Pricing Your Subscription Product
Felt let's talk about pricing your subscription so this isn't a full, full blown pricing workshop, but just so that we're all on the same page, I wanted to just start from the bottom on dh just in case for you, for those with you guys and I don't want to assume that you already know this so let's just start from ground zero are going to go over it pretty quickly and then I'll fall up with additional tips on how you can price your subscription. But first, the pricing formula that you have probably seen in thousands of places you basically want to start with your costs, and that is a total a sum of all of your materials off your overhead of the labor, the time that you spend making the product and then you multiply that by two and then that gives your wholesale price, and then you take that one step further and you take your wholesale price and multiply that by two again, and that gives you your final retail price. So a little note here you're looking at the the multiplied by two that's ...
really the standard of what you should be doing if you're if it's possible for you to start multiplying this by more than two by two point five by three by ten, even if your market can bear it, I would totally recommend that you do it but to us, the stander too is the minimum ok, so you can try doing this formula on your own with a calculator or I have a really great plug and play pricing calculator at creative hive co dot com slash pricing calculator and once you land on this page, you're going tio get to a google spreadsheet and it's going to give you some instructions on how to download this plug and play calculator and how you can use it for yourself. But basically what it does is you're going to enter in all of your material information your labor information, for example, how much time did you spend making x product and then it's going to automatically calculate for you based on the times to andan times to again method and it's going to tell you what your wholesale prices and what your retail prices so the reason we're multiplying this by two is that for one reason it ensures you're covering all your expenses that are hard to track, so one of those expenses could be the time you spend on social media. I don't know if you guys are on pinterest, but you know, a lot of us can spend hours and pinterest pinning things, liking it, adding things to our board, looking all the pretty pictures the time you spend on instagram doing your research on instagram, trying to grow your following all of that stuff, if he technically, you should be counting it in your in your pricing formula, but if you're not at least the multiplication of two times helps you account for that and adds that buffer in for you. So another example all the time you spend doing research ifyou're educating yourself on how to get better with your craft, you're trying to learn a new skill. If you're trying to learn how to do marketing the time you spend here in creative life, you should be paid for that that's a business expense, right? The second thing why we are multiplying this by two twice is that it also gives you profit, which essentially helps you grow your business because it's from profit it's from this buffer of money that you can then reinvest into your business and spent on advertising, or spend on scaling up and reaching new audiences or spend on, say, paying a blogger to feature your work what's most important is this profit helps pay for your income so it's really on lee from profits. So once you take your revenue, all the sales you get and then you find all of your expenses, what did you spend in this month? And then you duck that and you get profit, right? Hopefully it's profit, hopefully its profit from profit what I like to do my formula is I take seventy percent of profit and that is my personal income that is the personal paychecks that I pay myself and my husband every month so that we can then buy groceries so that we can go to the theater so that we can pay for a mortgage. I have worked with a lot of makers on business owners I've consulted with a lot of people one on one and a very big limiting belief that comes up is after you plug in your information your your numbers into for example the plug and play calculator you're going to get a retail price that is more than what you had anticipated that is more than what you think you can sell so if you feel like wow, this is really too much I'm never going to sell something if I need to charge this much I want to tell you that you absolutely can and a lot of us with when we have this limiting believe that we can't charge this much I think a lot of that has to do with etc and how a lot of people who are selling on etc are not necessarily in it for to be to be supporting themselves they're not necessarily in it as a full time career there in it as a hobby and for that reason maybe they don't spend the time doing the research on figuring out if this is the right way to price something so if you're comparing yourself to other people on etc it's going to be a losing game most people in etc are not pricing correctly for the most part it's skewed on the lower side of things so look beyond there what I would recommend for you to do is go out there on google on the internet in general and see if you can find other business owners or other big brands small brands, whatever they may be other people who are selling a state the same or a similar product that's what you're currently selling because chances are there's someone out there who's selling something you're selling maybe in a different way but a pretty similar product and chances are you're going to find someone who is charging a lot more than you are currently charging and you're going to see that they're doing very well they're making a lot of sales so all I'm saying is that there are people out there who are charging what it should be worse and so if you're comparing yourself to people who are charging less than you, then of course you're going to feel like I'm never going to sell it for what I should be but there will be people out there who are selling a similar product to you or selling a product that serves a similar audience than with you for higher prices and that still do well, and if, in doing that research, you don't find anyone else selling your product, or if you find that there isn't anyone selling it at the price point you want to there's actually no reason why you can't blaze your own path and start your own line of exclusive hot, high high wheat quality, high quality, very premium, handmade line of work, right there's no reason why you can't do that. The only caveat is, if you want to charge premium prices, you do have to back up your prices with branding with the photos on your web site, with the product listing descriptions with the entire shopping experience that you give your customers. So a lot of that has to do with your web site, you know, with the pictures you want to give people you want to make them feel something you want to make them feel emotions inside, and if if they go to your website and they're you know, they're encountering all of thes boggs, and they're all these roadblocks, and if you're making them feel frustrated, even if your product is really great, and even though the price is great, they're not going to feel like they can trust your company, they're not going to feel like it's worth it, so show your customers why it's worth it really communicate to them, and your communication can really come not just in the form of your text description in your copyrighting. It can also come from your photos from the photos that you post on social media from your entire website, from the layout that you've chosen from the design, just even from the communication you have through e mails with them. A couple of tips on pricing strategies even if you never intend to sell wholesale, I would still encourage you to do the you know once you figure out who also pricing, multiply that again by two because it helps make your subscription feel more special. With that extra money in the pocket, you can then have a bigger budget that you can spend on extra little things that can really enhance the experience of your subscription. Consider also pricing your subscription just a tad bit lower than what you're calculated retail prices. Essentially, what I'm saying is, I want you to make your subscription and no brainer to sign up. So for example, in my jewelry business, tiny hands, most of my necklaces are either twenty three dollars or twenty eight dollars my subscription product, the necklace off the month club, is at twenty five dollars. And for the most part I'm making them designs that I would normally sell it twenty eight or thirty eight dollars even I have a few things and I sell for thirty eight dollars so in a way it is a little bit of a discount for people it's a better deal for them if they were to join the subscription and then going back to the wholesale part of things what's nice with having that extra money in your budget by pricing correctly is you know you get to have that extra money to really make your customers feel special and if not it's still more profit for you and that feels good so as I was saying you want to try to make it a better value than your other products you want to really make it a no brainer for your customers to join so you can do this in one or two ways or you could do this into in both ways actually you can add value or you can discount so what I mean by that is for example added value is you could add a little bit something extra in your subscription so what I like to do is some I liketo pair up I like to think of themes for my subscriptions every month so for example one month I did a cherry cheesecake necklace and then I went online and I start looking for candy that was cherry cheese cake themed and I found this great taffy store that sold cherry cheesecake taffy so I bought a whole bunch and for everyone who got a subscription they got a whole bunch of candy asses well, that was following on that same theme so that's how you can add value to it and then this counting you know we all know how to do that right just make it a little bit of a lower price just a couple of dollars even is good enough and at the end of the day what I want you to do is just make it a no brainer for people to join make it make it really easy for them make it make it something that when they come to your website it's just it just makes sense that this is what they want do you build thie shipping and handling costs into the cost of the of the subscription that's a good question which we will talk about later but to answer your question now I normally have it as a separate cost but um and we'll talk well sometimes I do if you if you absolutely had to you could potentially add your shipping costs into your product price and then you could tell people it's free shipping for example or at a percentage to it so if you're shipping internationally and you want tio kind of really build and grow your international customer base then you could and for example, to shit like a a little necklace like that to australia, for example is going to be eleven dollars for me so I could potentially instead of selling my necklace for twenty five dollars, I could say thirty dollars, and then shipping is five dollars to australia, so that could be something you you could do if you wanted to so let's talk about kind of how you want to be collecting your payments so one way is in collecting the month to month payments and what's really nice about this is it's really easy? And your customers they're only being billed in my case twenty five dollars every other month and I'll talk about the frequency I kind of do my subscription once every two months. So it's pretty easy for your customers to swallow is not a lot of money up front and there are no surprises you get billed every other month and that's pretty consistent, you know, you know when to expect when you get when you when your payment is going to be taken out from your credit card and no surprises is a good thing because you don't want to surprise her customers in that negative way because then they're going to be upset and they're going to email you and we'll be likewise there charge on my card so as long as they're expecting it and if you're doing this in a regular schedule, they're going to be expecting it that's going to be all good for us? Or you could collect your payments in a lump sum manner so you could do it in every three months so you can pre pay for three months of subscriptions or six months or twelve months. S o for those of a selling on etsy, unfortunately, there isn't a way yet for us to have recurring payments. So for at sea folks collecting lump sum payments, I believe, is the only way to go about it. The cons with selling with selling your subscription with lump sum payments that is that it can be a deterrent for your customers say, for example, I was doing three months of twenty five dollars that's seventy five dollars, for my customers up front, even though technically in their minds, you know, they're paying for three months worth of subscriptions, it's still a lot of money to part with that from the get goal, and even if you take that to six months, a twenty five dollars, I don't want to even do the math and embarrass myself, but it's going to be over one hundred dollars, right, and so it makes it harder for people. To want to buy your subscription. So I think for most of us, if you have your own website of your own war press or shop, if I really encourage you to go the month to month route, another con with lump sum payments that is that it can surprise your customers. So if, for example, someone signed up for six months, they pay one at the beginning of the six months and then one six months comes around again. Once one six months have passed a start of the next six months, they're going to build, rebuild again and what's likely going to happen is that they probably don't even remember signing up six months ago, so when they see on their statement that they have this huge bill of, like, one hundred twenty dollars, are going to like when did that happen? What what? What is this? So it really helps to make sure that your customers expect when your payments air coming out so doing it month to month is just easier for everyone in general. The other con with having lump sum payments is technically, the money is yours, but when you think about it, if you have someone who's paying twelve months worth of subscriptions for you, they're paying that up front it's not really in your budget to be spending all twelve months in the first month you know you really have to kind of break it down and really control yourself I'm not spending all that money in the first few months so that money can be harder to manage and I've heard of people running subscriptions and if they're collecting lump sum payments they have a whole separate bank account just for the's lump sum payments so they know they're not spending this money so lump sum payments are you know, on the one hand they're great it's great money up front for us, right? It's a big positive cash flow into our business that's nice. So if you do decide to do lump sum payments or you know if you're selling on etc I would encourage you to also think about offering some small discounts on that lump sum payment because as I said, like three months of twenty five dollars at seventy five dollars of whole subscription what if I could make it sixty nine dollars and make it that just a little bit easier for them to purchase? One question you will have to answer if you do decide to to charge lump sum payments is how will you offer refunds if someone is signed up for the next twelve months? But they decide in months to that they're not happy with the product or that they decide they don't they need the money back because their house just scott I don't know whatever whatever story they might come up with what are you going to do about that what would your policy be? Are you going to keep the money are you going to refund them? I'm going pro rate them so definitely think about that if you do do decide to do a lump sum payments and when it comes to shipping definitely price it out I have shipping for for international subscribers I have one shipping price for that for canada and mexico subscribers I have a different price for that and then domestically within the u s I have a different price for that and that's all for me a separate price amid a separate cost so what I would tell my subscribers it's it's twenty five dollars for the club but it's four dollars an additional shipping costs for domestic or it's eight dollars for canada or it's eleven dollars for everywhere else in the world I wanted to ask if you guys have questions about pricing before we get onto are really cool interview with stacey yeah you may have this address on your website and I just haven't come across it um I have a lot of trouble with folks the messaging piece saying your prices are really high on you know you know they want the item and I'm just curious what's the best way to address that because you really don't have the time teo educate them on your craft and what all goes into it you don't want to bore them with all the details but you don't wantto disregard their question I just at a loss it having addressed that sometimes yeah so I actually get that a lot too because for the product that I fell when you look at it it you know you think all this will be great for kids but then a lot of parents don't want to be spending twenty three or twenty eight dollars for kids on ly for them to break it or destroy it and after a day of wearing it right so I get that question a lot so what I do I definitely agree with you that you do have toe kind of sit down to kind of educate them a little bit so I do explain to them that it takes so it takes this much amount of time to create something and a lot of thought goes behind it and that you do back up your prices if you're not happy with it, you're happy to give them a refund et cetera, et cetera and once once you sit down and write that first email out to that, whoever you might be reaching out to kind of say that as a template so that the next time someone asks you can just copy and pasted in their andi eventually I think essentially the reason why we get asked that question is we're not attracting the right customers so I think eventually through your branding or through through the marketing that you're doing you will eventually start finding more of the right customers more of the right people who are like that's a no brainer to pay like one hundred dollars for a toy you know so are collectible more like so just kind of have that ready I go through the same thing but it used to be it used to be a really big problem before I rebranded and then when I rebranded it looked a little bit more classy looked a little more sophisticated like adults could wear this to you know like the quirky young adult type person with pink hair on who were cupcake dresses there are there are girls out there like that so yeah I think it's it's all in your branding but I hope that answers your question ok do we have any more way have questions from not only pricing but the entire morning okay of instruction from the online community so one is from tiny paws if your subscription is for something like a course or digital product that you do once per month and could have ten or one hundred people subscribing without it costing you more like an actual physical project like it doesn't cost as much as that how do you figure the pricing for that huh? Digital products can be kind of difficult to price and I think with digital products to things you could survey what other people who are making a similar digital product issue were pricing for something like that um the second thing you could do is time yourself and figure out how much time you've spent creating that digital product and then in the back of your mind just have a guest in the number for how many copies or how many subscriptions you want to sell for that product and then kind of from there you'd be able to calculate your pricing so let's say you also want to tell yourself or ask yourself let's say you spend ten hours making it and let's say you're charging to twenty dollars an hour so you want to be paid two hundred dollars an hour at least to recoup in cost from selling this product on bets say you know you can sell one hundred of them so you know you at least want to charge two dollars at least for this product but yeah I definitely think that digital products tend to be a little bit more in that gray area because you do have more of that longevity of being able to keep selling it without putting in that extra work eso scaling up it's a lot easier anything having those guidelines will at least help give you a better idea where he should be pricing it great and we talked you talked a little bit about this but laced lead had a follow up question her question was do you typically do annual subscriptions or other durations which you talked about a little bit and her next question following that was also is it helpful to offer discounts for longer subscriptions yes so I don't I in my own business I don't do annual subscriptions but I do have friends who do do it and who do do it successfully and what they do is once they have accumulated you know the first round it usually takes a little bit more marketing work to get the first round of subscribers but during the next year you already have all of their email addresses and then you can send them and send them an email again to say hey, we're opening our next round of this annual subscription eso itt's not I don't think it's going to deter your customers but definitely having those customers email addresses so you can reach out to them again after the the first year is over we're definitely helps and your question and yes I do believe that if you want to charge a whole year a whole year's worth of subscriptions that you do add some sort of discount into it so you really encourage people to pay for for the whole year in advance they're a couple more questions from before the pricing information one is from artist sandra how many followers or fans should I have before I start my subscription business that's a good question and I don't think I could give you that magic answer um I think you should just try it out there my friend stacy and I were actually bringing on we were kind of having a debate about this because she believes that you ought to have your own you ought to have a current audience on existing audience before you start your subscription but I'm of to believe that you don't need to have a huge audience to start with because it all boils down to still doing the marketing to it I think if you have a large audience is just going to make marketing your subscription product a lot easier but if you don't and if you're just starting from scratch a zay mentioned like at the start of this workshop if you're starting a whole business from scratch and all you're going to sell us a subscription your social media falling and your audience is going to start at zero as well so you're still marketing your product in almost the same way you would market any other product so I think I my personal belief is that it doesn't have to be big for you to start because I also believe that I want you to get started before you're ready so don't let that like oh I'm not at ten thousand email subscribers that don't let that stop you from from from starting going subscription and finally there's one more question online c m y fabric box ass we love the exclusivity of only offering products in your monthly subscription, but how do we handle extra product if we don't put in our shop and there's been some conversation this morning in the chat about that from other people as well about that in terms of what you do with extra product? Or do you just make it when they ordered or yeah, yeah, so actually, in our next section, I'm going to talk about the system that you're going to have for selling subscriptions, which eliminate that being a problem, you're not going to have extra product, but to answer that question so like for a lot of the big box brands that do subscription products like birchbox and stitch fakes and things like that, what they normally do with leftover inventory is that after that month is over, then they have a regular shop that hey, you guys convey by this stuff that was in last month's subscription on dh then you know you could sell it on a little bit of a higher price point or if you want, you could wait until a few months have gone by and not have it so close, not have it so back to bank because that will really increase that exclusivity factor. But that is potentially something you could do is to kind of have a separate shop section where you then start filling in of leftover inventory with because I think some people would like that, too, is I have actually sold some necklaces in my subscription that are like, to me. They're really great. I know my customers really like them, but then I no longer sell them anymore. So it would make sense, eventually, that I've included in my regular lines, so that people who have seen this necklace from the subscription, who really want another piece, or who saw their friend headed, but they missed on the subscription. They could still get a chance to buy it, but maybe at a later date.