Qined Community 🧑‍💻

Mohamed
Mohamed

Posted on

HOW TO CORRECTLY SET THE PRICES OF YOUR PRODUCTS

Setting prices for your products can be one of the most perplexing and stressful aspects of running an online store . Price it outrageously low , and you might make sales but not much profit. Overprice them and you could scare off potential customers. Hitting that slippery pricing sweet spot is hard , but we'll help you figure it out.

What are your costs?

Costs are much more than the individual purchase amount you get from your supplier or the aggregate price of the materials used to produce your product. Despite the popular assumption that “ selling online is “ free ”, traditional retail expenses such as salaries, warehousing , order fulfillment , and marketing are a significant part of the work of an online trade . You'll also incur some additional costs as an online seller, including platform and hosting fees plus any apps or other services you want to use. It 's time to write down everything you 'll pay for as an eCommerce business , putting every aspect under the microscope, from setting up your online store to when your customer receives their order and beyond , including return or exchange logistics and follow-up marketing.

What is your target profit margin?

Once you 've checked all the costs related to development , manufacturing , delivery , and marketing, it's time to calculate your target profit margin . While it is seductive to create large markups on product prices, it must also be competitive. So you need to calculate a profit margin that makes sense . for the success of your business. To create this, you can either do the math yourself, or you can play around with Shopify 's markup calculator . There is no one answer when it comes to creating a profit margin for your eCommerce business and it may change a bit over time as buyers fluctuate and you streamline your operations . commercial. The key is to set a margin that is reasonably competitive, covers all your costs, and makes it worthwhile for you to run your online store .

A good benchmark for many is to double the cost of the product to arrive at a 50% profit margin (and a 33% net profit margin). However, in many cases such a high markup is unfeasible (eg consumer electronics), while in some others the key markup may be too low (eg fine jewelry).

Who are you selling to?

Before asking yourself how much your customers will pay, you need to figure out who your customers are . Creating a persona or two of who your perfect customer might be is a great way to visualize their life circumstances and how that might affect how they view your product. Could they be wealthy buyers looking for aesthetically pleasing household items? Are they budget-savvy trend hunters? Maybe they 're fitness buffs who value quality above everything , including the price. Whatever the case , it will be the people who buy your products, so focus on what is meaningful to them.

What are your customers willing to pay?

Once you have an idea of ​​who you'd like your potential customers to be, it's a great idea to run market research on real people, whether it's an existing customer base of yours, potential customers, or even people you know who could become customers .A quick survey is an easy way to gain valuable insight into your customers' buying habits .

What is your competition doing?

Comparing prices is very feasible these days , as search engines often show competing products side by side . With that kind of convenience , you really can't blame your customers for shopping around ; in fact , it would be wise to do the same. According to Tim J. Smith , Founder and CEO At Wiglaf Pricing, there are three important questions to ask yourself when it comes to evaluating your competition : Who offers an alternative to my product? Is mine better or worse? And the customer cares? If your product is superior , highlight what makes it so and increase the price. If yours isn't that great, undercut the competition and lower the price , drawing customers out of your store and into yours. As your competitors' prices change , They should also change theirs.

Depending on the industry your eCommerce business is in, you may not need to constantly monitor price changes, but it is something to keep in mind as your business grows.

Discussion (0)