How to create a winning print-on-demand pricing strategy

In the highly competitive world of eCommerce, your pricing strategy can determine the success (or failure) of your print-on-demand business.

It’s not just about mark-up, or price plus pricing models; it's about finding the perfect balance between profitability and customer satisfaction. But how do you set prices that will attract customers without eroding your profit margins? And how do you know if you're leaving money on the table?

The key to creating a winning print-on-demand pricing strategy is understanding the various factors that influence your costs, testing different approaches, and adjusting them regularly to stay competitive.

Did you know that on average, print-on-demand sellers take 165 days to hit their first $1,000 in revenue? Successful merchants, however, reach this milestone in less than 118 days.

So, how do you fast-track your success?

It all starts with the right pricing strategy.

In this article, we’ll walk you through the essential steps to help you master pricing for your print-on-demand products.

Contents

• Step 1: calculate your product costs
• Step 2: add a realistic profit margin
• Step 3: incorporate marketing and overhead costs
• Step 4: test your pricing strategy
• Step 5: monitor and adjust regularly
• Step 6: build customer perceived value
• Step 7: plan for long-term growth
• How MarketDirect StoreFront helps optimize your pricing strategy

Step 1: calculate your product costs

The foundation of any pricing strategy is knowing exactly how much it costs to produce and sell each product. For a print-on-demand business, there are several costs you need to account for:

Design costs

Whether you're outsourcing designs or creating them yourself, you need to factor in the cost of design. If you hire a designer, the price you pay for the design needs to be divided by the number of products you plan to sell. If you're designing the products yourself, include the time you spend creating those designs as part of your cost structure.

Production costs

This includes the base cost that your print-on-demand provider charges for producing the product. Costs will vary depending on the type of item (e.g., t-shirts, mugs, or phone cases) and the printing technique (screen printing, direct-to-garment, etc.). Make sure you understand these production costs clearly, as they will directly affect your pricing.

The average profit margin for top-selling products is 40-50%, with apparel typically achieving 40%, while mugs and candles can have mark-ups of up to 45% and 60%, respectively. These profit margins are essential for maintaining the financial health of your business while staying competitive in the market.

Shipping costs

Shipping is another critical factor. You have two primary options:

• Pass the shipping cost to your customers – Customers pay for shipping, which can sometimes lead to cart abandonment if they’re surprised by high fees at checkout.
• Absorb the shipping cost into your product price – Offering free shipping is a powerful incentive. 90% of consumers are more likely to purchase when offered ‘free’ shipping, so consider embedding shipping costs into the retail price to create a seamless shopping experience.

Platform fees

These fees are typically charged by the payment gateways (technology that allows businesses you to accept, process, and manage payments from your customers) or third-party processors that handle your customer transactions. Depending on the provider, you may incur a percentage-based transaction fee, often ranging from 2% to 3%, along with a small fixed fee per transaction (e.g., $0.30 per order).

Additionally, if you're using an online marketplace or eCommerce service, they may charge a percentage of each sale, which can add up quickly if you’re selling in high volumes. Be sure to factor these fees into your pricing strategy to ensure you're covering these costs without sacrificing profitability.

Taxes

Taxes vary based on the region you and your customers are located in. In the U.S., there are sales taxes ranging from 2.9% to 7.25%, while in the EU, you’ll need to account for VAT, which can be as high as 27%. Consult with a tax professional to ensure compliance and include these costs in your pricing.

Step 2: add a realistic profit margin

For most print-on-demand businesses, a 40-50% profit margin is a healthy target.

Once you’ve calculated your total product cost, it’s time to add a profit margin. The profit margin is the percentage of the total cost that you add to ensure you make a profit. But how do you choose the right margin?

Determine your profit margin

For most print-on-demand businesses, a 40-50% profit margin is a healthy target. Apparel typically achieves a 40% margin, while products like candles can reach up to 60%. If you're selling paper products, mark-ups can soar to 76%, making them highly profitable.

Here’s a simple formula to calculate your retail price:

Retail Price = (Product Cost + Shipping Cost) + (Product Cost x Profit Margin)

For example:

If your total product cost (including production, design, shipping, etc.) is $20, and you want a 40% profit margin, your retail price would be $28 ($20 + 40% of $20).

Consider your competitors

You should also take into account your competitors’ pricing. If similar products are selling for $25 and you’re pricing yours at $40 without offering extra value, you may struggle to make sales. On the other hand, pricing too low can reduce your profit margin and give customers the impression that your products are of lower quality.

Step 3: incorporate marketing and overhead costs

Your pricing should also cover the costs of running your business, including marketing and operational expenses. Here are some key areas to consider:

Marketing costs

Effective marketing is essential for driving traffic to your store, but it can also be expensive. Whether you’re paying for Google Ads, Facebook campaigns, or influencer marketing, you need to account for these costs in your pricing structure.

For example:

If you spend $500 a month on ads and expect to sell 200 products, your marketing cost per product is $2.50. Be sure to adjust your retail price to accommodate these costs while maintaining a healthy profit margin.

Platform subscriptions

Your eCommerce platform will likely charge a monthly subscription fee. For instance, Shopify’s basic plan is $25/month, while WooCommerce charges for hosting. Make sure these recurring costs are factored into your overall pricing model.

Customer service and returns

Handling customer complaints, returns, or product defects can impact your bottom line. While it may be difficult to predict exactly how many returns you’ll have, it’s important to leave some buffer in your pricing to cover unexpected customer service issues.

Step 4: test your pricing strategy

Once you've set your initial prices, it’s time to test. The only way to know if your prices are optimal is to experiment. Testing can help you discover the best price point that maximizes both sales and profitability.

A/B test your prices

A/B testing (or split testing) is a great way to compare two price points. For example, you might test a product at $24.99 and $29.99 to see which price yields better sales without drastically affecting your profit margin. Keep all other variables constant, such as product images and descriptions, and let the test run for a set period to gather enough data.

Test free shipping thresholds

Experiment with offering free shipping on orders over a certain amount (e.g., $50 or $75). By setting different thresholds, you can encourage customers to buy more to qualify for free shipping, which increases your average order value. Track how this affects both sales and profits to find the sweet spot.

Product bundling tests

Bundling products is another great way to increase the average order value. For example, offering a discounted price when a customer buys a mug and t-shirt together can lead to higher sales volumes. Test different product combinations and bundle discounts to see what resonates with your customers.

Step 5: monitor and adjust regularly

The average conversion rate for a print-on-demand store is 1.7%

Pricing isn’t a one-time decision. You’ll need to review and adjust your prices as market conditions, customer preferences, and your costs evolve. Here’s how to keep your pricing strategy fresh:

Track performance metrics

Regularly review the following metrics to ensure your pricing strategy is working:

• Conversion rate: The average conversion rate for a print-on-demand store is 1.7%, meaning only a small percentage of visitors turn into buyers. If your conversion rate is below this average, your pricing may need to be adjusted.
• Profit margins: Keep a close eye on your profit margins, especially if your costs (like production or shipping) fluctuate.
• Cart abandonment rates: If customers are frequently abandoning their carts, it could be a sign that your prices or shipping costs are too high.

Monitor competitor prices

Your competitors will likely adjust their prices over time, especially during holidays or promotional periods. Keep an eye on what they’re doing, and adjust your prices if necessary to stay competitive without sacrificing profitability.

Seasonal adjustments

Depending on your product offerings, you may need to adjust prices based on seasonality. For instance, raising prices on hoodies during the winter or offering discounts on summer apparel can help you capitalize on seasonal demand.

Step 6: build customer perceived value

Your pricing doesn’t just reflect your costs - it also reflects the perceived value of your brand. If you can build a strong brand identity and offer added value, customers may be willing to pay a higher price.

Offer high-quality customer service

Excellent customer service can set your business apart and justify higher prices. Customers who know they’ll receive fast, friendly support if something goes wrong are more likely to buy from you again. Great service can build customer loyalty and increase the likelihood of repeat purchases, which boosts your overall revenue.

Present your products well

High-quality images, detailed product descriptions, and a seamless shopping experience all add to the perceived value of your products. Even if your prices are slightly higher than competitors, customers may choose your store if they perceive your products to be of higher quality.

Step 7: plan for long-term growth

As your business scales, your pricing strategy should evolve. Here's how to plan for long-term success:

Bulk discounts and special offers

As your order volume grows, consider offering bulk discounts or special pricing for large orders. This can help you move more inventory while maintaining a healthy profit margin. For example, offering a 10% discount on orders of 10 or more t-shirts can incentivize larger purchases without cutting too much into your profits.

Adjust for economies of scale

As you scale, your production costs may decrease if you're able to negotiate better rates with your print-on-demand provider. Pass these savings on to your customers by adjusting your prices to remain competitive while maintaining your margins.

Sustainable growth

Growth isn’t just about increasing prices. Focus on streamlining your operations to reduce costs, which will allow you to offer competitive prices and grow sustainably over time.

How MarketDirect StoreFront helps optimize your pricing strategy

Managing a print-on-demand business requires juggling multiple factors - design costs, production, shipping, marketing, and more. This is where MarketDirect StoreFront can help.

MarketDirect StoreFront simplifies the process of managing your eCommerce operations and optimizing your pricing strategy through powerful automation and integration tools. Here's how it can help:

• Customizable storefronts: Create a branded, customer-friendly storefront that enhances the perceived value of your products.
• Automation for efficient operations: With integrated order workflows and automated pricing adjustments, you can streamline your business, saving time and reducing costs.
• Data-driven insights: Access comprehensive data on your sales performance, profit margins, and competitor pricing. Use these insights to adjust your prices and stay competitive in real-time.
• Scalability: Whether you’re just starting out or managing thousands of orders a month, MarketDirect StoreFront scales with your business, offering flexible solutions for pricing, order management, and customer service.

By using MarketDirect StoreFront’s advanced features, you can refine your pricing strategy, improve customer satisfaction, and grow your print-on-demand business effectively.

In conclusion, crafting a winning print-on-demand pricing strategy requires a mix of understanding your costs, adding appropriate profit margins, testing pricing models, and continuously adjusting based on market data. By taking these steps, you’ll set your print business up for long-term success while delivering value to your customers.