How I Price My Manufactured Products

Pricing, pricing, pricing...

This is such a crucial aspect of running a product based business because the price you set directly impacts your profitability. 

I've created a formula that has worked well for me after much trial and error. This formula ensures that you have profit and wiggle room for all the overhead expenses that we don't typically associate with the cost of our product AND it builds in shipping to the overall cost of your product. This allows for to have a lower and more attractive flat rate shipping fee, which is MUCH easier to manage than calculating shipping on every single product.

These "extra" expenses we incur from running a product based business are:

• Website fees
• Domain fees
• Our own time in designing, testing, and sampling products
• Apps 
• Product photography supplies
• Email providers
• Shipping supplies
• Emotional tax!!!
• The List can go on...

This is why we must be sure we have margin–profit margin.

When you manufacture an item it should give you great potential for higher margin because you are getting a product at a bulk price and utilizing the most streamlined approach in producing it, thus giving you a great price for the COGS (Cost of Goods Sold). Manufacturers have access to top of the line technology and systems that make producing a product, quicker, easier, and extremely cost effect.

Consider the analogy of a sewing machine. Sewing machines make sewing a straight line incredibly quick and easy, while sewing a similar straight line by hand with a needle and thread takes exponentially longer. Manufacturers are like the sewing machine, making production quicker which drives the price down because there is much less time and labor spent and more systems and automated machine assistance.

 

On top of this formula, I recommend having what I have coined, a "low barrier" flat shipping rate. We use $2.50-$3.50 but you can choose up to $5. This is a FLAT rate shipping fee that you can apply to all your products. The reason I like to include this is because it feels like a great deal to the customer..."only $2.50 to ship all of this? Amazing!" You can afford this low barrier flat shipping rate, because in my pricing calculator you have accounted for 70% of the shipping expense in the price of your product. 

Further–having a flat shipping rate is MUCH easier to set up on the backend of Shopify or Etsy.

Some people may ask, well, why not just offer free shipping? 

Great question.

I've tried this before and it increased my order conversion, BUT there was no incentive to increase my average order value (AOV) which is another way we try to increase our profitability.

By having the low barrier flat shipping rate, you can now use the strategy of a "free shipping threshold", meaning, you can offer free shipping on orders $75 or more (insert your determined threshold). 

Have you ever seen those alerts on websites telling you that you are ALMOST able to get free shipping? Then you consider, maybe it's worth it to add just $15 more to get that free shipping...

By having the low barrier flat shipping rate, you can get in on this strategy and build even more profit into your business.

The takeaway–price your products at the BARE MINIMUM using this formula so you can be profitable and stay in business.

You can find my pricing calculator in the RESOURCE VAULT along with dozens of tools and tricks that helped me reach 7-figures in my product based business.