How to Price a Digital Product?

Do you know the costs involved in pricing a digital product? In other words, what are the production costs that will directly impact your final price?

Most people instinctively respond with a resounding “Yes!” without much thought—pricing is the easiest part of the job!

Given that other parts of the process involve developing the digital product itself and marketing efforts to promote it, pricing often gets pushed aside until the very last minute.

Or worse: it’s done earlier based on benchmarks and competitor research—essentially looking at the prices of other courses and deciding yours with weak foundations.

However, just as there’s a proper way to price physical products, pricing a digital product is a task that requires some calculations.

Let’s discuss these calculations in today’s article. Ready?

Listing the Elements of a Digital Product

The first step in pricing a digital product is truly understanding the costs involved in its production.

This is true for any product, whether it sits on a shelf or is listed on Hotmart.

The thing is, the costs of a physical product are often straightforward to calculate. And even then, it’s possible to simplify further.

The fixed costs of a physical product are calculated by the finance department and reviewed several times a year. They don’t usually change drastically. These are added to the variable costs and function as a constant.

Meanwhile, variable costs come directly from the product itself, primarily related to purchase price, shipping, etc.

Adding these together and including a profit margin gives you a priced product.

A digital product works similarly but comes with unique nuances. The investment in its creation is more abstract and often overlaps with personal expenses—especially for first-time creators.

In the following sections, we’ll explore the elements that make up a digital product and then discuss how to price them correctly. Let’s dive in:

1 – Physical Resources

The first point we need to discuss is the equipment required to create a digital product.

This depends, of course, on the type of digital product you’re creating. For this article, let’s consider a classic course—primarily multimedia but with other digital resources like an e-book workbook and activity lists.

So, the necessary equipment for producing this course includes:

A computer with a good graphics card and sufficient memory for rendering;
At least one microphone;
A set-up for the scene;
Lighting (at minimum, a ring light);
A simple sound mixer for audio capture;
A camera.

These are the basic pieces of equipment needed to create a digital product, with variations depending on your specific requirements, of course.

It’s important to highlight the computer among these resources, as it is often overlooked due to being the most expensive equipment and essential mainly during the editing process.

Editing a video is a highly demanding task for any PC. If yours has less than 16GB of memory, lacks an SSD, and doesn’t have a dedicated graphics card, rendering a single video can take over 10 hours.

So, either invest in good equipment or partner with a videomaker to handle the editing externally.

2 – Variable Resources

In addition to the resources you directly spend money on, there are also some other, more specific ones that are less obvious.

For example, if you have another source of income and need to take time off to create your course, the financial impact on your life can also be factored into the pricing of your digital product.

It’s almost like a pro-labor fee. You’re investing your personal time into creating a digital product, and in many cases, that time has a price.

This category includes all types of variable expenses you can think of: fuel for travel, if needed; hiring a temporary team; launch costs. All of this must be factored in.

Speaking of launching:

3 – Marketing Resources

Having a well-defined marketing plan in place before launching your product is crucial.

The marketing plan will determine all the actions you’ll take, with a special focus on the product’s pre-launch phase and the launch itself.

By the way, in our article on product marketing, we explore these three phases in much greater detail.

Marketing is highly variable. Since we’re talking about a digital product, where prices can be adjusted at any time, you don’t need to have all costs meticulously calculated when setting your initial price.

In fact, when it comes to digital marketing with a strong emphasis on Inbound Marketing, it’s likely you won’t have all the costs outlined if you’re working alone without a partner agency.

If you do have a partner agency, the costs become much easier to understand. Essentially, it’s the monthly retainer plus paid media investments.

Alright, now we understand the resources required to price a digital product, right?

Keep this information handy because we’ll need it shortly.

For now, we need to discuss some other factors that will also influence the pricing of a digital product.

Let’s dive in:

How to Conduct Market Analysis for Pricing a Digital Product?

What we’ve discussed so far relates to internal analysis of your structure to understand what will contribute to the price of your digital product.

However, we also need to address an equally important aspect: analyzing the market you’re entering.

Here, we’ll focus on three main points:

Competitor analysis;
Target audience analysis and persona creation;
Expected average ticket price.

These are the three key market factors to consider when calculating pricing.

By understanding these points, you’ll have more tools to approach digital product pricing effectively.

Let’s move forward:

Competitor Analysis

When pricing a digital product, it’s essential to understand the market landscape—what constitutes a high, medium, or low price.

We’re not suggesting you base your price entirely on other digital products in the market. Rather, analyze the market to identify where your product fits in terms of price range.

Consider a physical product for a moment—a mechanical wristwatch.

There are various types of wristwatches on the market, each with its unique features. But if you’re producing a watch made primarily of nickel and brass, you need to price your product within that range.

Brands like Rolex, Timex, and Patek Philippe use other materials—gold, titanium, silver, and even gemstones.

Similarly, basic digital watches mostly use plastic and rubber.

Your wristwatch must be priced in the same range as those made with similar materials.

This is straightforward, but when it comes to a digital product, the process can become much more complex.

When analyzing digital products, you should do the same. Assess:

What digital products in your segment offer;
The general price range of digital products in your segment;
The price of digital products with similar characteristics to yours.

For instance, if your digital product is a course, how much does a course with the same number of hours and content as yours cost?

Using this information, you can determine a base price. This price should be validated by identifying the specific features of other digital products similar to yours.

This approach also helps you identify unique selling points. What does your digital product offer that others don’t? How much more is it worth because of this?

Of course, analyzing your competitors isn’t enough. You also need to consider your target audience.

Target Audience

Who are you selling to? Would your target audience accept the price you have in mind?

This is a crucial question to ask when pricing a digital product, especially if it offers unique features not typically found in the market or segment as a whole.

When analyzing competitors, it’s easy to assume that you’re also analyzing the target audience to some extent.

If the prices set by competitors are being well-received, your similar pricing would likely be accepted too.

But for cases where there’s a difference, it’s worth delving deeper into your target audience. Perhaps you’re curious about what would happen if you charged more for a more comprehensive digital product.

Or maybe you want to charge less for a simpler digital product with more aggressive marketing. What does your target audience think?

And since we’re on the topic of pricing:

Expected Average Ticket

Another point to consider is the average ticket you expect from your sales.

This is also informed by the nature of the digital product itself.

Simpler digital products requiring less post-sale effort are usually more affordable. The strategy here is to aim for a lower average ticket but a higher volume of sales due to the price and a higher margin because of the low production effort.

Conversely, more complex digital products are the opposite. The strategy focuses on a higher average ticket, requiring more investment in product structure and development.

It all depends on your goals. Usually, this analysis is done even before product development begins, during the ideation phase.

The Calculation for Pricing a Digital Product

There are various pricing methods that work well for both digital and physical products.

The key is to understand which calculation makes the most sense for your situation.

Here are some examples to diversify your approach, but the most common pricing formula is quite simple:

P = Fixed Costs + Variable Costs + Profit Margin

This straightforward formula accounts for all expenses involved in creating the product and adds the profit margin at the end.

Since digital products, especially online courses, involve relatively simple sales, there’s no need to go far beyond this formula to understand the pricing process fully.

However, it’s still essential to grasp how each of these variables behaves within the formula—and even explore other formulas to refine these indicators.

Let’s examine these points further below.

Formula to Calculate Fixed Costs per Unit

Fixed costs should be distributed across the expected sales volume. The formula is:

Unit Fixed Cost (UFC) = Total Fixed Costs ÷ Planned Quantity of Products

For example, if total fixed costs are R$10,000 and you plan to sell 1,000 units:
UFC = R$10,000 ÷ 1,000 = R$10.00 per unit.

Formula to Calculate Variable Costs per Unit

Variable costs are calculated by summing all expenses directly related to producing each unit. The formula is:

Unit Variable Cost (UVC) = Sum of Direct Variable Costs

For example:

Platform fee per sale: R$2.00
Affiliate commissions: R$5.00
Total: R$7.00 per unit.

Formula to Calculate Profit Margin

The profit margin can be set as a fixed amount or a percentage applied to total costs (fixed + variable). The most common formula is:

Final Price = (Fixed Costs + Variable Costs) × (1 + Profit Margin %)

Example with a 30% profit margin:

Final Price = (R$10.00 + R$7.00) × 1.30 = R$22.10 per unit.

These formulas serve as a foundation for adapting your calculations to different scenarios and sales volumes.

Did our pricing formulas help? I hope so.

We have one last tip—if you sell your digital product on a website, it’s essential to use a chatbot to assist with customer support and generate more leads.

Try Leadster.AI for free today by clicking on the banner below.

It uses the power of Generative Artificial Intelligence to serve your customers in real time and help you generate even more leads.

I’ll be waiting for you, okay? Thank you for reading, and see you in the next article!

How to Price a Digital Product?