Even if you have the most effective online marketing campaign in existence, you need to remember that your pricing is still critical in today's digital economy. Assuming all other things are equal, consumers will naturally choose the most competitively priced product. That's why it's essential to be able to accurately determine your price point.
What variables should you consider? How can research help you set a realistic price? Let's quickly examine these two key questions.
Understand your total costs
This first step represents the proverbial "nuts and bolts" of any sales strategy and yet, countless sellers get it wrong. Many businesses mistakenly equate the cost of a product in terms of the production costs alone. This is a mistake as there are many additional variables you need to take into account such as:
- the price of the raw materials
- labour and /or assembly costs
- shipping and handling
- storage and inventory fees
Of course, these costs will not apply to every product on the market. For example, a business designing custom t-shirts might not incur inventory and storage overheads. The same holds true for an app developer. However, traditional products such as electronics or computer hardware will often incur costs in addition to production costs. Therefore, it's crucial to understand the "big picture" and identify all your additional costs. You can then determine how much of a margin is required in order to turn a profit on each sale.
Know your competition
It can still be tough to know how a specific good or service should be priced. This is why one of the most effective Shopify pricing strategies involves comparing your products or services with other major suppliers. This will provide you with an insight into what your competitors are charging and the price potential customers might be prepared to pay. These listings are updated in real time scenario, so you always have access to the latest prices and accuracy is never an issue.
Once you have this information, you can leverage it to set your prices slightly lower than that of your closest online competitor. Even if only by a few euros or pounds, the fact is that consumers always enjoy saving money. This approach could make the difference between developing a loyal client base and losing customers due to inaccurate prices.
Finally, you need to be realistic with your profit margins. You should aim for a profit between 10% and 15% of the initial cost of the product. In other words, don't become greedy in terms of your overall return on investment. Even these seemingly small sums will add up over time; particularly if you specialise in bulk sales. The price of a product is a key selling point and it should never be overlooked.
Copyright 2020. Featured post made possible by Alexa Coleman, AC copywriter