Expert Tips on How to Price Your Products Effectively
Pricing is one of the most important aspects of any business. No matter what goods or services you provide, you need a price. If it’s too high, you risk low sales. If it’s too low, you won’t profit enough. Finding that balance is an essential task for any successful business.
However, deciding on an appropriate price can be difficult. This guide will explain the basics of pricing and how to price your products for success.
First, you need to calculate and consider all the costs associated with the product. This includes things like manufacturing, wages, marketing, taxing, shipping, permits, licenses, and more.
To make a profit, your product needs to be priced higher than all of the costs. So if a product costs $10 to make per unit, the price must be higher than that to profit.
One way to increase profit margins is by lowering these costs. Conversely, if costs go up without a price increase, you can start to lose money.
While this all sounds simple, it becomes very complex when dealing with a large multi-faceted business. This challenge is one business deal with their entire existence.
What Impacts Your Product Pricing?
Besides costs, there are other factors to consider when setting prices. For example, some businesses have a “loss leader,” a product they lose money on that brings in more customers to buy other products. This means that the product will be priced lower than expected, while others will be priced higher to compensate.
Also, consider why you made the product. Did you make it to provide a low-cost alternative to another product? Did you make it to fill a luxury niche? Did you make it provide good quality at a fair price? Why you made the product will have a big impact on pricing.
Other businesses are also an important consideration. If everyone else is selling a similar product for $5, you need to be competitive in some way. Maybe your product offers something that theirs doesn’t. Maybe you have unique marketing that entices customers. Your product needs to stand out in some way.
At the same time, don’t chase the bottom. That’s a losing game. Big businesses like Walmart and Amazon will almost always be able to undercut you, so try to avoid being the cheapest option and focus on standing out instead.
Use “Free” and Coupons Carefully
Offering something free can be a big incentive for customers. You might make less money off a single product by offering free shipping, but it could lead to more sales and profit in the long run. A free gift might entice customers to follow through on the purchase.
On the other hand, don’t go overboard. If you offer too much for free, it could eat into profits. Be careful to offer too much for free. This also applies to coupons and sales.
Like free offers, coupons and discounts can drive sales, but they can also decrease profits if implemented poorly. A 10% coupon could cause customers to buy more than usual, outweighing the cost of the sale. A 50% coupon though can cause customers to buy too much and result in a loss.
However, coupons can be hard to implement on eCommerce sites. Thankfully there are services to make this easier. WooCommerce is WordPress’ eCommerce plug-in and can help make you sell your eCommerce products easily.
Services like HJI Technologies can make this even easier by providing WooCommerce development resources. They can build an incredibly functional bespoke site customized to your exact needs. We also have e-commerce experts that can consult with you on how to price your products effectively.
With a suite of features designed to better your site like fast page loading, being mobile-friendly, and integrating directly with suppliers, HJI’s WooCommerce services are a great resource for businesses looking to enter the space or businesses looking to better their eCommerce site.
And since they have a process to deliver your site within 20-30 business days, you’ll be selling your WooCommerce products in no time.
Buy Now, Pay Later (BNPL)
BNPL has become increasingly popular in recent years, and for good reason. Offering BNPL can increase conversions, sales, and attract customers who may not be able to afford your products outright.
It used to be hard for small businesses to offer BNPL, but there are now tons of services that can help businesses provide the option to customers. Affirm, for example, integrates directly with WooCommerce, making BNPL easier than ever.
Don’t Underestimate Yourself
Avoid getting into pricing competition with other companies. You have a unique product, so let it speak for itself. Set a comfortable profit margin and stick with it. Showcase your products and what they have to offer instead of insanely low prices. Be confident that what you have to offer is something potential customers want. If you need some help, HJI has e-commerce experts that can work with you on how to price your products effectively.
It can be a challenge setting your prices, but it is necessary. By carefully calculating costs and considering all the factors, it is possible to set a price that leaves you and your customers satisfied.
Also see: What Is Burnout and How to Avoid It?