elevators were too much of a gamble, so I dashed up the stairs. I was gasping for breath by the time I made it to Room 942. The security guard at the door scanned the top form for Ms. Tennyflower’s stamp before taking the documents and ushering me into the room.
The room–more of an auditorium, really–was empty save a long, curved desk in the front. Two men and one woman sat behind it, each wearing a purple robe and an expression of superiority. Their average age must have been at least 65.
The security guard handed copies of my application to the MSRP judges. Without looking up, the judge in the middle said, “You can take a seat, Mr. Stegmaier.”
Where do you sit in an empty auditorium? I chose the second row and eased into a hard wooden chair.
“All rise!” said the security guard. I stood up. Such formalities.
After stating my name to the court and swearing in upon a copy of Freakonomics, the head judge asked, “Will your accountant be joining us today, Mr. Stegmaier?”
“No sir, I’ll be representing myself.”
The female judge–who I swear hadn’t even looked at the forms–addressed me with a smirk. “And what do you plead?”
I tried to recall the formal language of the court as I had studied online over the last few days. “I hereby plead for the court to consider an MSRP of $70 for Viticulture: The Strategic Game of Winemaking.”
The man on the left chortled before being hushed by the head judge. “How do you justify such an MSRP, Mr. Stegmaier? I will remind you just this once that you are under oath.”
“Yes sir,” I said. “My research showed that games with similar types of custom components and pieces have MSRPs of at least $70.”
“And where, pray tell, were those games registered?” The female judge really did not like me.
All three judges burst into laughter. I think the one on the left actually guffawed. Gasping for breath, he said, “Germany? This is St. Louis, son! We’re talking about Mississippi dollars here, not Berlin pesos! This boy comes in here, thinking he’s getting a $70 MSRP. My lord.”
I’m pretty sure the last few lines were directed at the other judges, not me.
The head judge wiped his brow with a handkerchief. “Mr. Stegmaier, from what I can tell from this components list, you’ve got yourself a $65 game at best. And that’s if it comes with my wife’s homemade pecan pie in each box. Tell me, Mr. Stegmaier–does Viticulture include a pecan pie?”
“No sir it doesn’t.”
“Well that simplifies things, doesn’t it? All in favor of a $60 MSRP, say ‘aye’.” The other judges, expressions of superiority having returned to their faces, replied in unison.
The head judge stamped the price on his forms and handed it to the security guard, who ushered me to the door. As I turned the handle, the judge called out, “Oh, Mr. Stegmaier?”
I turned. “Yes sir?”
“Good luck with your Kickstarter.”
Some people–myself included, as of last year–think that MSRP is an officially assigned number. Hence the elaborate fictional account above. That’s how my overly active imagination thought MSRP worked.
But as I’m sure you can tell, that’s not how MSRP works. If you’re making a product, you get to choose the MSRP. You literally just get to make up the number.
I’ll keep this short since this entry is already quite long: Basically all you have to do is look at other published products in your category and base the MSRP off of those products. If that number is close to 5x your manufacturing cost, that’s your MSRP. (See an excellent analysis of the 5x formula by Randy Hoyt of Foxtrot Games here.)
Keep in mind that if you intend for your product to enter traditional distribution post-Kickstarter, your MSRP will determine your cut. For example, in the board game category, distributors purchase games from you for 40% of MSRP. So if it’s a $100 game, you get $40 when a distributor buys a copy. Retailers pay 50% of MSRP.
Why do you need an MSRP for your Kickstarter project? Because it gives backers a reference point so they know how big of a discount they’re getting. And they should get a discount. Keep in mind that they’re pledging to support something sight unseen that they’re hoping to receive someday. They’re taking a big gamble on you, and they deserve a nice discount for doing so. I recommend 10-20% off MSRP, especially considering that online retailers will discount the product post-Kickstarter.
However, you should also keep in mind that the product you’re creating on Kickstarter will most likely be better than the retail version thanks to your Kickstarter-exclusive stretch goals. You won’t be selling that version in stores, so it shouldn’t need an MSRP. But if you allow retailers to buy into your Kickstarter at a discount, you need to factor in all those Kickstarter extras while determining their price.
If you’re trying to determine your product’s MSRP, feel free to post a description of it below and fellow readers can help you decide.