How to Price Products for Online Stores?

When you start selling products in your store, it’s crucial to price your products correctly. That can be the make or break of your eCommerce business on Shoplazza or Shopify.

If your prices are too high, you might not find enough customers to stay afloat! But when your prices are too low, you’ll sell at a loss.

So what do you need to know to price your products correctly?

1. Knowing Your Actual Product Costs

The first thing you need to know about pricing your product is how much it costs you to sell. And no, that isn’t as easy as taking your manufacturing cost and calling it a day.

That could lead to misconceptions about how profitable you’re actually being, which later could bankrupt your whole business.

So instead of doing that, let’s figure out what our product truly costs. That depends highly on your business and your product, but a standard product has these costs:

• Cost of Manufacturing
• Shipping
• Advertising/Promotional Content
• Packaging
• Affiliate Commission

Add any costs that aren’t on this list. Then just sum them all up, and you’ve got our actual product cost.

2. Don’t Forget about Fixed Costs

We’re not done yet with costs. We currently calculate our variable costs (costs that vary depending on how many products we sell)! However, we didn’t consider our fixed costs!

To put it simply, fixed costs are costs that we pay no matter how well or poorly we sell. For example, these costs are your store’s monthly subscription plan or email marketing tool cost.

So how do we cover those costs as well?

Well, that’s a bit more difficult, but one of the best ways is to get all of your fixed costs and divide them by the expected sales numbers. We can add this cost to the product, so it won’t take any money from our sales margins.

3. Knowing Who You’re Selling To

There is no universal pricing strategy that works for everybody. The thing is, not all customers want the same product. Some people look for the best products out there, while others look for the cheapest ones on the market.

So what you should first think about is what market you want to sell to. Once you understand that, I suggest you look at how your competitors price their products. Then you can get a clear understanding of what your customers are willing to pay for.

4. Do Some Experimentation

Pricing is not a one-time thing. Instead, it’s something you do periodically to find the best price for selling your products. So if you’re just starting, don’t worry if you priced your product wrong.

Here’s what you can do to find the best prices:

• Raising your prices on your best sellers: If you notice that some of your products have a lot of demand, then the best way to increase your profits is by raising the prices of your best sellers. And to combat the price change, you could give customers free shipping.
• Try seasonal discounts or promotions: Another way to boost your sales is to have some periodic sales. This way, more people will be looking to buy from you to get a better deal. One seasonal discount you should try out is Black Friday and Cyber Monday.
• Make bundles: Sometimes, bundles are the best way to sell your products. This way, your customers get more than one product for a discounted price. That is a great way to sell less popular products to make room for newer and better ones.

Conclusion

As you can see, pricing isn’t as simple as you might have first thought. A lot of calculations and decisions are made before finding the right price. After the initial price, you’ll continue tweaking it for more profits.

So we hope you found this information helpful and that you’ll use the knowledge you’ve learned to grow your store to new heights.

(Contributed by Andreas Ojala & Hermes Fang)