How To Set Product Prices For E-commerce Business

How To Set Product Prices For E-commerce Business

How To Set Product Prices For E-commerce Business | As the owner of an online store, one of the most challenging tasks you will ever face is pricing your products.

How To Set Product Prices For E-commerce Business. Pricing is always a significant factor in the equation, even though it isn’t usually a deal-breaker for consumers because they frequently aren’t just looking to buy the cheapest goods.

How To Set Product Prices For E-commerce Business

Essentially, you need to determine the best combination of profit per unit and the ideal quantity of purchases. There are many ways to set your product’s pricing and support the aforementioned goals, but combining at least two tactics is typically the ideal approach.

It’s crucial to take the necessary time to get the pricing of your products and services just perfect because it can make or break your online store. Also keep in mind that you can incorporate additional strategies to raise each customer’s profit and lifetime value depending on your overall strategy.

How To Set Product Prices For E-commerce Business

Let’s first establish the facts before moving on to the strategies. In order to create a pricing strategy or formula, you must first understand the following:

1) The profit margins for your goods.

This is a really simple process. You determine the price for each unit of a particular SKU (transit to your warehouse and any other fees included). Then, you test several pricing using only the following formula:

Price / (Price – Cost)

How To Set Product Prices For E-commerce Business

Your margins for each product are provided by this straightforward calculation.

It is never acceptable to assign a price to a product that yields a negative number.

2) The price of marketing.

Are you planning to promote your goods? You probably will, and online most likely.

The price of marketing that particular product should be included to your expenses, or you may simply split it among all of your SKUs.

How To Set Product Prices For E-commerce Business

For instance, you ought to allocate the $3K you spend each month on Google AdWords to equally market all of your products and your online store.

After covering these 2 fundamentals, let’s discuss some straightforward pricing tactics for both established and start-up ecommerce firms. It’s important to keep in mind that you can use any one of them, ideally a combination. Don’t simply copy others; consider your market and geography to determine what would perform best for you.

How To Set Product Prices For E-commerce Business

First pricing approach: cost-based pricing

For both brick and mortar retail stores and internet stores, this is one of the most well-liked and straightforward pricing systems.

How To Set Product Prices For E-commerce Business

The process involves simply adding the desired margin or a straightforward fixed amount of money that you think is ideal to the cost of a unit as determined in step 1 (transportation and other variable costs included). The final cost of the item will be the sum total.

The two difficulties with this strategy are that you must calculate the precise cost of each unit without leaving any costs out and that you must be aware of that cost in order to consistently maintain it during promotions and other events.

How To Set Product Prices For E-commerce Business

If an e-commerce company has really nailed the operational side of the business, they can easily and quickly use this strategy.

You decide how much overhead to include, but often wages for staff members are not taken into account.

How much profit to increase is the second tough aspect. A portion of it can be determined through experience, and a portion (or all of it) can be determined by observing prices charged by rival businesses that sell the same or comparable goods.

How To Set Product Prices For E-commerce Business

Pricing incorrectly could kill your sales. You may keep up with your competition by performing a manual inspection initially, followed by routine software checks.

Pricing Strategy 2: Price-based on the Market

This plan, which builds on the last element of the previous one, is also known as a competition-based strategy and takes your competitors’ actions and the state of the market into account.

How To Set Product Prices For E-commerce Business


If you can compete on price for commoditized products, this is a solid strategy. Usually, this is combined with a cost-based pricing strategy like #1. In essence, it shows you when to reduce your prices to increase sales without sacrificing your profitability from step one.

How To Set Product Prices For E-commerce Business

Additionally, if the price of your goods is too low, you can raise it, maintain your position as the cheapest seller, and squeeze out an extra profit.

Pricing Strategy 3: Priced with the consumer in mind

Value-based pricing, as it is commonly known, is typically used for non-commoditized products. In these situations, the value is typically sold, and the price only needs to be fair.

For instance, a novelty product that may not have direct rivals can use that pricing strategy while emphasising its advantages over more established or rival items.

How to Determine the Best Price for Your Product or Service

Knowing how to set your product pricing is just as crucial to the success of your business as producing high-quality products and developing a successful marketing plan. The best course of action is to attempt and price your goods so that both your customers and you receive decent returns. Several ways for setting your product price successfully will be covered in this post.

Find out via some research what your rivals are charging for their goods. You’ll discover the rationale behind their price decision as well as whether goods have been over- or under-priced. Don’t skip this stage because it can assist you in estimating the value of your own goods. You can set your price a little lower to indicate better value if your competition is flagrantly overcharging.

How To Set Product Prices For E-commerce Business

Similar to this, you have a chance to charge more, provide greater value, and attract more customers if you see that your rivals are undercharging. Your business won’t suffer if you charge more because many consumers would rather pay more for superior quality. Therefore, investing time in your market research will make it simpler for you to choose your own price.

Does your product outperform its rivals in terms of value, quality, or added advantages? If so, you have the chance to charge more than they do while still giving your customers value. You can differentiate yourself from the competition while still demonstrating to buyers that your product delivers greater value by offering higher value at a higher price. Customers that need higher product quality will have to pay a higher price.

How To Set Product Prices For E-commerce Business

Don’t forget to pay close attention to the discounts and promotions that your rivals are doing. You can then decide if you should provide your customers with higher quality or greater value. You can better understand your competitors’ sales strategy by keeping an eye on what they’re doing. 

How To Set Product Prices For E-commerce Business

You ought to take notes on their approach and then apply what you learn to improve your own marketing initiatives. Offering the best deals to your consumers in comparison to other businesses is preferable because skipping this one advice could give your rivals an advantage.

In conclusion, there are many variables that may affect your pricing model, and the advice in this article is simply the tip of the iceberg. Therefore, if you truly want to experience any level of success with your product, make sure the price you set is appropriate and that you’re providing top-tier quality in order to meet your customers’ expectations.

How To Set Product Prices For E-commerce Business

How to Determine Product Prices to Make the Most Money

Let’s imagine you’re selling a product for $17 and have already sold 1,000 units. Then I appear and declare, “Hey, I believe your asking price is too low. Increase it to $47 and observe the results.”

So, we do. We send the same volume of visitors to your website, and we close out with 1,000 units worth of sales. Just this time, we made $47,000 as opposed to $17,000.

Additionally, neither the marketing nor the product itself saw any significant changes. The pricing was the only item we altered.

How To Set Product Prices For E-commerce Business

Do you think this is crazy? It’s not because I frequently witness it. In fact, I can count on two hands the number of times my own company doubled or tripled its prices, and not only were our sales unaffected—they actually rose.

Why is that so? I am clueless. There are a lot of reasonable theories, but I won’t waste my time researching them. I simply know it functions.

That isn’t always how things go. When you do the arithmetic, you’ll see that even if you sell half as much stuff at $47 as you do at $17, you’ll still make more money. A further advantage is that you are less likely to issue refunds and experience customer service issues the more money a consumer spends on your goods.

How To Set Product Prices For E-commerce Business

First off, since you have more room for error, you can allocate more resources to customer support. Second, many people would buy something on impulse for $17 knowing full well they can obtain a prompt refund. But for $97 and $397, not many people are likely to buy something on a whim.

Your price point needs to be tested. I’ll demonstrate one quick approach to achieve that for you. Create a joint enterprise with another person first.

In exchange for a share of the income, they recommend your goods to their list. Consider that they have a list of 4,000 individuals.

Either instruct them to divide their list into 4 groups of 1,000 and send each group to a separate price point, or utilise split testing software that alternates between the 4 price points automatically so that each is evenly displayed.

How To Set Product Prices For E-commerce Business

Simply add the numbers after that. What was the most lucrative price point? You’re all set. No speculation is required. Of course, unless you’re getting a lot of targeted traffic to your site, you can’t really test the price point.

How to Determine Your Online Product’s Price (How To Use Dynamic Pricing To Boost Your Sales Rate)

By definition, internet marketing is the process of promoting your things online. However, it would be pretty constricting to think that online marketing is just about, well, marketing.

Assuming you are already familiar with the nuances of product development and the wide range of online advertising strategies, we will now talk about a topic that could make or break your success in internet marketing.

How To Set Product Prices For E-commerce Business

Now, the topic we’ll be talking about is one that many online entrepreneurs take for granted. That is what would link your company to the positive actions of your customers. That is what would turn your website visitors into paying clients.

We are discussing the cost of your product.

What price range should you choose for your product? Naturally, you would want to achieve a range that would allow you to recoup the costs associated with its development and promotion. The break-even point is this. 

Any amount over break even would be regarded as your profit. Again, it makes sense that you would want to maximise your earnings.

How To Set Product Prices For E-commerce Business

These two elements thus determine price:

  1. Your investment amount; and
  2. Your desired earnings per item

When it comes to price, there are often two methods used. Let’s look at them now.

  1. Price your product slightly higher than the point at which you break even and rely on the number of units you can sell.
  2. Set your product’s price much higher than the break-even point so that every sale will generate a sizable profit.

The first strategy would be ideal for you if you anticipate that your product will be a best-seller. You might just rake in your income from the numerous sales you are able to make.

How To Set Product Prices For E-commerce Business

The second strategy might be more appropriate if you expect your product to have slow sales. You won’t feel under pressure to sell a lot of products in order to realise your earnings because each transaction will provide you with what you need.

But there are issues with both strategies in their own right. By undervaluing your goods, you risk giving potential customers the wrong idea about its quality. A sizable portion of the market would become hostile if you overpriced your product.

How To Set Product Prices For E-commerce Business

Personally, I believe that you should charge what your product is worth for it. Allow the forces of the market to handle themselves. You won’t have to worry about negative effects if you charge a fair price for your goods. Every product is unique, thus each one deserves specific consideration when it comes to pricing. When choosing the appropriate price for the same, bear this in mind.

But here’s a top-secret tip: you can significantly increase your sales by manipulating the price of your goods. You did read that correctly. YOU CAN INCREDIBLY INCREASE YOUR SALES USING THE PRICE OF YOUR PRODUCT. This is achieved using a method known as dynamic pricing. Dynamic pricing can elicit a sense of urgency in customers, encouraging them to buy your product right away.

How To Set Product Prices For E-commerce Business

You might use a few technologies to implement dynamic pricing for your offerings. You would advertise a product for an absurdly low price and include a disclaimer that the price will rise after a certain amount of time. This growth would carry on until the offer’s price was too high for your market.

For instance, an eBook can now be purchased for $5. Its cost would climb by $5 after 25 hours. And the cost would rise by $5 once more after another 24 hours. so forth, so forth. Mass hysteria would emerge from your target market’s eagerness to take advantage of your offer while it is still affordable, which would cause a queue to form.

How To Set Product Prices For E-commerce Business

One of those cutting-edge marketing techniques that has worked well for numerous online firms is dynamic pricing. If you want to feel a sudden rush of incoming orders, it’s worth a go.


If you don’t have a sound and successful pricing plan, focusing exclusively on income and sales could be devastating. You can always maintain competition by using price tools, and when used in conjunction with the ideal pricing approach, they can help you keep your sales and profits in the black.

How To Set Product Prices For E-commerce Business



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