How to set a floor price for a falling-price sale (and protect your margin)
Updated
Set the floor at the lowest price you'd be happy to sell every unit for, usually your cost plus the margin you need after fees. Set the starting price near full retail. The gap between them is the drop's range: wider ranges create more excitement, narrower ones protect margin.
What is a floor price?
In a falling-price sale, the floor is the lowest the price can go. However long a fall lasts, the price stops at the floor and goes no lower. On Freefall the floor is private: shoppers see the live price and the retail price you show for comparison, but never the floor, so nobody knows how low a drop can go.
How do I calculate my floor price?
Work up from what each sale costs you, not down from retail:
- Product cost: what you paid for or spent making the item.
- Selling costs: the platform fee for your plan, payment processing, packaging and any shipping you cover.
- Minimum margin: the least you'd need to make for the sale to be worth it.
Add them up. That's your floor. For example, a jacket that cost $60 to make, with about $12 in fees, packaging and shipping and a $25 minimum margin, has a floor around $97. If you'd regret selling every unit at the floor, raise it.
Where should the starting price be?
Each fall starts at your starting price, so set it at the most you'd expect an eager buyer to pay, usually at or a little below full retail. Starting slightly below retail means the very first price already looks like a deal next to the retail price shown beside it.
How wide should the range be?
The range is the gap between the starting price and the floor. It's a trade-off:
- A wide range (floor at 40 to 60% of the start) creates more excitement and more movement, and works for clearing stock or for products where value is uncertain.
- A narrow range (floor at 70 to 85% of the start) protects margin and suits products with a known value, like sealed collectibles or new releases with strong demand.
How fast should the price fall?
Three settings shape the fall:
- Curve. Plunge drops hard early, then crawls toward the floor, which rewards quick buyers. Steady falls evenly. Slow burn holds high, then accelerates, which keeps the price up for early fans.
- Fall duration. Each fall lasts a random length between the minimum and maximum you set (5 to 15 minutes by default), so nobody can predict when the bottom comes.
- Reset chance. At random moments a fall resets to the starting price. The chance grows as the fall goes on, so the lower the price, the bigger the risk of waiting.
Because of resets, many falls never reach the floor at all. Freefall's drop editor shows the estimated share of falls that do, so you can see the effect of your settings before you publish.
Common mistakes
- A floor at cost. Fees and shipping turn a "break-even" floor into a loss.
- Too much stock. If supply outlasts demand, the price spends more time near the floor. Release fewer units and run another drop.
- No announcement. A falling price needs an audience watching it. Tell people when it starts.
Frequently asked questions
Should the floor be my cost price?
Rarely. Include your fees, shipping and packaging, and the margin you need. If a sale at the floor wouldn't be worth making, the floor is too low.
Do shoppers see the floor price?
No. Shoppers see the live price and, if you set one, the retail price for comparison. The floor stays private, so nobody knows how low a drop can go.
How often does the price reach the floor?
It depends on your settings. Random resets mean many falls never reach the bottom. Freefall's drop editor shows the estimated share of falls that reach the floor, so you can tune it before going live.
Can shoppers wait for the lowest price?
Not reliably. Each fall lasts a random length and can reset to the top at any moment, so waiting for the bottom risks losing the item to someone else or watching the price jump back up. Shoppers buy when the price is right for them.