Is your price correct? Here are 9 pricing strategies for products you can try.

Online retailers need to think beyond simple math when setting prices.

Profit margin and revenue are important. You should consider other variables such as fluctuations in the cost and location of your goods.

Your customers will surprise you with their buying preferences and willingness to pay for it. Understanding pricing strategies and how to use them is crucial to making a profit.

We’ve created this guide to help you make informed decisions about pricing your products. Continue reading to learn about the most successful strategies and how you can choose which one to use for your online shop.

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Before you decide on a price, here are some key points to remember

It is not easy to find the right price. You risk losing customers if you set the price too high. You risk losing your margins if you set the price too low.

Here are five things you should consider to find the sweet spot.

01. Margin of profit

Factoring in all expenses will help you calculate the true cost to run your business. Understanding all your expenses, including the cost of ordering or producing products, will help you estimate how much each sale will cost to keep your business afloat.

You should include obvious costs such as the cost of ordering products from suppliers and materials costs. Also, consider fees associated with selling online (marketplace fee, payment processing fees, etc.). Other costs such as production time or packaging supplies should be included.

02. You plan to sell where

Make a list of the places where you intend to sell your products, including marketplaces and your brand site. You should consider the various audiences, pricing, fees, and top-selling items on each channel. Consider how competitive your product categories are.

Amazon might have buyers for your $60 hydro flask, but Wish is more likely to attract buyers. Wish’s product selection and pricing are geared toward deal-seekers.

03. Guidelines and regulations

Price parity is a requirement of many third-party marketplaces. This policy requires that your prices be the same everywhere you sell your product.

Other platforms such as Etsy prohibit sellers from coordinating on pricing.

Before you alter your pricing, make sure you are fully familiar with the requirements and pricing rules for each channel you sell.

04. Market research

You need to clearly define your target customers so that you can determine how much they spend on products similar to yours. Take a deep look at your market to determine what price they are willing to pay for a particular item.

It doesn’t matter if your products are highly sought-after, but it is important to set your prices strategically in order not to price yourself out of market or undervalue the products. It’s possible to do real-world research by visiting the top competitor sites or marketplaces and comparing what the average price of top-selling products is. You can also use product research tools such as Jungle Scout to get a deeper understanding of average competition, margins, demand, and supply.

05. Unique value proposition

Customers will pay more for products that offer something new or align with their values.

A recent survey of 19,000 consumers found that 70% said they would pay up to 35% more for sustainable products (e.g. organic, recycled or eco-friendly). Consider how your product can improve the lives of your customers and then quantify it in your price.

9 popular product pricing strategies

Now that you have an idea of what to consider when pricing your products, it is time to experiment with other pricing strategies. Here are eight of the most popular pricing strategies eCommerce businesses use today.

Pro tip: Start with one or two of these pricing strategies and then experiment until you find the right combination for your business.

  • Cost-plus pricingAdd an additional markup to your product’s cost to get to your desired price point. Although this is the easiest way to set prices, it doesn’t take into account customer demand or prices from competitors.
  • Keystone pricing – Simply double the wholesale price for your product to set your price. It is likely that you will want to adjust the markup to reflect shipping costs and demand.
  • Pricing based on competition – Make sure your prices are in line with the price of your competitors. This strategy is often used in highly saturated categories or in markets where price is important to buyers.
  • Premium pricing – You can charge a higher price than the competition to give the impression that your product is better quality or more expensive. This is one way you can build a luxury brand image. However, you need to make sure your costumes get enough value to justify the price.
  • Price skimming Set the maximum price that you are able to charge for a product at launch, and then reduce it incrementally over time. This strategy will allow you to maximize your profits during the initial stages of your product’s lifecycle .
  • Offer your customers a discount or sale pricing – This is a great incentive to increase sales and customer retention. You can also reserve discounts for slow-moving or out-of-season goods. Avoid discounting your products for longer periods than necessary. This could cause customers to lose trust in your brand.
  • Pricing – To attract customers and increase market share, set a low price at the beginning. This strategy can be used for increasing sales and customer loyalty.
  • Value-based pricing – Set a price that is fair to your product. This can lead to higher prices for products of high quality, durable or made by a well-known brand.
  • Product bundle pricing– A group of related products can be offered as a bundle. However, the total price for the bundle is more than one unit. The bundle will offer a discount on the single unit. This is a great way to increase your average order value (AOV) and encourage customers to purchase more than one item in your store.

It doesn’t matter which pricing strategy you choose. The most important thing to do is experiment and discover what works for your company. Don’t be afraid of trying different pricing strategies until you find the right one. Keep an eye out for your competitors.

Did you know that Wix eCommerce includes flexible tools for managing and monitoring your prices? Wix eCommerce offers flexible tools to manage and monitor your prices. You can track your cost of goods (COGS), margins and profit all from one place – plus you can set discount-pricing and create coupons. Explore all of Wix’s eCommerce options.

Pricing strategies put into practice

Here are three examples of Wix eCommerce merchants pricing their products today.

Pricing for penetration

Multiple pricing methods are used by Darby Pritchards online jewelers . One of their most distinctive features is their adoption of penetration pricing. This is in keeping with the company’s mission, to provide affordable and mid-range pieces. Darby Pritchards is a popular choice for shoppers who appreciate variety and want to stockpile jewelry for all occasions.

Product bundle pricing

The Spice Suite offers a wide range of delicious spices and oils for home and professional cooks. Her brick-and mortar store is located in Washington, DC. However, her online store makes her spices available anywhere in the world. The Spice Suite offers only bundled products online to offset shipping and handling fees. These include spice boxes, kitchen wear bundles and fashion wear boxes.

Pricing based on value

Kaekoo offers handcrafted textiles by artisans from India, Turkey and Thailand. Its Our Story page states that each piece is hand-crafted using traditional techniques passed down through generations. The brand uses value-based pricing, selling handwoven pillows at a much higher price than average, but this is for good reasons.

Understanding the difference between strong and weak pricing strategies

There is no one right or wrong pricing strategy. Pricing will be influenced by how it affects your bottom line, the products you sell, as well as current demand for your inventory.

Pricing products can be complicated because it is easy to overlook problems that could affect your effectiveness.

These are some examples of scenarios that can be used to determine whether a pricing strategy works in any particular situation.

  • You’ll need to think about the price of a wider range of products. There are many products in the marketplace. It is important to determine pricing for each product line and subcategory you offer, and then analyze your market research.
  • When pricing your product, you should consider all startup costs. This includes inventory, shipping and marketing costs, as well as employee salaries.
  • Selling unique products or experiences will likely make it easier to charge higher prices, especially if the product is in high demand, such as CBD-infused skin products. You can charge more for the more unique and valuable products you offer.
  • You can also charge more if you are selling products in high demand or limited supply. Price gouging is not an option. Many merchants charged too much for masks, hand sanitizers, and other essentials during the COVID-19 pandemic. They were then forced to pay the consequences by government agencies and marketplaces.
  • You need to be aware of premium pricing strategies if you sell products that are easily commoditized. It is easy to lose customers to your competitors.
  • You can set prices based upon the value of digital products you sell There are additional options to set prices. You can also offer a lower price on a basic product, and then upsell to customers who want a more feature-rich version at a higher price. This works especially well for subscription-based pricing models, where customers pay a recurring charge to access your product.

The producer price index is one way to make sure your pricing strategy is sound. This program is managed by the U.S. Bureau of Labor Statistics and measures average price changes for domestic goods and services.

This index gives a comprehensive view of how inflation affects prices for all goods in the U.S., and breaks down pricing changes according to category. For example, the price for “final demand” goods–examples include pharmaceuticals, construction equipment, and diesel and jet fuel for the government–increased by 2.3% in March 2022 from the previous month.

Even though you don’t need to buy jet fuel for your business you can know how diesel prices are rising so you can anticipate an increase in shipping and transport costs that could impact your personal finances.

With the right pricing strategy, you can sell competitively

Pricing can be a complicated topic. However, with careful planning and experimentation you can find a solution that works for you. Do your research and know your costs. Also, be sure to test frequently.

source https://www.wix.com/blog/ecommerce/2022/05/product-pricing-strategy

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