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This week: pricing, by our guest, Kent Wilson, COO at RV Snappad and editor at the DTC Times.

Many DTC brands default to basic "cost x 3" formulas, while successful brands are focusing on contribution margin, factoring in the full picture of delivery costs, platform fees, and channel strategy.

Welcome to your master class in pricing psychology, margin magic, and the art of making more money while selling the same stuff.

Let’s dive in.

WHAT’S HAPPENING

👩‍⚖️ TikTok faces Supreme Court: The court will hear its appeal on the divest-or-ban ruling as TikTok rolls out a new Donation feature​​.

🚁 India snubs drones: 94% of consumers won’t pay extra for drone delivery, favoring practical uses like disaster relief​.

💰 Amazon strikes worsen: 10,000 more workers across the US have gone on strike as of December 19th, as workers continue to demand better wages and working conditions.

🤖 OpenAI’s Shipmas: 12 days of announcing a new feature every day, with some impressive stuff. OpenAI’s dominance continues. 

TACTICS

🧠 Pricing Strategy Masterclass

🏄️ Margin Mastery

That simple "cost times three" pricing formula you learned from that eCommerce guru? It's probably costing you money.

Here's why: If you’re solely focused on gross margin, you’re completely missing a crucial element - contribution margin.

Think about every step your product takes from the factory to your customer's doorstep. Each touch point adds another cost: 

• Packaging

• Shipping fees

• Warehousing costs

• Platform charges

• Payment processing

And don't forget about returns (a silent profit killer.) 

The point is, you need to price in everything it takes to deliver your product because in ecommerce, it doesn't just stop at the cost of goods sold (COGS). If you don't know all your associated expenses, you can’t know your true profit. 

Rule of thumb - ideally your true cost of delivery, a.k.a contribution margin, should be 35% or lower of your total revenue. This leaves enough room for marketing, discounts, fixed expenses, and profit. 

The lower this number, the more growth leverage you have (ie; the more money you can afford to put into marketing). 

☯️ The two product pricing categories

Think your entire catalog should work the same way? Think again. 

Here's an insight that separates successful DTC brands from the strugglers: understanding the difference between cost of acquisition (CAC) products and your lifetime value (LTV) products.

CAC Products: The Heroes

These are your thoroughbreds - the products strong enough to absorb advertising costs while still turning a profit on the first purchase. 

They're what you'll be known for, what you'll advertise aggressively, and what will drive new customer acquisition. When calculating pricing for these products, you need enough margin to cover not just your standard costs, but also your customer acquisition costs (CAC).

Your LTV Products: The Supporting Cast

Then there's everything else - the accessories, upgrades, and complementary items that might not be special enough to advertise profitably but can boost customer lifetime value (LTV). 

Since you're not using these to acquire customers, they don't need to absorb advertising costs in their pricing strategy. Instead, they should be priced to maximize adoption and enhance the primary product experience.

Smart Catalog Strategy

Understanding this distinction changes everything about how you:

• Structure your advertising (focus spend on CAC products)

• Design your website (hero the products that can handle ad spend)

• Build your email flows (introduce LTV products post-purchase)

• Plan your product development (ensure you have both types)

Pro tip: Look at your best-selling products. Can they actually absorb your current CAC and still be profitable? 

If not, you might be focusing your advertising on the wrong products. Or you may need to increase your prices. 

🛥️ Channel Considerations 

Beyond Your Shopify Store

At some point, you may look to expand your sales channels. 

As you move beyond your Shopify store into other channels, your pricing model will need to consider other factors, including:

• Amazon's various fees and requirements

• Retail partnership margin demands (they typically want 45-50% margins)

• International marketplace and logistics costs

• Channel-specific/custom packaging needs

Pro tip: Build your pricing strategy with your end-game channels in mind. It's much easier to start high and offer strategic discounts than to raise prices later.

💅 Premium Pricing

When Higher Prices = Higher Demand

Plot twist: Some products sell MORE when you raise prices. 

These "Veblen goods" flip traditional pricing on its head.

What kind of products fall under this category?

High-quality craftsmanship, exclusive availability, and status symbol potential are the most straightforward ones.

Then, you have products where customers really want to be sure the product will work. Where its failure would suck for them. We’re not selling pumps at the bottom of oil wells, but that’s a good mental example. Think technical gear, anything mechanism based, or durability dependent. 

Next, we’ll quote social psychologist Robert Cialdini: “in markets in which people are not completely sure of how to assess quality, they use price as a stand-in for quality.” This applies to any category where there might be some doubt about the value of the product. Art or services like consulting or even a massage for instance. 

Does any of the above apply to your brand? If so, stop competing on price. You might be leaving money on the table.

BUT! Even if you don’t fit into the categories above, you can try to leverage premium tactics to drive premium pricing. 

Examples: limited edition product drops, VIP / exclusive access / first access to new product launches and branded merchandise, or “first in line” shipping/customer service.

Sometimes successful pricing tactics are less about the numbers and more about driving perceived value.

🛠️ Tools & Tactics

Price Monitoring That Actually Works

Most DTC brands know they should be tracking competitor prices, but manually checking websites is about as efficient (and as fun) as counting grains of sand. 

Modern price monitoring tools have transformed this from a headache into a strategic advantage.

The key is knowing what to track. 

For your CAC or hero products that drive acquisition, competitive pricing is crucial - these tools help you stay profitable while remaining competitive. 

For your LTV products, focus more on understanding market gaps and opportunities where you can add unique value.

Some Shopify apps to help monitor pricing:

• Entry-level Shopify apps like Prisync work well for smaller catalogs. 

• As you scale up, Price2Spy brings more sophisticated features. 

• Enterprise solutions like Intelligence Node and Competera offer AI-powered pricing automation that can handle complex multi-channel strategies.

• Particl is a new competitive analysis tool that keeps an eye on the top players in your industry, including pricing, advertising, top sellers, and more. 

🤝 Putting it all Together

Your Pricing Strategy Checklist

✓ Understand your true costs (contribution margin, not just gross margin)

✓ Identify your CAC vs. LTV products

✓ Set appropriate margins based on product role

✓ Build in channel considerations

✓ Assess your eligibility for premium pricing

✓ Monitor competitor pricing

✓ Track metrics by product type

✓ Regular quarterly reviews

Understanding all of your costs of delivery, as well as the unique demands of different sales channels is the vital first step.  

When it comes to your full catalog, your hero products need to handle the weight of customer acquisition while your LTV products can focus on enhancing the customer experience and driving long-term value.

Remember to consider future channel expansion and to review where you stand in the competitive landscape. And find other ways to drive perceived value so you aren’t only competing on price. 

With ❤️,

The Early Checkout Team & Kent Wilson

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