There are 2 popular ways of pricing a Kickstarter, and both have their own advantages. I have a strong preference, but which works for you?

Pricing is tough. You want to get sales, but if you’re reading my advice you probably don’t have the budget to make a loss on your sale price. The direction you should take depends on your future plans for your business. Are you trying to start a company for the long haul, or are you looking to make a quick buck and then move on?

Pricing for sales

When I launched my first campaign, I was an unknown. I was building an email list and trying to gain a reputation, but I had no exiting base to use to help sell my watches.

I did know that I wanted my first model to be the start of a long term business. While I couldn’t afford to make a loss, I was OK not making a profit. This meant I could price my product to be super affordable, which acts as a marketing strategy on its own.

I priced my first product to cover expenses, and as a result sold a lot of product and received a lot of free coverage.

The advantages of pricing low are obvious:

  • Lots of sales
  • Make a splash without spending lots on advertising
  • Free press coverage

The are some disadvantages though, which are important to consider

  • Unexpected extra costs can cause problems delivering your product
  • Your customers expect you to be a “bargain” brand, which can make it hard to increase your prices later. You’ll need to do it a bit at a time, until you’re at a price point that is sustainable
  • If you’re relying on the business to live off, you are going to struggle to pay your bills. This strategy works well if you’re launching a side-project alongside your existing job and have time to build. It’s less suitable if you need to make money straight away.

Until I’d launched my second product I wasn’t confident that I’d made the correct choice when pricing my first. With some careful setting of expectations, I was able to price my second higher, giving myself a (modest) margin, and the business continues to grow. The large customer base I’d built up with my first campaign resulted in a lot of return business.

This would not have worked though, if it was a “one-off” type of product, or something I needed to live off.

It’s important if your budget is tight that you are super careful to get your budget right. Make sure you know that your factory can deliver and that they will do it at an agreed price. Make sure you have enough slack built in to fix small problems that occur. Spend the time learning the tax code for your country, as well as any import fees you are going to get stung for when importing your product (if appropriate). You’ll find that some shipping companies have “hidden” costs that can really add-up.

Price for profit

The other option is to price your product to make an immediate profit, perhaps with a few early very special price points to get things moving.

The advantage of pricing at a higher point is that, assuming you fund your project, you are likely to have the money to comfortably deliver. By going for low pricing, you’re gambling on getting lots of sales to make sure you have the cash to cover all your bills. If you just scrape over the funding line without a margin on your product, you’re going to really struggle if you encounter any issues at all.

The problem with pricing higher is that if you’re not offering a bargain and have no history, spreading the word and getting people to take a bet on you will be harder.

If you pick this option you need to be sure that you’ve got a engaged list and a great product, as you’re going to have to do a lot of work to sell it.

I avoided this strategy because I needed to differentiate my product somehow, and didn’t have the money to run a huge advertising campaign. I had a good quality watch but it was nothing stunningly new or groundbreaking. You need a selling point, and mine was going to be value.

My pricing strategy

Before I ran my first Kickstarter I had a strategy, and it’s worked well for me. If you’re in a similar market or industry I’m convinced it’s the way to go. Here is what I did:

  1. Run campaign 1 at pretty much break even point. Aim for lots of sales
  2. Run campaign 2 at a profit, but not crazy margins. Make sure that you’ve got something new to offer that helps justify the price increase
  3. From pre-order/crowdfunding campaign 3 onwards, price at a sustainable level

If you get through stage 1 comfortably, this should result in a sustainable long term business. If you fail at stage 1 (or just scrape through) then either your product, price, or pre-campaign marketing was wrong.