As the owner of an online store, it’s important to have a good plan for how to price your goods. Here are some basic tips on how to do this.
Whether you’re about to start a retail business or have been doing e-commerce for a long time, it’s good to know about the best ways to price products. The tips below will teach you the basics and help you improve your current plan.
It can be nerve-wracking to think about how much to charge for a product because you want to make money, but it’s hard to know what will turn off or attract potential customers. It’s important to work on your pricing method so that you can compete with other stores and big online markets like eBay and Amazon.
Tips and tricks for pricing in general
So, what do you need to think about when deciding how much to charge for your products? It isn’t that simple. If you set your prices too low, you won’t make much money, and if you set them too high, you won’t sell many things. You shouldn’t get too close to the edge. But it’s up to you to decide which way you want your business to go. Don’t forget that it’s not just about low and high prices; you have to treat it like a game. Most of the time, retailers use the following methods. Some of the methods below can help you not only figure out your prices but also build a store that can sell.
Calculating
If you already have the information you need about your products, you can just sit down with a piece of paper, a pen, and a calculator. At first, you can set a basic price for everything (this is a simple way to say it), but later you have to change those prices based on what’s going on. On the Internet, you can find many formulas that sometimes help and sometimes don’t. All of it depends on how you run your business and do e-commerce. Once you know how much everything costs at the wholesale level, including shipping and any other fees that have to be paid back, you can count on it. Many people say that the best is to make at least a 40% profit on the things you sell, that a goal of at least this margin is the best, and that 50% is the right ratio.
There’s a way to do it, which is when the store just doubles the wholesale price, and that’s what the price is in the store. But this and the income can sometimes be too low or too high.
You might have to handle cheap and expensive items differently. The more it costs, the higher your profit margin needs to be and the more you can charge. When it comes to expensive items, things are different. At best, the markup is usually only about half as high as when it goes the other way. Another point is that if you sell a popular product that hundreds or thousands of other people also sell, you have to play more with the price because it’s a big competition. You’ll have to play the discount game at some point. The price will be set by the market. Since we’re here, we have to say that it’s important to figure out what makes you different and what makes you better.
There is no one formula that works for everyone. It’s up to you as a unique seller to figure out what would make you a good amount of money.
Psychological tactics
There are many ways we can have an effect on people without them noticing. This game is also a part of e-commerce. It’s important to show potential customers that you have good things to offer and that it’s worth buying from you. You need to make it more likely that people will buy what you’re selling.
Nine, nine, nine
One good way to do this is with something that you can see everywhere. It’s about the end. Putting.99 at the end of a price makes it look like it’s less and a good deal. It looks better to pay $6.99 than $7.00. And odd numbers are more popular with customers than even numbers. For example, the first example looks better than $7.99, $8.00. Everywhere, the number 9 is in a unique spot. Which one is your favorite: $34, $39, and $44? A study shows that people would rather buy something for $39 than $34, even though it’s more expensive. Interesting.
Prices that lose money
In this pricing strategy, a product is sold for less than its market value, or the cost of buying it in, to boost sales of other, more profitable goods or services. A “leader” can be any popular item that gets a lot of attention. This strategy brings in customers who will buy more goods to make up for the money lost on some items.
So, what is this plan for marketing and sales promotion? If you want to lower the price of a product, keep in mind that it’s not just about that product; it’s about everything else as well. The effects of a cheaper product can be seen in other products that customers may also buy at full price. It could be because they think, “Okay, if I buy it for less, I’ll have more money to spend on other things.” After that, they’ll leave more money than usual in your store, just because they went there to buy that one item on sale… If you raise the prices of some other items, it will affect your whole sale.
Discount
Do you think a customer is more likely to click on an ad that says “Buy Quality Sunglasses Here” or “Buy Quality Sunglasses Here and get up to 30% off”? You are correct.
People click on markdowns because they like rebates. You can have sales when it’s a certain time of year, when it’s your birthday, or even when there’s nothing special going on. Getting more traffic is always important, and most people care about price.
Why are discounts good for you besides getting more people to come? You can get rid of items that haven’t sold, show that you care about keeping buyers’ wallets full, build stronger relationships with clients, and not only get more people to your store, but also make more money.
It doesn’t have to mean a loss of income. In fact, it can be the opposite. You might already know the trick… When you know there will be a sale, you can start to raise prices in a quiet way a few weeks before the sale. When it comes time to get the discount, the prices won’t be that low. You also need to have a good plan for selling the items you are discounting.
But be careful! Don’t offer discounts too often, and don’t bother people who might buy from you.
Multiple pricing
It’s obvious. And it’s about putting things together. You sell one thing and bundle it with another. Product bundling is when you sell a group of products as a single item for a single price.
For example, when you sell more than one item for the same price, it can be like selling a PlayStation console along with a new game. This can be a good strategy, but like many things, it can also have problems. People may think the value is high, which can lead to larger purchases, but after a while, it can be hard to sell each product at a higher price on its own.
Anchor pricing
People like to see what this technique is about. There is something about the product that makes them think about buying it. because it’s more important now. Anchor pricing means that you show both the sale price and the original price so that customers can see how much money they can save.
Checking competitors
When you start a retail company but don’t have any experience with e-commerce, it makes sense to look at how other companies in the same field do what they do. You can look at the prices of their products and see how they try to sell more of them. Everything you see can teach you something.
Concerning “below competition,” this means that you look at the prices of your competitors and use that information to make your prices lower than those of your competitors.
With above competition, you price your products above those of your competitors on purpose. In this way, you show that you are more unique. But you need to know where you stand on the market and why you’re better than your competitors. Then, you need to tell customers why you’re better, such as through responsibility, quality, or great customer service. If you just opened your store, this probably isn’t the best way to do things, but there are no rules for anything.
Unique Selling Proposition
It is also known by its short name, USP, which is an acronym. We already talked about this, but we didn’t call it by name. Well, this isn’t directly about prices, but it’s still something to think about. The term “unique selling proposition” refers to that one thing that makes you unique and shows why you are different from other people and why you are special. You can think about the whole market, the whole industry, your location, your audience, or anything else.
So, take a moment to think about what makes you unique. You should know that this is something that every business, including stores, has to figure out. Why is it here, in a discussion about prices? Because if you know your value, you can figure out what the best prices for your products are.
Terms you need to be familiar with
Price / Wholesale Price / Wprice:
This is how much the webshop owner pays the wholesaler or supplier for each item.
Suggested Retail Price (SRP) / Sprice / Retail Price / Recommended Retail Price (RRP) / Manufacturer’s Suggested Retail Price (MSRP):
This is the price that the wholesaler suggests you, the owners of a webshop, use in your store. You should look at your supplier’s Terms and Services, which may tell you important things like whether you can sell the product for less than this price. When you start selling products from a new wholesaler, this is the first thing you should do.
MAP / Minimum Advertised Price:
This is the cheapest price you can put on an ad for a product in your store. It strikes a balance between value and how well something sells.
Street Price:
This is the price you can find in stores. This is the most expensive price.
Compare at Price:
This is what shows up as an older, higher price in your shop when you want to give customers a discount. They can look at the old price and the new price, which is less, and decide what to do.