The Customer Economics of Breaking Stuff

We're at an interesting stage at our growth, one all new companies must pass through on their way to becoming established companies. In fact, it's probably the most important stage, since it's the place where most businesses peter out, and never get the traction they need to continue. When we first launched, we were thrilled by the immediate support we found, or rather, that found us. It was is hundreds of cyclists were just waiting for us to appear, and finally found a company that understood them. Fortunately, I've launched other businesses and have seen this happen before, so I didn't confuse acceptance from the pioneers and early adopters as bona fide success. It would have been easy to say after the first year, "That's it - we did it. We're in the game," and sat up. It would also have been foolish

The early adopters are still finding us, and probably will for a while (no matter when you meet us, we're new to you), but we're also now rubbing elbows with the population of customers known in the marketing departments as the early majority. They're important for two reasons, both of which are suggested by their name. On the one hand, they're still early, and are willing to make purchases from newer companies. And significantly, they're a majority, and typically represent over 1/3 of the total market for a product. Winning the affection of this group is the difference between struggling to drive the business forward each year and enjoying sustainable growth. In many cases, it's the difference between surviving and folding. 

Anyway, the way these folks (a lot of you folks, in fact) are different from the early adopters is that they're a little more cautious. Whereas the early adopters will recognize our value proposition and take us up on it even though we're a young company, the early majority wants a little more reassurance that in buying from us they're not making a mistake. Saying, "Trust us - our shit is plenty good," doesn't help, though one of you saying, "Trust me - their shit is plenty good," goes a long way." Referrals, testimonials, seeing our products out in the wild, and other evidence that smart people have decided to buy from us and not been made fools of are no small part of what gets them past their initial caution and gives them confidence to buy.

Because we're reaching these people now, we're getting a lot of questions aimed to placate prospective customers' caution and open the door for them to buy. See, these people want to buy from us - they recognize the value proposition we offer, totally get the philosophy, understand the attributes of the product, and generally believe that it's 3-in-1 oil we use to lubricate nipples, and not snake oil. But they still have  a few questions for us.

Chief among these is, "What happens if my stuff breaks?" 

That's actually two questions. The first is, "How likely is it that your stuff will break if I buy it?" and what is tactily implied is "Does your stuff break more or less often than other brands' stuff?" The second question is, "So how screwed am I if your stuff breaks?" Curiously, there usually isn't an unuttered follow-up to that one, like "How screwed am I if other brands' stuff breaks?" There should be, and that's the focus of today's post.

First though I want to answer the first question about how often our stuff breaks. We have lost a few wheels in fiery race course blazes, though those are attributable to rider error (both the rider of the wheels in question, and the neighboring riders) than any manufacturing or building defect. In all instances but one (that we know of), we've deployed our Wheel Crash Replacement and rebuilt the wheel around a new rim for $250 (carbon tubular) - $300 (carbon clincher). The one that hasn't been replaced yet is my own RFSC 38 front, sacrificed to the Gods of Turn 4 in a spectacular inversion last summer. I keep meaning to take a replacement out of inventory, and then you guys keep buying it out from under me. Shoemaker's children going barefoot I guess.

To date, only one of our frames out in the world has broken. No, not the one mounted on a roof rack and driven into a parking garage, and not the one I was on when I went executed a pike with a half-twist at 29mph. In this case, the Wheelhouse's owner was racing and had just crested a roller when a shift threw the chain over the top of the cassette and into the spokes. This pulled the derailleur into the spokes, shearing the derailleur hanger (as it should). But then the derailleur, lodged firmly in the spokes, whirled through a half revolution of the wheel and made a blinding fast samurai chop on the drive side seat stay. Envisioning the incident, I'm still pretty astonished the force didn't slice the stay clean through, but the stay put up a good fight and only cracked. A pencil thin stay designed to shave grams and add extra compliance wouldn't have stood a chance, I expect.

Did we warranty the frame? Nope, we did not. The only way we would have been able to do that is if we warranteed all frames that brake from crashes and traumatic incidents, in training or racing, without question. And the only way we could afford to do that would be to charge at least 50% more for everything we sell. And that means that those of you who don't break your stuff are subsidizing the ones who do. That's not how we roll.

But the myth clearly in need of debunking is that carbon fiber is fragile. Impact resistance is signficantly higher than when the myth was born, close to a decade ago. And we've seen carbon fiber's durability tested often and violently enough to make us cringe. Yet we're still fully confident in using it for our HOT BUNS cyclocross bike, and even in the hardtail 29er we start testing in a few weeks. (Part of this confidence is owing to the fact that both of these frames come from the same supplier as our Wheelhouse road frame, an outfit that is very generous with the layup and aims for beefy instead of svelte.)

So the next question is, would any other brand have warranteed that frame? Again, nope. In fact, some of the biggest brands immediately void a frame warranty as soon as you race a bike (despite compelling you to buy them by putting a stable of bikes under professional racers at the world's largest events), whether you crash it or not. Simply, no brand - in any industry - can afford to replace for free the stuff that breaks through crashes or trauma. If they did, it would create something called a Moral Hazard. If you knew you'd get a free pass every time you broke your frame or wheels, you likely wouldn't take the same necessary precautions, perform maintenance and make good decisions. It'd be like driving a rental car on the Baja 1000. Fun as hell, as long as what you're left with isn't your problem.

So that leaves us with the "How screwed am I?" category of questions. First of all, we aim squarely at durability with both our frames and wheels. We eschew the superlight trends, knowing that our customers are far more likely to stack it up in a crit than someone on the Gentle Dentists Saturday AM ride. Our frames err on the side of overbuilt, and we positively will not build wheels with too few spokes just to nod at fashion or featherweight. So one way to answer the question about "How screwed am I?" is to reply that in most cases you won't even have to ask the question. 

But stuff does still break, and when it does - believe it or not - it can be fixed. It's not uncommon for a buyer to think, "OK, these November wheels cost $900. If they break, I just flushed almost a grand." That's not exactly true. First of all, "they" is usually just one wheel lost to trauma. It's rare that a crash claims an entire wheelset So instead of being out all $900, you're actually only out $400 - $500. Except that you're not out that much, as replacing a clincher rim through our Wheel Crash Replacement Program is only $300. So in most instances, the actual internal debate should be, "If I break one, is $300 an acceptable cost for replacing it?" 

Compare that actual expense with the options for other wheels you're considering. In some cases, we know some brands have a similar policy, but if it's a premium wheelset with a premium price, the cost of replacing a rim is also, yep, premium. We've had customers come to us and buy a complete wheelset because the cost of replacing one rim from their existing (broken) set would be about the same price. If you read between the lines there, you see also that even the premium wheelsets break - it's not durability that runs the price up on them. For some brands, getting a replacement rim built around your existing hub is not an option though, if the wheel is part of a machine-built system or even handbuilt overseas (as many are). Then the brand's only option is to sell you a single wheel. The cost varies, but keep in mind that it will have to include the brand's expense for the additional hub they have to include, which renders your existing and perfectly serviceable hub all but obsolete. 

The story with frames is pretty similar. In the example above of our customer who cracked his seat stay, he was able to take it to a boat repair business that does a lot of work with carbon fiber, and have it wrapped up right nice for $150. Carbon fiber repiar is a specialty, to be sure. But it's not magic an it's not uncommon, at all. Most repairs can be done between $200 - $500 (this guy got a good deal at $150). No small part of the expense is matching the paint and decals on the repaired frame, which we all but eliminate with our raw carbon matte clearcoat finish. The fancier a frame's finish, the more it will cost you to restore it to its pre-crash condition and appearance. So again, if you torch your frame, the economic balance point is not weighing $900 to get a new one, but $200 - $300 to have it repaired. 

Now if you back over your bike or wheelbag in the team minivan - then you're comparing full replacement costs. Here is where you compare our pricing and policy to the crash replacement policies of other brands. First, we don't offer frame crash replacement. Economically, crash replacement is an insurance policy. The only way to file a claim is to pay the premium. Brands that offer crash replacement have everyone pay the premium - it's figured into the cost of the bike you buy, and not something you can opt out of when you purchase in order to save $300 or so. We don't think that's equitable, so with us the cost for replacing a frame beyond repair is the cost of a new frame - $845. That's usually slightly more than the crash replacement cost of some other brands. If all you're looking at is the cost of replacing ours vs the cost of replacing another, many other brands look like a better deal, to the tune of $100 - $200. But keep in mind that you've paid a good $1000 more for the original frame or bike, for the right ot save $100 - $200 on the off chance that you total it. 

Economics are a huge part of not just who we are, but why we are. If you're looking at us because of our purchase cost, it's worth expanding the comparison to include cost of ownership as well. We fully support the notion that you shouldn't race what you can't afford to replace, but broaden it to also include "or repair."  

Race Smart.

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