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So you’re thinking of selling a 3D printed product, your design is ready, you’ve printed your samples, taken the photos and you’re ready to put it in your store for sale… but how much should you charge? That’s what our Hive by Cubee Community Webinar on April 15th answered.
How much does 3D printing a product cost?
Here is the real breakdown:
As 3D printer operators we have a general sense of the cost of our parts: heavier parts are more expensive, longer prints are more expensive, thinner layers are more expensive, expensive materials & machines are more expensive, etc.
To compute these costs, most of us manage our print farms under a service bureau business model, regardless if you are actually providing services or not, we’ve created spreadsheets to compute a cost for each part we print. These spreadsheets usually involve a combination of material, printer amortisation, electricity, labour and other ancillary costs (like Magigoo, post processing, software licences, rental, etc etc) in a way that magically churn out amounts we are sufficiently comfortable with to operate a business.
Service bureau customers, again whether they are actually paying or not, also have a general sense of the cost of our parts, usually because we’ve trained them to understand that expensive materials equals expensive parts, etc.
But here, we’re not selling services to people that are “in the know”, we’re planning to sell products to "randos" on the internet or in our stores, people that have no clue of what 3D printing is, how much it really costs to print something and certainly not familiar with the industry nuances that black can be at times more expensive than blue (for obvious reasons).
Retail customers have certain expectations with regards to price, quality, customer experience, brand equity and most importantly about discounts and promotions. So how do you as a business set prices that will allow you deliver on all these and still pull a profit?
What should be my profit margins with 3D printing?
When it comes to retail sales, the quick and fast rule is that the Cost of Goods Sold (COGS) is no more than 30% of the suggested retail price. If your COGS is higher than 30% the likelihood of ever achieving financial viability and business sustainability (let alone scalability) decreases exponentially. As for going lower than 30%, if your brand equity allows it, great, however if it doesn’t you’d be simply alienating customers by giving off an overpriced feeling to your brand/product.
So, OK, a COGS of 30% it is. But what goes into the COGS? Does it include packaging, shipping, marketing, etc etc, or is that part of the Cost of Sales –which comes out of the 70% retail margin–? Let’s dig a little deeper.
What Goes into Pricing a 3D Printed Product?
Cost of Goods Sold vs Cost of Sales
I like to draw the distinction between the two as:
Cost of Goods Sold being a reimbursement of the sunk costs, what has already been spent and invested so that you are able to manufacture the product; essentially recovering the money spent on inventory, machinery, tools, ancillaries, etc. I consider these as fixed costs, as no matter if you are selling or not, the money has already been spent and stock is always on hand and ready for use. Whereas,
Cost of Sales is the amount that needs to be spent in order for you to capture that sale, essentially financing the customer experience and supporting the sales efforts. I consider them variable costs, as if you’re not selling, you’re not spending on them.
Cost of Goods Sold | Cost of Sales |
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I won’t be going too deeply into each of these line items, you’ll need to watch the Webinar recording on the Cubee Learning Center for that, but lets go over the three most significant line items: Material, Machine and Marketing.
In 3D printing, material is a major cost component and getting this wrong can be catastrophic.
As we all know, not all materials cost the same, and as service bureaus we simply transfer that cost over to our customers, but retail customers do not want to be paying more for black than for blue, as for consumers the colour as key characteristic does not determine the value of an object (much like with clothing).
Consumers simply want to choose a product (often based on price) then choose a colour based on preference, so what’s the strategy when we know that black is more expensive than blue.
As pricing all the variants based on the most expensive material would make your product out of reach. I recommend using a 3rd Quartile material pricing strategy for materials sold, making 75% of material sold costed at profit or at even, and 25% costed at a loss, averaging out to a slightly higher than median (hidden profit).
In the specific case of On Demand., the material component of products sold ranges from $12.45 and $26.44 (per kilo), with a true sales average of $18.05, a median of $18.91 and a 3rd Quartile of $19.92, giving a $1.86 bonus profit per Kg sold, enough to offset forex variations on the subsequent order.
Adjusting pricing only when the running median dips below the true sales average over a fiscal quarter (as consumers don’t like it when prices change too quickly or unpredictably).
How much should I charge for 1 hour of 3D printing?
When it comes to machines, we often live under the illusion that printing is free as our printers have usually been bought and paid for some time ago. However business is good and we need to buy more, they break down and we need to replace them, so we need to have enough money in the coffers for when that time comes.
Like with any capital expenditure, we all understand the concept of amortisation: expense divided by amortisation period equals cost per period of use; but what is the true value of that expense and how long is that period? Let’s break down these values
Total cost of ownership
This is the simplest to compute, first you simply need to add all non-consumable line items expected over the entire amortisation period, including service contracts, spare parts, repairs, etc. It is important to exclude from this amount jointly purchased consumables, such bundled materials, resin tanks, build sheets, nozzles, etc, as these fall under the “ancillaries” line item of the COGS.
Amortisation period
The amortisation period is a bit tricker to compute, as it makes assumptions with regard to actual “printing for money” every machine on the production floor will perform, I generally assume my printers will be printing for money 45 weeks a year, 4 days a week and 16 hours a day, or 2880 hours per year.
The remaining hours are usually used for cool down/warm up, waiting for unloading, sample production, prototyping, testing, calibration, etc and for when jobs ends in the middle of the night and your printers aren’t generating income until you queue up the next job. This downtime is normal, but it should also not be generating a loss, as such we account for these hours by reducing the annual total, so that the paid printing time also pays for the non-printing downtime.
As for the number of years, most companies will universally amortise capital equipment over 5 or 10 years, however 3D printers rarely have such a long service life, nor do they retain long term value. As such, I recommend this amortisation schedule, for prosumer and professional printers, which is the most likely scenario for in-house production.
Printer TCO | Service life (years) | Hours |
< $ 5000 | 1 | 2 880 |
> $ 5000 | 3 | 8 640 |
> $ 50 000 | 5 | 14 400 |
How much does it cost to advertise a 3D printed product?
We all know that your ability to successfully run a service bureau greatly depends on your ability to establish and maintain trust relationships with customers, as the higher the trust level you command with a customer the more they will send jobs your way. However in retail the relationship is a little bit different. Customers give their trust in a company with a strong public presence, with an established following and most importantly with endorsement (reviews) from other customers like them.
Consequently the service bureau sales strategies don’t apply directly to a retail business, and instead brands must rely on digital marketing efforts, such as : Search Engine Optimisation (SEO), social media & search engine advertising and influencer marketing, and those cost money, serious money.
In marketing there are four key figures brands need to pay attention to: Return on Ad Spend (RoAS), Customer Acquisition Cost (CAC), Customer Lifetime Value (CLV) and Time to Return on Investment (TROI), both as indicators of marketing performance and also as budgeting tools to set price points.
Return on Ad Spend (RoAS) is the gold standard for eCommerce metrics –if you invest $1 and receive $3 in return, your RoAS is $3–, it represents the overall effectiveness of your marketing efforts.
Customer Acquisition Cost (CAC) is the cost incurred in bringing a new customer –if you invest $90 in marketing and win 3 new customers in return, your CAC is $30–
Customer Lifetime Value (CLV) is the average amount of money the average customer will spend overtime across all transactions. To be considered “healthy” your CLV should be more than 3x your CAC.
Time to Return on Investment (TROI) is the average time required to earn back the ad spend through gross profit, and demonstrates your ability to scale. To be considered “healthy” your TROI should be less than a month, whereby the total marketing budget is earned back within the same month. Having a longer TROI is not necessarily an indication of poor performance, just a constraint on cashflow that may add up to cause issues.
As the adage goes: “it takes money to earn money”, and customer acquisition through marketing can get expensive, as such it’s important to bake in these costs into the product price, or at least earmark a certain % amount of the sales price for Marketing –and the rest being taken from the remaining profit–.
My professional preference when it comes to the marketing line item is to allocate 5 to 15% of the suggested retail price as a proactive allocation for marketing. Not to say that the total marketing spend is not to exceed this amount, but as to limit Marketings’ ability to eat into the gross profit margin as an uncontrollable mystery expense affecting the appearance of business profitability and sustainability.
In Summary
Correctly pricing your products is foundational to business success, and starting with a good pricing strategy is essential. To learn about the other pricing line items, you may watch the webinar recording in the Cubee Learning Center, in the Hive Account dashboard.
Want to join the next webinar live?
This article was written based on the webinar we held for members of the Hive 3D product sellers community.
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Watch the recordings
To watch past webinar recordings, visit the Cubee Learning Center, in your account’s dashboard, and be sure to follow us to learn more about upcoming webinars, including meet the designer session and business learning.
