Most merchants have a lot of questions about subscription box pricing. What should I charge? How do I get healthy profit margin? What’s the perfect price for a subscription box?
One of the most important steps for starting a successful subscription box business is choosing the right box price. Unfortunately, a lot of subscription box business owners struggle in this area. Pricing your subscription box too low is one of the big mistakes subscription businesses make, so you’re going to want to pay close attention to this guide.
The 2 biggest cost for a subscription box business is products and shipping. However, you’re going to have more expenses than just those two, such as custom boxes, credit card fees, packing materials, ect.
While all the products, shipping and materials are expenses, you can’t forget about the time you’re committing every month. You need to make profits if you want to sustain your subscription box business for the long-term.
Also, keep in mind that your cost and expenses may be in one fee is you choose to get subscription box services.
Subscription Box Cost
There’s going to be 8 areas of focus when calculating your total subscription box cost. Here’s the 8 levels.
- Average Cost Of Products
- Shipping Cost
- Box Materials Cost
- Packing Materials Cost
- Transaction Fees Cost
- Cost Of Fulfillment
- Marketing Cost
- Fixed Monthly Cost
(1) Average Cost Of Products
First, you need to know the average cost of the products you’ll be using for your subscription box business. You need to make sure you include the cost of products and the cost it takes to ship the box out. For most of you, this will be one of your top expenses.
Now, the cost of your products are going to vary depending on the type of subscription box business you have. Despite that, you need to know at all times how much products are costing your business.
(2) Shipping Cost
How much does it cost you to ship your box? The cost you’ll pay shipping depends on the box size and weight of the box.
If you do plan on shipping for free, make sure you exclude international shipping. If you’ll be shipping internationally, make sure you include that cost in the price.
Most of you will be doing self-fulfillment starting out. As your subscription box business grows, you consider cutting your shipping and fulfillment cost by outsourcing fulfillment. As the company owner, you need to focus your energy and effort on growing your business versus running your business.
(3) Box Materials Cost
How much will your box materials cost?
Remember, your box is a part of the experience. You want to put some effort into the design. The best way to do that starting out is by asking your subscribers, audience or getting feedback from others.
While box design is important, being profitable is more important, so the cost of box materials needs to be as low as you can get it.
(4) Packing Materials Cost
How much will your packing materials cost? This would include packing paper, labels and tape.
A lot of these packing materials are cheap, so material cost can usually be kept low.
(5) Transaction Fees Cost
How much is your credit card fees?
Transaction fees can add up quickly and they can account for a lot of money once you have a fair amount of subscribers.
How much you pay in transaction fees depends on the platform you operate on and who you use for payments.
(6) Cost Of Fulfillment
Most of you are in the early stages or just getting started with your monthly subscription box business.
(7) Marketing Cost
If you’re planning to use Facebook ads, Instagram ads, Google ads or SEO, you need to account for those cost. How much do you spend on marketing to acquire a new subscriber?
Yes, you need to know exactly how much it cost you to get a new customer.
Now, what ever channel you decide to use to grow your business can vary in cost too. If you’re running Facebook ads, those are going to be cost. If you’re running Google ads, those are going to have cost. If you’ve hired a SEO, that will have cost too.
If you’re doing your own marketing, you will save on those expenses but it will be at the cost of your time. This is why you need to find a balance between doing things yourself and outsourcing work.
(8) Fixed Monthly Cost
You’ll also need to calculate your fixed monthly cost. This will include your Shopify site, your email marketing software, marketing tools or accounting software. As your company grows, fixed cost each month will likely rise. Still, there’s a lot of different ways to control your subscription box cost.
Finding The Right Subscription Box Price
Now that you’re able to calculate all your cost, you can now begin to test the right subscription box price for your boxes.
Let’s use a good example.
We’ll say your subscription box cost per box is $24.00. To get a 50 percent margin, we’d need to price our subscription box at $48.00. 50 percent is a really good margin for a subscription box.
If you can’t get to 50 percent, don’t worry, 20-50 percent margins are a good aim.
Here’s a tip for all of you subscription box owners: if the value is there, your customers are going to buy.
There’s a ton of different ways you can add “value” without having to add more physical products.
- Weekly Videos
- Bi-Weekly Conference Calls
Don’t be afraid to think outside of the box. If you’re looking for inspiration, go to Google and search for it. The ideas are limitless.
The big key for you calculating cost is ensuring your business has a healthy margin.
If you’re struggling to find a good margin, you have to look at your cost closely and see where you can save.
Now, you can also add more value to your subscription box and charge a higher price. There’s a lot of different things you can do, don’t be afraid to think outside the box.