Charging Shipping on Rewards
When you’re leading a crowdfunding project, you want anyone to be able to support your vision and get their rewards in return, no matter where they live.
With platforms like Indiegogo and Kickstarter, this is possible. You have access to a global audience.
However, there is a downside to this. You’ll never know for certain where backers are going to pledge from, which can make it difficult to estimate shipping costs for all of your backers. You can choose to limit the countries that you ship to to help control unexpected fees, but in return, risk missing out on a segment of the market that is interested in supporting your project.
If you want to be profitable, you’ll need to account for shipping fees during your planning phase so you can price your reward levels accurately.
Kickstarter provides a few different options when it comes to specifying your shipping costs. This article should help inform which option is best for you and your project.
How to estimate shipping costs
There are a few steps you can take to help calculate shipping costs for your project.
- Create sample packages for each reward level and measure their weight and dimensions so you can get cost estimates from different shipping companies. This will also help account for charges in “dimensional weight” that some carriers apply — if your package takes up too much space they’ll charge you for the size instead of weight. This can also help you avoid less obvious problems like using boxes or extra packaging that tip you over to another price tier. Testing out packages can help you optimize packaging and avoid these problems.
- Don’t forget to take the packaging expense into account, not just the cost of moving your packages. You should have goals for how many of each type of reward you’d like to ship. Use these to predict the costs of boxes and packaging for each reward level and get quotes from packaging providers. If possible, purchase extras in case you exceed goals, or need back ups in case you have to repackage anything. These are costs you don’t want to overlook.
Check out this post for more tips on packaging.
- Get prices from shipping carriers and third-party logistics providers (3PLs) to see if you can outsource to them. This can be especially effective If you have an existing eCommerce store and already work with a carrier or 3PL. If so, you can use Kickbooster’s Pledge Manager to sync reward inventory through your online store. The Pledge Manager will automatically create an order on your eCommerce store when a backer completes a survey, allowing you to manage your crowdfunding orders with the rest of your business.
- Take advantage of discounted rates by opening an account with shipping providers instead of paying the retail price. This can be useful if you’re planning on fulfilling a lot of orders, or doing more crowdfunding projects in the future.
- Factor in rate increases if you’re not planning on shipping within the year. Many shipping carriers will increase their rates annually, so make sure you account for that increase in your project planning and fulfillment timeline.
Offering free shipping
Offering free shipping is a great way to attract backers. People will sometimes get scared away by additional shipping prices, but if you factor them into the price of the product, backers usually won’t be deterred, even if the total price is the same as if you charged for shipping separately. That’s because people won’t feel like they’re paying something extra.
This will be relatively easy to do when you’re shipping to backers in your home country or region since the shipping costs will be a little lower. But if you’re going international, you can still subsidize their shipping costs by covering the same amount you do for domestic customers and charging them the excess cost separately.
Other considerations for international shipping
Restrict reward availability to specified countries
If you aren’t ready for the complications that come with international shipping, you can choose to limit the countries you ship to. This can help control unexpected fees. The obvious downside to this is that you won’t be able raise funds from people outside your specified countries or regions.
Look out for unexpected fees
When you’re fulfilling rewards for international backers, beware of import taxes, customs duties, and brokerage fees. You should research these beforehand and factor them into your international shipping costs. If you don’t, you could pass these fees to your backers, causing them to pay a lot more than they expected. It’ll be hard to get somebody to pledge to a future project or continue a relationship with your brand after they have a bad experience like that.
Sometimes these fees can end up surpassing what you’re earning from the pledge itself, especially for lower reward levels. That’s why it’s important to calculate these fees in advance to make sure you’re still profitable (or at least covering your costs). Alternatively, you can use tools like Kickbooster’s Pledge Manager to automatically calculate and charge taxes during the backer survey.
Having to spend a few extra dollars on every backer because of one overlooked fee can add up very fast, so it's important to consider it ahead of your campaign launch.
Shipping costs and your project goal
Keep in mind that the shipping costs you build into your reward pricing will count toward your project goal, so you won’t get to use all of the money you raise to manufacture your product. That means you need to make sure you’re setting aside that money to pay for your shipping fees.
Factor these expenses in when you’re creating your project’s funding goal and make sure you account for the shipping fees so they don’t eat into the expenses you need to actually manufacture your products.
We put together a helpful guide that explains how to calculate shipping fees, and the other costs you need to consider when creating your funding goal.
What to do if you charge backers the wrong amount
If you overcharge or undercharge for shipping, the most important thing you can do is properly communicate it to your backers. Being upfront with them will help you maintain a positive relationship.
But to avoid any problems, you might actually want to create a bit of buffer by overcharging to avoid losing money on unexpected fees. Of course, you should only do this if you can keep the price at a level that’s reasonable for the reward.
Creators can use Kickbooster’s Pledge Manager to account for over or under charging on shipping. It will automatically apply a credit to backers for overcharging so they can put it toward add-ons. Kickbooster's Pledge Manager can also help you raise additional funds by offering backers add-ons, and even up-sell them to a higher reward tier. The Pledge Manager can also be used to capture any additional shipping fees from backers.
The Pledge Manager also comes with a deferred payment feature that allows project creators to only capture payment when the rewards are ready to ship, giving you a chance to double check all shipments, and also saving you the trouble of issuing refunds if certain aspects of your project don’t work out.
A lot more goes into a successful crowdfunding project than coming up with a great idea and meeting your fundraising goal. Fulfilling your backers’ rewards and not breaking the bank with shipping charges is just one of the many factors you have to take into account.
Use software like Kickbooster’s Pledge Manager to help you streamline and manage all your fulfillment and shipping needs.
Interested in trying our Pledge Manager out?