Tuesday, July 21, 2009

Canada is not Immune

I sometimes get involved in “discussions” on forums with paintball players regarding the virtues of higher priced/lower volume paintball over lower priced/higher volume paintball. Often when they find out our field is in Canada, they shrug my opinion off because our field is in Canada, and apparently Canadian fields are more expensive because the Canadian dollar is worth so much less and Canadians are dumb enough to pay the high prices.

Recently a fellow Canadian paintball field owner (not here in BC) contacted me asking me for my opinion about a couple of things. He informed me that a field not too far from him had recently lowered their prices. Their outdoor field was selling paintballs for $40/case and a $10 field fee (or for $20 you can bring your own paint and play). 500 paintballs are $15. Rentals are $15. (All names are being withheld to protect the innocent)

So a first time player needing rentals could spend $65 and get everything he/she needs and a case of paintballs to blast away. Our average customer spends almost that, so I am sure that lots of players are doing just that (buying and shooting a case of 2,000 paintballs). Gear owners only need to spend $50, so I am VERY sure that many of the gear owners are shooting a case. The field owner that contacted me was concerned because this field had these very low prices and another field even closer had also just lowered prices to extreme lows.

I have always assumed that it wouldn’t take too long for some “entrepreneurs” in the paintball industry in Canada to provide paintball to the masses at low prices in hopes of attracting lots of players just as fields in the USA have done. Will it work? Sure, sort of. It will attract a higher number of players that like, or at least don’t mind, playing in a high volume paintball atmosphere; those players that want to be able to shoot lots of paintballs but not spend a week’s salary to do so. But the number of people in the general population that prefer that style of paintball is limited.

It’s daunting when you are the field owner that does not want to, or can’t drop prices to match or beat those prices. I’ve been in those shoes. But when it happened to us, we dropped our prices anyway. It was a knee jerk reaction and we were na├»ve and didn’t know better at the time. Of course, that’s when we found out that dropping prices of paintballs doesn’t increase overall attendance. It increases the amount of paintballs players purchase and it increases the number of players that don’t mind playing in that environment; but only temporarily. After a while, very few players come more often because the prices are lower. Offsetting that (several times over) are the players that don’t like that environment and end up not coming at all.

My advice to any field owner facing a situation where their competitors have dropped their prices to ridiculous levels is to ignore them. There is no point trying to compete to attract a share of the relatively small number of participants who enjoy that environment. I suggest those field owners do exactly the opposite. Build some fields that are visually appealing and look like they would be fun to play on. Price paintballs so players are encouraged to only shoot about 500 or so per day (about 700 maximum). The market for “regular people” in the general population that will prefer to participate in that environment is much greater than those that want to play in the 1500 to 2,000 paintballs/player environment. This means if the competition is charging $40/case, raising prices to $80/case is probably not enough. At $80/case, many players will still shoot over 1,000 paintball/day. When we dropped our prices from $160 to $100/case, our attendance dropped from what it was in previous years during the same periods. It wasn’t a drastic drop, but a drop nevertheless. As the drop in prices decreases below $100/case, the drop in attendance will drop further and more dramatically.

The hard part for a field owner that decides to go this route is to weather the storm until a natural customer base forms. As could be imagined, if one field is charging $120 to $160/case of paintballs while various competitors are charging $40 to $60/case, many unknowing customers are obviously going to choose the cheaper option. Most people don’t understand that the price of paintballs is not like a regular commodity. Who would go somewhere to buy their milk for $8 when they get it everywhere else for $4?

This is where the field owner needs to make sure they understand they are in the business of selling fun and not in the business of selling paintballs. Once they understand that, they can market fun rather than trying to attract players with low paintball prices. One way to do this is to not even mention paintball prices in the marketing. A new potential customer doesn’t really care how much paintballs cost. They want to know how much their day of paintball is going to cost in total and most importantly, they are going to want to have fun. New players have no idea how many paintballs they will be shooting. When I tell people who ask how many paintballs they will use and I tell them that our average customer shoots about 500 paintballs, many are amazed that people shoot that many paintballs.

The majority of people paying $60 for a day of paintball will have more fun playing in a group where most are shooting 500 paintballs in a session than they would in a group where most are shooting 2,000 paintballs in a session. In both scenarios, they have paid exactly the same for their day of fun. But at the end of the day, what is important is how much fun they had, not how many paintballs they shot.

I no longer worry when my competitors drop their prices. I make sure my customers get good value. That means they are going to spend a certain dollar amount and feel they have received their money’s worth of fun. A long as my customers are leaving with smiles on their faces and stories to rehash with their friends and at the water cooler, I know we will be OK.

So as Canadian field owners follow the trend most US field owners have been following for quite some time now, I will sleep well knowing that I am going to keep providing a fun environment and not fall prey to others who are more worried about selling paintballs than providing fun.

8 comments:

  1. I really like the "Don't sell paintballs" message. Charge $50 for everything, including 500 rounds of paint, and don't even list a price for more paintballs, or if you do, do it in really small text that says "Additional paintballs are available for $10 per 100 paintballs" or some such.

    As for why people lower their paint prices... because they have no business sense whatsoever. When you cut your margins by half, you then need to sell twice as much to break even. But your customer can only buy 50% more paintballs for the same money, which means you also need 50% more customers to break even.

    It should take any rational person about 30 seconds to realize that is not a bet that can be won.

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  2. I think most field owners that decide to lower their paintball prices do it out of desperaton. Attendance isn't what they would like it to be, and there is usually a competitor or multiple competitors that have come on the scene or have dropped their prices. Out of desperatin, the field owner believes if he/she drops their prices, their attendance will increase.

    The fact that it usually does intitially (see the blog), confirms their theory that dropping prices works to increase attendance. Then, as gradually things level off or drop below the original (already too low) levels, the field owner feels they need to drop prices even further to bring attendance back up. It's a never ending circle because, overall attendance at a recreatioanl field will drop once prices fall below a certain level and will drop exponetially faster as prices drop further. Most field owners just don't understand that and without that understanding, desperation takes over.

    But now I'm going to get someone telling me that "ABC Paintball" has low paintball prices and they get lots of customers and are making a killing.

    Sure, that can happen. ABC Paintball is probably the best paintball field around supplying paintballs near that price range in a fairly large market. There is a Demand Curve for virtually all styles of paintball and if the marketplace is big enough, they can do just fine and even do really well. But that doesn't mean that a field in the same marketplace selling paintballs at $150/case where others are selling at $50/case will not end up with higher attendace. The Demand Curve for the field supplying paintball games with low paintball consumption that $150/case creates, is totally different from the Demand Curve of paintball games at $50/case. The two attract totally different kinds of customers. There is very little overlap in the customers that prefer one style over the other.

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  3. All things being equal, cutting prices without dramatically expanding the size of the market is the surest way to destory profitability in any industry.

    A 10% price increase can often increase profitability by 40% or more, while a 10% price decrease will require nearly twice the amount of volume (and work!) to maintain the same profit level. Obviously margins and cost structure plays a huge role.

    But these fields are assuming they operate in a vacuum. Following everyone else down the ladder when they cut prices just means you end up with roughly the same share of the pie and reduced profit for you troubles. Then you just have to hope the other guy goes out of business before you do.

    In a situation like this the definitely should keep prices the same or even consider raising them.

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  4. Hoping the other guy goes out of business before you do is a sure-fire losing strategy. Even if he does go out of business before you, that just means someone else will enter the market and you continue the same losing game.

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  5. Yep, never said it was wise. If that's your best bet, it's not really a wise bet.

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  6. "All things being equal, cuting prices without dramatically expanding the size of the market is the surest way to destroy profitability in any industry".

    Not just profitability, but even sustainability. In recreatioanl paintball it's even worse though. Not only is the field owner cutting his margins, meaning he has to substantially increase the volume he sells, but he is ltiterally changing the product he is trying to sell (paintball outings). It's not like cutting the price of sugar. Sugar at 50 cents per pound isn't any different than sugar at $2 per pound. But paintball at $40 per case, where nearly everyone is shooting close to a case, creates a totally different paintball experience than paintball at $160/case, where neraly everyone is shooting approximately 500 paintballs.

    So the recreational field owner cutting his prices of paintballs means he is cutting his margins and most likey will also be cutting hi attendance. Of course if he's going from $50/case to $40/case, he will hardly notice the difference. He will just notice the initial (almost immediate), but temporary, increase in attendance. This will fool him into thinking the price drop created a larger market and he will remember that when things level off (and possibly drop) again and he needs to figure out once again how to boost attendance. It's a never ending battle (actually it will end when net profits fall below zero).

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  7. no its all bad. Paintball Sucks!

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  8. Stop playing Paintball and it wont cost that damn much. or you could just make your own. the economy is too bad to be playing paintball, unless your rich.

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