Kickstarter Lesson #201: A Step-by-Step Guide to Pricing Your Core Reward

3 October 2016

A successful crowdfunding project combines a lot of different elements into one cohesive package. If you do 9 things out of 10 right, sometimes that 10th thing might make a huge difference.

That 10th thing is often price.

Usually if there is a problem with price, it’s because it’s too high. It might be a fair price, but that doesn’t necessarily make it the right price to attract thousands of backers. This guide will mostly try to address that issue, though of course this is just my opinion.

But the flip side is if you price your core reward so low that you lose money. If my recommendations below result in a price where you are losing money on a per-unit level (manufacturing cost + shipping subsidy), please ignore my advice.

Step 1: Determine your manufacturing cost per unit for the minimum print run. The idea is that this cost should decrease if you make more than the minimum, but by adding stretch goals, the cost will actually end up staying the same. Example: $10

Step 2: Calculate your MSRP. This stands for “manufacturer’s suggested retail price”–it’s the sticker price for the product post-Kickstarter). This will vary from industry to industry; for example, in the board game world, MSRP is usually 5x or 6x the manufacturing cost. In general, you’re also going to want to look at the MSRP of existing products on the market that have very similar components–the perceived value is crucial. And keep in mind that your core reward may not be exactly the same as the retail version of the product. It may include promo cards or other content, which should definitely be factored into this MSRP calculation. Example: $50

Step 3: Remove 40% of the MSRP. This may seem steep, but keep in mind that you’ll be selling the product to distributors post-Kickstarter at a 60% discount. Example: $30

Step 3: Add the shipping subsidy. This includes all costs associated with shipping a game, including pick-and-pack, postage, and freight shipping to get it to the fulfillment center (or to you if you mail by hand). Most creators in the US offer “free” US shipping, which means they’ve built the shipping fee into the reward price. That subsidy is then deducted from all of the international fees charged to backers (i.e., if the subsidy is $8 and the total cost to ship to Malta is $25, the shipping fee for a Maltese backer is $17). Example: $38

Step 4: Look at similar crowdfunded products. Research what other creators have charged for similar products. Take this information lightly, though, because those projects may not have priced their rewards correctly. It still helps to be aware of that data, though (again, perceived value is important). Example: $35-$45

Step 5: Finalize the core reward price. For me, this usually means to 9-ify it (round to the nearest 9). If this would add or deduct more than a few dollars, though, I’ll round to the nearest 4 or 5 (it’s not an exact science). Example: $39

Using this formula and estimating around a $10 shipping subsidy, here are my recommended Kickstarter core reward prices per MSRP (for lower-cost items, shipping can often be lower than $10, so just use the above steps):

  • $30 MSRP: $25
  • $35 MSRP: $29
  • $40 MSRP: $34
  • $50 MSRP: $39
  • $60 MSRP: $49
  • $70 MSRP: $55-$59 (at this point and beyond, I’m assuming the size and weight of the product is requiring a higher shipping cost)
  • $80 MSRP: $65-$69

These prices allow for $20-$30 profit on a per-unit level. Of course, you have Kickstarter and Stripe fees, art and design, freight shipping, and other ancillary costs to factor into your overall budget, and you might use most of that profit to simply make more retail versions of the product.

But I think you’ll find that your chances of Kickstarter success improve significantly if you offer an appealing price, and an appealing price still offers nice margins for you because you’re selling directly to the consumer.

***

As a backer or as a creator, what do you think about these steps and the resulting prices?

Also read:

34 Comments on “Kickstarter Lesson #201: A Step-by-Step Guide to Pricing Your Core Reward

  1. Let me preface this comment that this is just one theory for first timers (and definitely not for everyone).

    I always believe it’s a good idea to try to price your base pledge down to almost a break even at minimum print quantity. Of course make sure you’ve built in some serious safety factors for unexpected costs, increases in shipping, etc.

    The idea is that getting a successful kickstart (and your first offering in print) has its own built in value. I would estimate that most first time creators would rather be successful at KS the first time without making a lot of money than have to relaunch, reconfigure etc.

    Of course, you’ll hopefully get many more pledgers than your minimum (with such a low price). Start giving some smaller stretch goals while keeping some of the gains (now you are actually starting to collect some money yourself that most people build into the pledges from the beginning). Start adding some SG’s that cost you a bit more per pledge and still keep adding a bit of money for yourself. Last but not least if it looks big enough for retail utilize 100% of the savings of a larger print run as true profit.

    Like I said, not for everyone but if someone is more interested in getting their game printed and building a reputation for themselves early on than trying to make significant money on their first offering this might work for you.

    Lastly I must add that if making a significant amount of money on your first offering is paramount you may be better off finding an interested publisher.

  2. It’s eye-opening that creators may sell to distributors at a 60% discount off MSRP (it doesn’t sound like that much profit is made per unit). And when some OLGS will sell at a 30% discount (or more) off MSRP — lower than the KS price — are “deluxe” versions and/or promos important “added value” for backers to support a project?

    1. Indeed, 60-65% off MSRP when selling to distributors is industry standard for board games.

      As for online game stores, I agree that special editions and promos are some of the ways to entice backers to support the project instead of just waiting for the retail release.

  3. @Scot – many backers will bring this up. ….I know of a true publisher who found out months before the game was manufactured that a certain OLGS was preselling certain add on items (that he intended for direct sales only) at a large discount such as this WITHOUT clearing it with the publisher…..things like this and discounting deeply are definitely issues you must watch out for ( IMHO). Definitely make sure your backers feel that their “investment” and support early on leaves them feel it was a good choice vs. waiting for retail.

  4. I was hoping you would touch on the funding goal as well. As I look around at fellow Kickstarter creators the #1 thing I see them doing wrong is setting their funding goal too high.

    Getting to funded is an important psychological milestone and indicates that your project is successful. If you set your goal too high it’s easy for the project to lose steam and limp across the finish line. (If you’re lucky.)

    Setting the goal low allows for rapid funding, stretch goal excitement, and a general snow ball effect to the project. It also makes stretch goals easy since it’s all the stuff you took out to make the funding goal low!

      1. Thanks Jamey! I thought you might have touched on it before. Any way to double underline the link? ;)

        Part of it might be that creators don’t understand the need to do the unthinkable: compromising the pre-stretch goal quality of your game in exchange for a lower funding goal. Stretch goals can always add quality back. But you can’t lower a funding goal once you’ve set it.

  5. Here’s a quick and relevant question for Jamey (et al). What do you think of the practice of putting the price on the game on the video thumbnail so it’s easily seen on the discovery page? Sometimes the creator puts the price in a green kickstarter starburst, sometimes in a corner banner or other place. I’ve notice this popping up a lot, especially in the product categories.

    1. Dale: That’s a keen observation. I’ve noticed that too, and I really like it, because it instantly answers a question that many people are likely to ask the moment they arrive at the project page.

  6. Hi, Jamey, how are you?

    I guess (after reading your post) that in your MRSP you include only manufacturing cost and shipping? Is that right? You don’t add to it Kickstarter and Stripe fees, art and design, freight shipping, and other ancillary costs?

    So your recommended Kickstarter core reward prices per MSRP allows the creator to have $20-$30 profit on a per-unit level. Do you use this profit to cover other costs (the fees, art, etc.)?

    I’m curious how are you calculating the overall cost and what do you include in it, I mean the cost which you will use to multiply x5 or x6 to get the MRSP?
    Thanks!

      1. Jamey, I got another question if you don’t mind :)

        From what quantities of games, you will use the cost the factory gives you to get the MRSP? To produce 1000 games will be much more expensive than 5000.

  7. Nice, that will be a helpful guide for a tricky subject! I’m working on my 7th campaign and I’m STILL going back and forth on pricing, so I’m sure newer creators will really appreciate it. A Kickstarter campaign brings with it the added challenge of not knowing how many people will support you from the beginning. If 3000 people back, you might be able to charge $30 for a game, but if only 200 people back, you may have to charge $45 for the same thing. You can price it assuming you’ll get 1000+ to support you but if you do that and you only get 200, you might risk going out of business. Ahhhhhhhh!

    Will you add all your sunk costs into it for things like illustrations, molds, graphic design, advertising, and video production, or do you take that out to lower the price and hope to make it up from profits? That’s a tough question and not one necessarily for Jamey, but just one creators will have to answer when they set their price.

    One mistake I’ve made a couple times: I recommend not mentioning the price in your main Kickstarter video (and review videos) if you can avoid it because once it appears in a video, it’s much harder to change. You might think it’s the final price, but then you figure out a cheaper way to ship to the EU or you forget about a customs fee and the price needs to move up or down. It’s similar to how Jamey recommends allowing yourself the option to move your launch date. Although when you move your price, especially up, folks may feel a bit miffed, and we don’t want that.

    1. Brian: I can relate to that–I agonize over the impact of pricing too.

      I do not add sunk costs into the cost per unit. I budget for them, but they do not factor into the MSRP for me (I’m sure other companies do, though–we’ve all seen $40 games that probably only cost $4 to make, but maybe there’s a lot of art in the game).

      That’s a great point about mentioning the price in the video.

  8. Disclaimer: FLGS perspective incoming.

    The flip side to this is protecting the value of your product. If you “suggest” a retailer can get $60 for a game and then sell it at $49, you’re sending signals that you don’t think your game has staying power to command the MSRP.

    I take an extra-careful look at games that hit distribution after coming off Kickstarter, and most of the time I pass because it was discounted incredibly for the Kickstarter, retail is a significantly pared down experience, and most of the hype has already died down.

    I carry your games, Jamey, because they are exceptional (I am going to hand-sell SO many copies of Scythe) and it seems like you genuinely make moves intended solely to help FLGS’ like mine, but I do have to offer my counter-perspective when I see a heavily-discounted Kickstarter.

    1. Micah: Thanks for sharing your perspective! I can definitely understand the idea of protecting the brand and the perception of value (that’s something I’ve been discussing lately with online game stores).

  9. I always find a gulf between the “5 x minimum order manufacturing cost” price and the “perceived value based on what’s on the shelf at my FLGS with similar components” price.

    Most of the games that are out there didn’t have a minimum print run and their price reflects that.

    I don’t find them to be compatible approaches. I always find that there’s a decision to be made between three approaches:

    1) Campaign based on “5 x minimum order” knowing that this generates a pledge that’s unreasonably high for that collection of components
    2) Campaign based on “5 x larger order” knowing that this generates a campaign goal that’s seen as unreasonably high alongside existing campaigns.
    3) Campaign based on “3 x minimum order” knowing that this makes the campaign barely profitable and the game inviable at retail unless the campaign significantly overfunds.

    Sitting closest to the (3) corner of the triangle, with a preference for approaching (2) over (1) where that’s not possible seems best to me – but it can be taken too far. I think there’s a race to the bottom that has campaigns with funding targets and pledge levels that would be literally impossible to fulfill if they just squeaked funding, created in the hopes that it’s a formula for over-funding. Which seems dangerous to the creator, backers and the platform – yet I can see how it comes to pass.

    This topic’s always stuck me as a complicated one that lacks a decent universal solution.

  10. Thanks Jamey, this post is helpful. I appreciate that you go step by step and provide actual numbers that are really easy to follow. It may be worth cross-linking with your KS Lesson #7 about the funding goal. Setting the reward price plays directly into the funding goal. From what I’ve read it sounds like there’s a “triangle” of interdependent factors: reward price, funding goal, and manufacturing costs.

    On an unrelated note, have you written about how much you need to have prepared/finished before launching a Kickstarter campaign, especially for first-time creators? I always hear stories about projects that fulfill 1-2 years late. Something like that can hurt the creator’s reputation so I’m curious about your thoughts on things like how far along your talks with manufacturers should be (should you already be discussing potential stretch goal additions?), % of artwork completed, etc, before launching.

    1. Joseph: Thanks! I’ve added a link to the funding goal post. :)

      Sure, I’ve talked about that in different ways in a number of entries. There are several entries that talk about how it’s usually ideal to have most of the product design finalized before Kickstarter, leaving just a little bit of wiggle room for backer feedback/engagement. Other entries where I talk about it are below

      https://stonemaiergames.com/kickstarter-lesson-3-art-and-design/
      https://stonemaiergames.com/kickstarter-lesson-68-you-dont-have-to-launch-today/
      https://stonemaiergames.com/kickstarter-lesson-171-the-project-timeline/
      https://stonemaiergames.com/kickstarter-lesson-97-delivering-on-time/

  11. Jamey,

    One of your comments might have gone under the radar…”sunk costs.” I personally think far too may “would be designers” attempt to run a Kickstarter project at close to “$0” expended on the project OR the corollary, they have spent so much on the project already that they attempt to use the Kickstarter project to recoup those sunk costs without an informed plan.

    In the first example, this is an unfortunate case of believing that the Backers will cover all aspects of the game development and production, they forget to have their own skin in the game,. In the second example, the designer may already feel “skinned alive” and has to push the costs onto their Backers. I have dealt with both kinds of designers as a developer and it’s a difficult place to be…but if I had my druthers, it’s easier to move folks away from former situation than turn-around someone facing the latter one.

    As for me, I had a similar discussion before I ran my KS campaign, but the3 difference was that I had produced thematic-cum-artistic pieces which didn’t subscribe easily to the “5x manufacturing costs” formula. If that were the case, I would have to have charged more than $50 for some of the smallest pieces…I settled on a “2x manufacturing costs” formula, and pushed all of the shipping costs to the Backers. For bard games however, your analysis is spot-on and now that TAU CETI is going through the production phase, I can attest to the numbers!

    Cheers,
    Joe

  12. When determining costs, the print run size seems the biggest variable, and this is what I’m having the most issues with.
    For example If I print 1000 units it costs me around £4 per unit including art etc.. If I do 5000 the costs drop a lot, to around £2/unit . I’m not sure as to the volume I should expect. Do you have any tips?

    1. Sure, as mentioned in this post, I recommend that you base your reward price on the minimum production quantity. As the coat drops (if you exceed your goal), you can spend the margin on stretch goals.

  13. Hey Jamey,

    I’m late to the party on this post, but loving all your advice. I’m prepping a game to Kickstart next spring and have a question about core price. Should there be some consideration for income taxes? Assuming the game funds, if I’m going to end up paying taxes on KS dollars as if they were income, doesn’t that take a pretty large bite out of the funds if I’m trying to treat this like a business from the start and set aside money for taxes? I’m a crowdfunding noob and just starting to absorb all the information for doing it successfully, so I apologize if there’s an obvious factor that I’m missing here.

    Thanks for the guidance.

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