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?