Selling digital items can be a good (sort of) passive income, but pricing them is a little challenging.
Most pricing formulas take the cost of your materials into account, but since digital products don’t have physical components, that can leave you with a lot of questions.
So how should you go about pricing your digital items for sale on Etsy, or on other platforms in general?
To price digital items for sale on Etsy or online, you need to have a good grasp of all of your business expenses and include them in the cost of each item even if those expenses don’t include physical supplies to make your products. You also need to include the cost of your time. This will ensure that all of your annual costs are covered, and that you’ll be able to make a profit at the end of the year.
I asked some digital sellers from my EShop Success program for tips on how to price digital items, so read on to see what they said.
Table of Contents
- How to decide on your prices for digital products on Etsy.
- Is there a way to price things that everyone in your category uses?
- Don’t compete on price on Etsy.
- Consider where else you sell your products.
Some of the links in this article are affiliate links that will pay a small commission if they’re used to purchase something. Thanks for your support!
How to decide on your prices for digital products on Etsy.
Pricing digital items for Etsy involves taking a few things into account:
What’s the “normal” price and is that worth it for you?
Etsy has a lot of digital listings that are listed for incredibly low prices. This doesn’t mean that you need to list everything at $1, but you do need to do some investigation to see if the prices that are considered “normal” are high enough for it to make it worth it for you.
Joanne, owner of Krysallysskreations, says “I sell digital embroidery designs and I tend to forget that not everyone can do what I do and that I have invested in the programs that not everyone has. Never mind the 20+ years of experience and learning that goes into creating a premium quality design that runs smoothly on their machine so they can be productive. My best advice is to not try to compete with everyone else in price. Know your worth, people will pay for quality.”
Just because everyone else is pricing things really low doesn’t mean that you can’t price your work higher, but you do need to be aware of the limits of what the competition is putting on you.
Be prepared to adjust your pricing until you feel like you’ve found the right place for your price points and your profit margins.
Also keep in mind that some types of digital products can be priced higher than others because that’s the convention in that category.
Pay attention to whether you can add different products to your shop in order to maximize your profits!
Are you making a profit?
If you set a price based on a formula (that usually doesn’t work) it’s possible that you won’t be making the profit that you want.
With digital products, you might need to experiment until you find the right price to charge.
Karen, owner of Loving Mondays and A Planner To Remember, says “I only sell digital in two shops and my best advice is to use Etsy ads (yes…it works great for me), keep daily stats and test pricing until you hit the sweet spot.”
Etsy takes the fees out of a $1 price the same way that they take fees out of a $100 price, but the higher price will give you a much higher profit, so be prepared to experiment.
Lyndsay, owner of Pony Express Graphics, points out that you need to think of all of your business expenses. “I sell digital products and I often forget to think about the monthly services I pay for. Whether it be monthly memberships to obtain fonts/design elements, monthly fees for the programs to use to convert said files into different formats, or the fact that I pay for Google Drive storage to store all my designs in one spot.”
If you don’t think about that kind of thing you could potentially be operating at a loss without realizing it!
Have you included all possible discounts and fees into your prices?
When you sell on any platform, the fees that the platform charges have to be added in as an expense. You also have to think about any potential discounts or coupons that you offer.
If you don’t take those things into account, you might not make as much as you think, and you might actually end up losing money on some sales.
Pricing digital items too low will potentially end up making you lose money with every order because of the fixed fee 20 cent listing fee and the 35 cent fee that’s wrapped into the payment processing fee.
If you want to make sure to get everything included in your pricing, you should get my Pricing Guide here: Pricing Guide for Etsy Businesses. It goes into full detail about how to figure out how much to include in the price of each item so that you’re not caught off-guard.
Once you get past the deciding on prices part, you then have to think about how you’ll structure your price points.
Is there a way to price things that everyone in your category uses?
Digital sellers will recognize that there are definite niche-specific conventions when it comes to pricing certain items on Etsy.
If you do have products in a niche where everyone prices things really low, or where everyone uses 99 cent endings, you need to decide if you want to go along with the pack or try to break free.
Is there a reason for the way those people are pricing things? Or are they just doing it because everyone else is doing it?
A lot of digital sellers use a 99-cent price point, or prices that end in 99 cents. There’s no reason for that, though, and if you can provide a truly unique product, you should be able to use whole dollar amounts, which generally indicate a higher quality.
Don’t compete on price on Etsy.
There is no good reason to compete on price alone when you sell on Etsy. The fact is, when people start undercutting each other, all it takes is someone to come along and mark their items at 1 cent less than yours in order to “win.”
In this case, the winner is the loser.
Compete on quality and originality, emphasize that in your marketing, and you’ll have a much better chance of making a profit at the end of the year.
People also tend to think of a higher price as being an indicator of higher quality, so don’t leave the human behavior part of it out of your calculations!
Consider where else you sell your products.
If you sell on any platforms other than Etsy, or if you have your own website, you’ll need to decide whether you want to charge the same or have different prices in each place. There are reasons why you would want to have prices a little lower on a website than on Etsy, mainly so that people shop on your website for a better price.
You might also want to sell digital products on multiple platforms, since you won’t have the problem of managing inventory across multiple sites.
This is a benefit to selling only digital…You can set up shop on as many platforms as you want to and go for more visibility across eCommerce sites in general.
If you do have a website, you can offer exclusive designs that you only sell there in order to get people to shop there so that you can maximize your profits and not have to pay fees to each platform.
I’ve heard of people who only offer coupons on their websites, and never on Etsy. There are ways to move people from Etsy to your website where you don’t have to pay Etsy’s fees, and pricing can be one of them.
Pricing digital products can be tricky because of a number of factors, but if you set your prices where you need them to be to make a profit, you can always adjust to respond to market changes. And by that, I mean you can raise them if need be!
If you've ever shopped for anything online, you've probably seen messages that say "only one left". Does this mean that there really is only one of that thing left? Or is it just a trick to try to...
It doesn't happen very often, but every now and then, you'll buy something on Etsy and then realize that the shop is closed after you've purchased from them. How should you handle this situation?...