Kickstarter Topic #7 – How to Price Your Kickstarter Rewards

Now that I have determined the cost of manufacturing and the cost of shipping for my card game (Linkage: A DNA Card Game) for our Kickstarter campaign, I need to figure out how much I should ask backers to donate for a copy of the game.

The price of the reward should obviously include the cost for manufacturing, the cost for shipping, the 10% Kickstarter and Amazon fee, plus a few buffers for any contingencies that may occur.

So below I’ll go into gross detail about how I calculated each of these for my game.

Now the price of your rewards are different than the MSPR cost. I have seen many different MSPR pricing models: everything from 6x, to 8x to 10x the product’s cost of manufacturing as well as other models that don’t factor in the manufacturing at all. Instead they estimate the MSRP purely on comparable products.

Though the MSPR and the Kickstarter Rewards are different, there are lot of similarities on the logic behind how to estimate them. And if this is done incorrectly, it could be a very costly mistake.

There is a lot of advice out there, some good and some bad, so I sifted through as much of it as possible and came up with a pricing strategy that I think works really well for my campaign. Here’s is a summary of how I estimated the price for my Kickstarter Rewards for my campaign.

My Cost Basis

I use the term, “Cost Basis” in a similar way that stock and mutual fund investors uses the term. Here I mean, every expense that goes into producing and shipping one unit of my game. This cost is the “basis” for all other estimations since it represents the highest expense amount to get one unit to a customer.

The cost basis for one deck of Linkage for my kickstarter campaign takes into account the Kickstarter and Amazon fees, cost of manufacturing, shipping to my door, shipping out to the customers, as well as any additional cushion for unforeseen expenses. Obviously this cost basis will decrease if manufacturing more units, of find a better shipping rate etc.

By The Numbers

Currently my plan is to use Quality Playing Cards (QPC) to manufacture 500 units of the game using the standard card option. This will cost a total of $2.88 per deck to manufacture (for a grand total of $1,440 for all 500 deck).

Shipping from the manufacturer in Orlando, FL to my front door in St. Louis, MO will cost roughly $168.26 (this is an estimate given to me by the QPC), which comes out to approximately $0.34 per deck of cards.

Shipping from my location in St. Louis to any location with the U.S. will cost approximately $2.77 per game using USPS First Class Parcel mail (price includes a simple bubble mailer envelope).

This is a grand total of $5.99 ($2.88 + $0.34 + $2.77)

I would argue it would not be wise to estimate my final cost basis on the lowest manufacturer, rather on the second lowest manufacturer. It is inevitable that issue will arise, and if issues arise so much so that you need to use your backup manufacturer, then you want to have a safety cushion your cost basis so you are not taking this amount out of your kid’s college savings accounts.

This would raise the manufacturing cost $2.88 per deck to $4.28 per deck (for a grand total of $2,140 for all 500 deck). This will also create the need for a higher funding goal, but more on that later.

With this backup manufacturer, the grand total is $7.39 ($4.28 + $0.34 + $2.77)

In my experience as an engineer for a consulting firm, we always added a 25% buffer to financial estimates. This may be a little extreme in this case but James Mathe also comments about adding a buffer to your cost estimates. James advices on a 10% buffer after you total all of your costs (He also says that 5% of your packages will be lost or damaged by USPS, which will also need to be accounted for at some point – more on this later.)

It is inevitable that random unforeseen charges will arise so in accordance with the advice of James Mathe, I think it would be safe to add a 10% buffer.

Now I have my final Cost Basis – The additional 10% brings the grand total to $8.13 ($7.39 + $0.74)

This is essentially the total cost to get one unit of my game (based upon a 500 unit print run), manufactured, packaged, and shipped to a single backer (VERY IMPORTANT – NOT including any of my own man-hours). This is the “cost basis” that I will use to estimate my Kickstarter Rewards.

The Anchor Reward

I’m borrowing a term out of Jamey Stegmaier’s playbook here. The Anchor Reward is the base reward – usually it’s one copy of the product you are trying to fund with the Kickstarter campaign. In my case, the Anchor Reward is one copy of my game. So the real question now is: How should I price one copy of the game?

My logic is: (1) the game should be priced well above your cost basis, (2) but should have a comparable price to other similar Kickstarter products. (Remember, MSRP can be heavily dependent upon or even totally determined by competitor pricing so using a comparison model is a highly credible method of determining price.)

(1) Price above your cost basis: Now, James Mathe recommends multiplying your cost basis by four (though not in so many words – he says to total all your costs, add ten percent, then multiply by four… which is the same thing as multiplying your cost basis by four).  Uwe Eickert from Academy Games says you should take your total manufacturing cost and multiply that by eight. On the other end of the spectrum, Michael Mindez from Tasty Minstrel Games (TMG) has priced many of his Kickstarter projects just above the cost basis, and sometimes even below (from Funding the Dream – Episode 25) with the intent of increasing the volume of production in order to help drop the unit cost with bulk pricing.

(2) Comparable to similar games: A recent, and very popular card game on Kickstarter was Japanese, which involved 52 cards (enough to play with 2 players). This game is priced at $20

Martial Arts, a trading card game, had an Anchor Pledge of $30 for two decks of cards. This is $15 for a single deck.

Wrangled – is another basic card game that had a price point of $20, with an early bird special at $15 for the first 100 backers only.

Otters (an adorable card game about otters) was priced at $12 on Kickstarter and was intended to be a simple and humble Kickstater campaign. The creator of Otters, Michael Lachini has also given me some good feedback on my campaign. So if you have kids or just like otters go buy a copy of his game.

Price of my Anchor Reward: $14

It think it’s obvious that the average price point (for the Anchor Reward) for a card game on Kickstarter is roughly $12 to $20. Since my costs basis is $8.13, I will likely price my Anchor Reward at $14 (the bottom of this range).

With a $14 pledge amount, Kickstarter and Amazon will take roughly $1.40 (roughly 10%), so this should be factored in. Another cost to keep in mind, is the extra expense of shipping additional packages to backers who received damaged games, or possibly no game at all. Again, James Mathe commented that this will likely happen 5% of the time.  So I will add an additional 5% to the Cost Basis to account for this.

Cost Basis plus 5% for shipping Problems = $8.54 ($8.13 + $0.41)

Total Expenses: $8.54 + $1.40 = $9.94

Total Margin: $14.00 – $9.94 = $4.06

This $4.06 will allow me to pay for components that are tough to estimate on a per unit basis because they are lump sum fees. These include the fees for the art work and graphic design, the file preparation, prototyping expenses, and even advertising channels during the Kickstarter campaign.

But the primary goal in keeping a little extra margin is to allow me to pay for a larger print run and have some games to sell after the Kickstarter campaign, with the hope of actually making some profit then.

Now, what’s funny is that I will get people who will say totally contradictory things about this margin. Some will say I’m charging way too much for just a simple card game, while others will say that my margins are way too small and that I will likely lose money if anything goes wrong.

What if I Use the Cheaper Manufacturer?

Okay, so some of you are probably thinking, “You’re trying to pull the wool over our eyes. If you end up using the cheaper manufacturer, then you margin will be way higher!”

Great point! The real intention of this blog post is to show how I estimated the price I put on each reward, in a way that take into consideration the number of risks and challenges that may arise. This is not intended to be a business 101 lesson on making profit margin, it’s meant to show you the logical process I went through to price each reward level in a way that HOPEFULLY keeps me safe as a project creator.

And while we are on this point anyway: what really interesting is that roughly 9% of my funds currently are in addition to the price of the reward level! So money that people are freely giving on top of the price I have asked them to contribute to receive a given reward.

Please Take a Second to Comment!

I would love to hear what you think! Have I overlooked something crucial? What was the thought process used in pricing your game or product for Kickstarter? Do you have any questions about any of the details of logic above?