The Wood-Fired Blog

Free Stuff

Facebook went public yesterday, and there a couple of things that stood out for me. With a market capitalization of $104B, larger than both Amazon.com, and McDonalds, and 900 million users (a significant percentage of the population of the planet with access to a computer) the company has clearly been an incredible success. As an aside, from an investor’s perspective, the Facebook IPO demonstrates how important it is in today’s system to be an early institutional investor and an insider, and how little upside remains for the real investor (you and me) by the time the shares hit the public market. Facebook hit the retail market at $42 (the price paid by someone who placed a buy order with their retail broker), and closed the day at $38 (only with buying support from Facebook’s investment banks). For the typical Facebook user who bought the stock, Friday was a losing day.

Still, with a $104B market cap, Facebook makes a big statement on the value of free.

Which brings me to the theme of this posting. Free stuff. My view is that there are two different ways of making money by giving something away for free.

1. You can use free as a way of inspiring your customers to buy stuff from you.

2. You can give away services in order to show customers ads and to collect data on their activity that you sell the advertisers.

In the first model, your users and your customers. You treat your users with respect, and you have a clean business relationship. Your customers give you money in exchange for an item or a service that they value, and the company makes a profit by selling that item or services at a higher price than it costs to produce. This is the model that Forno Bravo and Apple follows. We make stuff (pizza ovens and outdoor fireplaces) and we sell it—hopefully at a profit. We give lots of valuable stuff away for free, but we only do that in an effort to make our customers happier so that they will buy more stuff.

The second model is more complicated. The main difference is that the company’s users are, in fact, not its customers. It’s customers, the people who generate its revenue, are its advertisers. This business model describes both Facebook and Google. This dynamic can create a great deal of conflict between the company and it users, where what is good for the user, for example privacy rights and content ownership rights, is bad for the company. And visa versa.

Today Facebook makes a profit of roughly $5 per user per year, virtually all through advertising. In order for the company to grow its revenue and profit in the coming years to meet Wall Street expectations and deliver on its huge stock valuation, they will need to grow that figure to $20 per user per year. Now that Facebook is public, it is going to be interesting to watch.

All of which brings me back to Forno Bravo and free. Is there a free lunch? At Forno Bravo, we believe that the answer is a big yes! :-)

We offer a wide range of free services, including the Pompeii Oven eBook (who else would teach it customers how to not buy its products?), the Forno Bravo Forum, the wood-fired cooking eBook series, the Community Cookbook and more. And we will be announcing more free services and new free eCookbooks in the future—all with no strings attached. These services cost a good deal of money to create and maintain, but from a business perspective, these are good investments.

The important point is that Forno Bravo does not accept advertising and we will never sell or share your information with a third party. Never! We think that it should be easy, relaxing and fun to be a part of the Forno Bravo community.

This has been our strategy from day one, and it has been working really well; both for Forno Bravo and, we think, for our customers and our community. So we aren’t going to make any changes. Even though Facebook is now worth $104B.

I’m off to bake some bread and take lots of notes for our forthcoming wood-fired bread eBook.

Keeping It Simple

I really enjoyed this posting on www.zeldman.com: web design news & information since 1995.

THANK YOU for the screen shot. I was actually already aware that the type on my site is big. I designed it that way. And while I’m grateful for your kind desire to help me, I actually do know how the site looks in a browser with default settings on a desktop computer…

The first thing you might notice reading www.zeldman.com is that is it easy read, and yes, it is true, he uses really big type on this latest version of his web site in order to best share his thinking with his audience—and to think outside of the box. That’s when it occurred to me that one of the things that I am enjoying about blogging is the ability it gives me to present my thoughts to our oven community without the clutter of traditional web design, and all of the demands of links, navigation, colors, fonts, logos and layout. It gives me a sense for freedom to just think and write. Nice.

Among other things, Jeffrey Zeldman hosts The Big Web Show, a weekly podcast featuring special guests and topics like web publishing, art direction, content strategy, typography, web technology, and more.

How Do You Price a Pizza Oven?

As a manufacturer and retailer, how do we price your products?

It’s an interesting question and there are number of different issues that come into play. As I wrote earlier, I believe that a higher degree of business transparency is an appropriate strategy in the Internet age, and it occurred to me that sharing our pricing strategy would make sense—both for us and for our customers.

If you have done research into pizza oven pricing recently, you will have noticed that the Forno Bravo ovens include all of the installation equipment (all of the insulation, mortar and the chimney), while our competitors force you to buy all of those essential items as costly extras—AND, you will have seen that our ovens cost a lot less than our competitors. A Forno Bravo residential pizza oven typically costs between $1,000 and $1,500 less than than the “other guys” including shipping. That is a very high cost saving compared with the overall cost of a typical residential oven.

We believe that we are the “category killer” in our market. According to Wikipedia:

Category killer is a term used in marketing and strategic management to describe a productservicebrand, or company that has such a distinct sustainable competitive advantage that competing firms find it almost impossible to operate profitably in that industry (or in the same local area).

You might be wondering—how can Forno Bravo do it?

There are a couple of good reasons. First, as a manufacturer, we purchase large quantities of the highest quality, but very low integration level, raw materials—directly from the original manufacturer. Think calcined aggregates, calcium aluminate and polypropylene fibers. Our raw material costs are a lot lower than our competitors who import ovens from Europe or buy their products from contract manufacturers. Second, we actually make our own products—in the USA. We do not purchase items in Euros and we do not have to pay for costly container shipping. Don’t forget that pizza ovens are very heavy and are difficult to safely ship—you need to ship the ovens from a city in Italy where they are made to the port by truck; from the Italian port to a US port by sea; through customs; and from the US port to the importer’s warehouse by truck. You don’t need to know the exact numbers (though of course as a former importer we do) to know that there is a very high “per oven” cost to simply ship the oven from the European manufacturer to California.

And finally, we are the highest unit volume pizza oven manufacturer and seller (probably by a very large margin) in the US. This brings a number of benefits to you—the consumer or dealer installing the oven. Our high unit volumes drive up our efficiency and they drive down our manufacturing costs. Also, because we are selling lots of ovens, we do not need to make as large a profit on each oven as we would if we were selling a much smaller number.

I am still struck by the fact that one of our competitors was selling a small, low-end 32” oven, without insulation, mortar or the chimney, for $2,750 when we first founded Forno Bravo. Clearly they were not selling very many of them, and they needed to make a big profit from each one. Today, we sell a higher quality 32” oven, with all of the installation equipment, for $1,850.

The best external model to describe our pricing strategy for our ovens is the Apple iPad. Because of their high volumes and innovative design, Apple is able to sell a product that is both better and less expensive the their competitors. So much so that they have scared many of their competitors completely out of the market.

We believe that Forno Bravo sells ovens that are significantly better than our competitors in terms of design and quality of materials; that our ovens are much more complete than our competitors because they include the things that you always need to install your oven; at a price that is significantly lower than our competitors. That is one of the reasons Forno Bravo has been so successful and has expanded so significantly in recent years.

There is one other similarity between a Forno Bravo oven and the iPad. Both have a straight-forward, fixed retail price. You can buy a Forno Bravo from one of our dealers, from the Forno Bravo Store, or by call our sales department (800-407-5119)—and it will cost the same no matter where you buy it. Sometimes it can be fun, or worth it, putting a lot of time into doing price comparisons for different merchants selling the same product, but in the case of pizza ovens, there are so many fun details to work on (design, installation, the rest of your kitchen, and making great pizza dough)—we wanted to make buying the oven itself easy.

But what about shipping and packaging costs? I see that you charge for shipping.

There are some interesting models out there that you can examine in terms of shipping costs. On one extreme, take Amazon as an example. They charge consumers a flat $75 fee to qualify for Prime status, and everything is shipped for free, 2nd day delivery. For many commodity items, this model provides the consumer with good value, while for Amazon, it has played a big role in their emergence as the nation’s dominant online retailer. At the same time, Amazon loses billions of dollars on shipping each year, that they then make up with huge sales volumes. Like many retailers (including Costco), they operate on very tight margins and make very little profit on each item (in fact they lose money on many items they sell)—but it all comes out in the wash. Heck, Jeff Bezos, the Amazon founder is worth about $18B, so it’s fair to say they’ve made some aggressive moves that have worked out well.

On the other extreme, you see small merchants on eBay (and sadly on TV Infomercials) who sell their product at a low prices (perhaps below cost), or even for free—but who charge very high shipping and handling fees. Which, in part, led to eBay’s practice is listing the “cost” for an item as the item cost + shipping cost. All of which makes a lot of sense.

As a manufacturer and retailer (we produce ovens and sell them), we have made the decision to charge the actual cost of shipping and packaging, based on the size and weight of the oven and the distance of the customer location for our factory, as one of our pricing cornerstones. There are a coupe of good reasons for this.

First, we do not build the cost of shipping and packaging into the price of our ovens. We have a reasonable number of customers who pick-up their oven directly from us at the factory, and it does not seem fair to make those customers implicitly pay for shipping and packaging that they are not using. We also charge shipping according to the customer’s location, rather than charging a flat fee nationwide. Again, it does not seem fair to charge someone in Northern California the same cost to ship an oven, as we charge someone very far away.

Beyond these practical issues, this strategy underscores a philosophical underpinning. We believe that the company should charge a fair price for our ovens and that we should make our profit on actually selling ovens in the marketplace—and that the amount we charge for shipping and packaging should simply offset our actual costs. We ship a lot of ovens, and we get very good freight rates, and we pass these low rates on to our customers. So when you get a quote from Forno Bravo using the FastQuote system, you are seeing the actual cost of shipping.

Which leads me to the idea of charging a crate fee. I know that lots of us get tired of seeing the litany of small fees that the phone companies, airlines, and shipping company keep filing on. Airport fees, fuel surcharges, luggage fees, access fees, etc. As the comedians ask—how are are we from toilet fees on airplanes?

But our crating fee is different; because it’s real. In order to get one of our wonderful pizza ovens to you in perfect shape, we build a really, really well-designed and well-built wooden crate. It has a ton of wood, bracing, straps, wrap and foam, and we use a very well proven method for stacking and strapping all of the oven pieces in place inside the crate. Everything in its place, in just the right order. My point is that all of this costs real money; in fact, plywood is one of our largest single expenses (who would have thought).


Staging crates for export via container ship.

Which takes me back to why we have to charge a crate fee. I think it would be unfair to customers picking up ovens and who do not need the crate, to have that cost built into the oven price.

If I were to pick one word to summarize “how do you price a pizza oven”, I think I would say “easy”. We have put a lot of work in behind the scenes to make it easy for you to pick the best oven.

Why Blog

We have a number of different ways of communicating with our community of customers, dealers, Pompeii oven builders, partners and friends. Fornobravo.com itself is a labor of love, as much as it is a company web site, and we also have the FB Forum, the Wood-Fired Newsletter, the Community Cookbook, FB FAQ, Facebook, YouTube, and we host Peter’s wonderful Pizza Quest. Why blog?

My response is that I am often struck by things that are happening at Forno Bravo that I think are pretty interesting—that don’t fit in other communication vehicles. I have found myself writing articles for the Wood-Fired Newsletter that were too long, or writing about topics that are simply too technically intricate. And if you have spent much time on Fornobravo.com recently, you have found that it keeps getting deeper and deeper in information, and that new (and hopefully interesting things) might be getting lost in a sea of details.

So I have decided to blog.

One quick comment on comments. I have turned on “responses”, but we will not be answering questions in the comments. We will be moderating responses for spam, but we can’t promise that we will respond. We have a number of outlets oriented toward sharing and community building—primarily the FB Forum and our Facebook page. We really enjoy hearing what you think and we have learned a huge amount from community. Your input has been truly invaluable and we looking forward to continuing to build the community dialog. But not here. haha. Also, I am looking forward to using this outlet to share the things that I am seeing and learning, without the demands of responding to the great things that you are thinking. It’s a practical limitation, but it’s a real one.

One last note. The photo thumbnail in the upper righthand corner of the blog was taken by our 13-year old daughter. I think it’s great. Here’s the full photo.

With all of that said, off to blogging.

James