Pricing & Commission – How much to charge
So you want your print-on-demand custom merchandise store to be successful, and you know that the best way to do that is to maximise sales – but the big question is how?
The good news is: We get this question a lot, so you’re definitely not the only person who needs some advice here.
The bad news is: There is no magic formula.
But, the other good news is: We’ve got your back.
A lot of thought goes into pricing and commission, and you might be surprised to know that there is a little psychology behind choosing the perfect price…
Cover your Costs
First thing’s first: You do you. In order for your store to be profitable, you need to first think about how much you need to cover your costs, and then add any commission you want to make on top of that.
To calculate your costs, all you really need to consider is how long it took you to create your design and the wholesale cost of your product (because Kite takes care of everything else!), oh – and your shipping. Shipping isn’t included in the wholesale price of Kite products, because the actual cost depends on where in the world your product(s) is being shipped to. We have four shipping categories:
- United Kingdom
- United States of America
- Rest of the World
No matter what you charge the customer, you will always be billed for the actual shipping costs. So this gives you two options: You can set up shipping zones in your Shopify account so that shipping fees are automatically added to each order at the checkout, or you can increase the markup of your products (to cover the cost of shipping) and then offer free shipping to your customers.
Free shipping is very attractive to consumers, because it allows them to rationalise shopping online over nipping out to the shops. In fact, 9 out of 10 consumers cite free shipping as their number one incentive for shopping online. Not only that, it is a pleasant surprise for them when they get to the checkout screen.
Do your Research
All customers are different. In order to know how much to charge, you need to get to know yours…
What is their average age?
What is their disposable income like?
If you’re an influencer creating merchandise for your fans, then you probably already have a good idea of who your customers are and how much they are willing to pay for your products. However, if you’re a business owner, you might benefit from a little industry research. One of the quickest and easiest ways to do this is to create a list of insights you would like to uncover about your customers, and then conduct a survey through a site like SurveyMonkey.
It also helps to study competitors, too. Find out what they are charging, and read reviews to discover how their customers feel about this. From there, you can take that knowledge and apply it to your own pricing strategy.
9 is a Magic Number
Pricing your products may seem straightforward and simple enough, but there can actually be a lot of psychology behind it. A long-favoured technique by retailers is “charm pricing” – a strategy that involves using prices that end in 9. A study by Thomas and Morwitz called “The Left-Digit Effect in Price Cognition” (bit of a mouthful!) found that prices ending in 9 are perceived to be much smaller in price than they actually are. For example, when we see a price like £1.99, our brains process this as closer to £1 rather than £2.
Sounds crazy, right? But it works!
In another study, this one by the University of Chicago and MIT, women’s clothing items were priced at $34, $39, and $44. Amazingly, the items sold best at $39, even though this wasn’t the cheapest option. So 9 really is a magic number!
The Importance of Testing
The truth is, you aren’t going to know what works until you try. But it is important that you keep trying. Don’t just stick with the first price you decide on, especially if you’re not selling as much as you would like.
If your sales are suffering, or even if you’re doing moderately well, you should always test different prices before settling on one. Monitor your sales in your Shopify sales dashboard and alter prices to see what works best for you.
With Kite, it’s easy to see exactly how much profit you will make from each product you sell. Just click on one of your products within the Kite app and you’ll see our pricing calculator. You can enter different percentages into the markup box to see what works best for you.
As a rule of thumb, we recommend a markup of at least 30%, or 40-60% if you are offering free shipping. But you know your customers better than anyone, and what you ultimately charge them is your call!