How to Price Music Merch Bundles for Maximum Profit

By Chris Huff from Discmakers

As an independent artist, it can be difficult to know how to price your merch products. One excellent sales strategy is selling your merchandise in groups called merch bundles. People love feeling like they’re getting a deal, and a bundle offers multiple items at a reduced price.

Here’s some tips on how to price these bundles and achieve a maximum profit.

Understanding merchandise bundling

Why buy one thing when you can buy three at a discount? This is the essence of consumerism.

What is merchandise bundling?

Merchandise bundling is the act of grouping two or more merchandise items into a single package, generally offered at a lower price than one would pay for the items separately.

Benefits of bundling for your business

Product bundles are an excellent idea for several reasons. It’s a great way to unload items you are having trouble selling. You can combine your best-selling products with less popular ones at a reasonable price. People love a bargain! This can help you get rid of merch items you’ve had for years accumulating dust.

Additionally, if you offer your audience something of real value at a good price, you’ll stoke the fires of brand loyalty. They will enjoy buying from you if they think you offer high value. Give them a great deal on a bundle containing a vinyl LP and a limited-edition poster; this will go a long way towards earning their loyalty for life.

Common types of merchandise bundles

Physical product + another merch item is probably the most common merch bundle in independent music. A vinyl album and a T-shirt, a vinyl album and a poster, a CD and a sticker — the possibilities are endless. It’s also common for artists to bundle their albums together, offering two or three for a bulk discount. This is a solid way to circulate more of your music into the world.

Key factors in pricing your bundle

Issues like pricing take us from the musician realm into the business realm. The good news is these tips and strategies generally apply to the sales of any product, music-related or not. A little bit of knowledge can go a long way towards increasing your income.

Understanding your cost structure

In order to set a proper price for your product, you’ll need to understand your cost structure. This starts with figuring out exactly what your expenses are and dividing them into specific categories for analysis. Two important categories to sort costs into are fixed expenses and variable expenses. Fixed expenses don’t change regardless of sales and variable expenses fluctuate based on sales volume. Costs should also be categorized as direct or indirect. Direct costs are attributable to specific products and indirect costs are overhead expenses not traceable to a specific product. Once you do this sorting, you’ll have a clearer picture of what each product needs to earn in order to be profitable.

Knowing your market and competition

People have a finite amount of money to spend, so be aware of what competition you have especially in your genre and geographical area. Don’t get obsessive about eyeballing your competitors, but do notice what they are doing promotion-wise and on social media. Note their prices and what you think they might improve; use this to guide your own strategies. The information you gather will help you decide what to charge for your product bundles.

Evaluating customer perceived value

Perceived value is your target audience’s opinion of your product’s worth and its ability to meet their needs/expectations. The higher perceived value you have, the more you can charge. Well-established musicians can charge their customers $400 or more for a box set and often sell out. Here at street level, marketing efforts can help increase your perceived value with both people you don’t know and current fans. Just because your perceived value is low right now doesn’t mean that you need to deeply discount all your product bundles; it just means that your price ceiling will probably be the average market price at the start.

Pricing strategies for maximum profit

Learning to price correctly is a balancing act. The less you charge, the more you might sell, but then perhaps you could have made more by charging more. Gauging how much your customers are willing to spend can be like Nostradamus predicting the future, but there are a few tried-and-true strategies to keep in mind.

Cost-plus pricing

This method of pricing involves adding a percentage to the cost of a product to calculate the retail price. The percentage is fixed based on what you would like to earn rather than what you think people will spend. Some businesses use this method for convenience as using a formula means you don’t have to think much about pricing. Taking your total cost and doubling it will result in a profit margin of 50%. The disadvantages to this method are that customers may not respond, you might not sell anything, and the rigidity of structure doesn’t allow for customer input. It’s best used by those higher up in the food chain.

Value-based pricing

Value-based pricing is a strategy aligned with perceived value. In this model, you’re pricing your goods with awareness of your audience. It’s recommended at first that you price in accordance with what other competitors at your same career level are pricing. With this pricing strategy, have your marketing emphasize your uniqueness, your value to the customer, and your product’s value. Value-based pricing places the focus on your relationship with your audience, which is crucial for independent musicians.

Competitive pricing

You’ve worked hard on pricing your newest merch bundles. Then you see that The Screaming Abdabs who you are opening for next Saturday are offering all three of their albums on vinyl for the bargain price of $50. Suddenly your current bundle of three vinyl records for $60 seems silly in comparison. Since you’ll be sharing a merch table, it makes sense to reduce your bundle to the Abdabs’ price, at least for this gig. This is called “competitive pricing,” using your competitors’ prices to gauge your own. It’s especially helpful in saturated markets (markets with a lot of competition) as customers are going to be comparing prices before buying.

Calculating the right price for your bundle

The numbers will be the ultimate determiner of the correct starting point for your bundle pricing. Keep in mind that for the purposes of any pricing exercise, your bundle is actually considered a single “unit” regardless of whether it contains two or more items.

Determining the cost of goods sold (COGS)

The most important number in your formula, cost of goods sold (COGS) is the total of all expenses incurred in the making of your bundle. If it includes a recording, it’s the total of all expenses involved, from studio time to manufacturing. Take this total figure and divide it by the number of units manufactured. If your total COGS is $10,000 and you make 1000 vinyl records, your base cost for each unit is $10. You’ll also need to add in the COGS for any additional items in your bundle, whatever they are. For this exercise, we’ll say that brings the base cost up $5.

Including overhead and additional expenses

Next, figure out your total indirect expenses for a given period; a month can suffice but 3–6 months is probably more accurate. These include all your day-to-day expenses for you to operate as a business. If you are a sole proprietorship mostly operating out of your home, this includes your rent or mortgage, utility bills, and all essential costs of living.

Calculate the total overhead cost for the period of creating your product, then determine the overhead rate. This can either be cost per unit (total costs / number of units produced) or a percentage, but for these purposes, cost per unit is probably most applicable. So if your total overhead for the three months of making your record is $10,000 and you make 1000 CDs, your overhead cost per unit will be $10.

Setting profit margins

Now that you know your COGS and overhead, you can consider how much of a profit you’d like to make. With the above example, your base price is going to be $25 to recoup your costs. Adding $10 for profit margin to that would mean that your record have a final retail price of $35 — not an unreasonable price for a bundle containing a vinyl record! Set a realistic margin if it’s your first physical product as your pricing will generally be constrained by what the market will bear. It’s good to have awareness of pricing before you start recording. You can reduce overhead and COGS before the album is finished and then be able to work with a higher profit margin.

Testing and adjusting your bundle price

The good news is that adjusting your bundle pricing on the fly depending on sales and demand is easily done. Better to make all your calculations, set a starting price, and run with it than to wait until your pricing is perfect in your own mind. Testing prices in the field is what matters!

Analyzing sales data

The more data you have on who is buying your product, the more you’ll be able to craft a sensible sales strategy. If you are mostly selling bundles in person, keep note of who is buying your music and their identifying demographics. Keeping track of this information, even in the old analog paper-and-pen sense, can be helpful in identifying your pricing needs.

Customer feedback and surveys

Listen to what your customers tell you about their purchasing experience. If customers are not forthcoming and your data isn’t showing anything revelatory, you might want to send out a small survey about pricing to your email list. Not everyone will respond, but any feedback you receive is helpful when things are unclear or not working.

A/B testing different prices

While this isn’t necessarily the best strategy for indie musicians, it is possible online to run a random A/B test on your landing page and test two different prices for the same product. It’s illegal most places to A/B test price while filtering by criteria such as race and gender, so be careful with this. Also be careful that customers don’t notice that someone is getting a better deal than them. Amazon got caught showing different prices to different users in 2000 and it damaged their brand significantly in the short term.

If you’re going to A/B test, make sure you have specific, time-bound, numerically based goals. Don’t test to just raise sales in general, test to see if reducing prices 10% will lead to a 20–40% increase in sales, for example. The best practice would be a random assignment of the A price or the B price to someone visiting your web store and, after a reasonable sample size, see which price sold better and caused customers to linger longer on the site.

Legal and ethical considerations

Some elements of pricing are controlled by law. Whether or not something is illegal shouldn’t be the only consideration though. Price gouging and unethical business practices should be something that you avoid.

Compliance with pricing regulations

In the U.S., there are federal and state regulations covering deceptive pricing practices. With your bundle pricing, make sure that everything about the bundle is transparent. Don’t wait until the product is in the shopping cart to show them a 20% processing fee; make sure anything like that is included in the price.

If you’re outside the U.S. and shipping to the U.S., physical music is not affected by the new tariffs, but items like T-shirts are. Physical media should be labeled as “informational material” on the outside of the package. You might want to reconsider clothing and other tariffed items as a part of any bundle being shipped into the U.S.

Maintaining transparency with customers

Building trust with your audience is the most important thing you can do. Your audience wants you to have integrity; there are enough shysters in the world trying to rip us off everywhere! Artists should be cut from a different cloth. It’s always okay to charge what you are worth and make a healthy profit on each product or service you sell. It’s not ok to have your crowd preorder an album that never comes out, crowdfund a tour that never happens, or take their money without giving them something of equal or greater value in return. Integrity is almost as important to building a long-term audience as your music.

If you lose their trust, you’ll never regain it. Established artists have more human capital to spend and can get away with crookedness; be better than them.

Marketing and promoting your pricing bundle

Obviously, people need to know about your bundle in order for them to buy it. This will include promotion on social media and paid advertising. Promoting it as a limited-time offer will stimulate demand. Make customers aware of the value they’re receiving and emphasize what’s unique about you and the product. Remember, you’re not just speaking to superfans, but also potential fans.

Monitoring and optimizing bundle performance

Having metrics in place to track the performance of your bundles is important if you’re looking to price them for maximum profit. Whether or not you use all the tools available to help you optimize your sales, any action you take in this department will help you gain clarity.

Tracking sales and profitability metrics

If you’re selling in person at gigs, keep a spreadsheet of your sales and make sure to track your net profit made per bundle sold. This is the money left over after you have deducted all expenses from the retail price the bundle sold for. If you’re selling online, any retail storefront like CD Baby or Bandcamp will have data they can share with you.

Adjusting based on market trends

Events in the world at large do affect consumer purchasing of luxury items like product bundles. Recessions, government shutdowns, and natural disasters can and will affect sales. You can decide whether you want to lower pricing of your bundles as a response to national or local events. You might also want to contribute a portion of your proceeds to an appropriate charity in these types of situations; this can also temporarily stimulate demand.

Iterating on customer feedback

Always listen to what your customers are telling you, both verbally and non-verbally. Register their responses and non-responses to your every action! Don’t craft your entire sales strategy around customer whims, but listen as a matter of practice and when necessary make course adjustments. A non-reaction doesn’t mean that they hate it, but ask yourself in that situation “what would make them react?”. The two-way communication between musician and audience is really the most important part of the modern music business. Facilitating that connection and strengthening it with each product bundle release should be one of your main goals.

Chris Huff has been a professional singer, multi-instrumentalist, songwriter, and producer for over 25 years. He has worked as a sideman with Peter Yarrow (Peter, Paul, and Mary), Echo and the Bunnymen, Chuck Hammer (David Bowie, Lou Reed), and Tom Kitt (Broadway composer of Next To Normal). Chris also wrote liner notes for David Bowie’s Live And Well CD.