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How to price your products to gain more profit value

Jul 21, 2022 · 17 min read

Have you ever found a popular product, marketed it, and received no sales as a result?

You start to doubt yourself as a result of the gut-wrenching sensation.

Should I have asked someone to review my store? Did my marketing plan fail? Did I pick the wrong product?

Your store's financial success could be adversely impacted by a number of factors.

Fortunately, changing your price will address one of these issues quickly.

If this is your first week participating, I'm currently working to create a brand-new online store from the ground up.

I'm overjoyed that I'll be selling a fun, DIY product: letter boards. In week one, I picked the ideal dropshipping niche.

The focus of week two was on demonstrating my step-by-step procedure for opening a Shopify store for the first time and choosing the ideal theme for my market.

I ordered product samples from my suppliers and added products to my store during the third week of this series.

By the time week four rolled around, my product samples had arrived, and I was pleasantly surprised by the amount of care suppliers took to package their goods. My customers are going to love these letter boards!

It completely derailed this entire project during week five when a family member passed away, but I still managed to take my own product photos for only $25.

A preview of my product page was also shown to you. I walked you through how to optimize your product page for search while sharing some of my best copywriting tips last week, when I concentrated on writing the ideal product descriptions and about us page copy.

I'm going to be doing a deep dive into product pricing because I've seen first-hand how crucial it is for a store's success. I'll also be adding returns and shipping pages, and getting my logo up. This week is all about finishing touches. The password can then be deleted from my store once everything has been completed.

  1. Failures and Wins

  2. Things to Consider Before Pricing Your Products

  3. Product Pricing Formulas

  4. Getting Paid in USD

  5. Completing the Finishing Touches Refund and Privacy Policies Shipping Zones Designing My Logo

  6. Refund and Privacy Policies

  7. Shipping Zones

  8. Designing My Logo

  9. Next Week

  10. Want to Learn More?

Failures and Wins

I've run several online stores in the past, so I know what works and what doesn't. Before I dive into my strategies on how to properly price your product, I wanted to share some examples of my own mistakes and wins so you can make better pricing decisions.

My abandoned cart rate was through the roof a few years ago when I was selling phone cases through print on demand, which is notorious for its high shipping costs.

So, instead of selling a product for $19.99 plus shipping, I decided to include my shipping costs in the total price of the product, making it $35.99 with free shipping.

Did it succeed?

Nope!

I literally stopped receiving any orders or sales.

For that particular product, charging $19.99 still encouraged more sales than including free shipping in the product price.

I'm sharing this because you need to experiment with product pricing and it's crucial to understand that even if you make a mistake, it's still possible to make changes.

I've also experienced some significant victories.

Yoga equipment was the focus of my first profitable dropshipping business. I marked it up by 3x to a retail price of $29.99 from its original $10 cost.

Some retailers were selling the item for more than $50, so even if I kept the price at the original level, it would still be at market value. I set the product's original price to $50 so that it would show a 50% discount on the item.

And the product was a smashing success. I was able to drive high sales growth because I was selling below market value but still within a profitable range, and the 3x multiple allowed us to have a $10 marketing budget for our products, which worked out really well as it still resulted in a respectable profit.

If I sold at the $50 market value, for instance, we'd probably mostly sell one or two products since it's a higher price.

In my first year of this business, I sold 10,998 products, and I consider this to be one of the dropshipping secrets to my success. Instead, I was able to bundle the product to sell more of the exact same product.

Things to Consider Before Pricing Your Products

Expenses: Before you set your product's price, you should know what your company's expenses are. You'll need to lay out all of your expenses for the upcoming few months. You should also account for any unforeseen costs, so feel free to round up your total expense figure by 10%.

Here are some expenses to think about:

  1. Wholesale product cost Shipping costs Advertising/Marketing costs Recurring monthly fees (Shopify, Shopify apps) Website fees (store theme, logo design) Contractor/Employee salaries/Your salary Emergency Fund

  2. Wholesale product cost

  3. Shipping costs

  4. Advertising/Marketing costs

  5. Recurring monthly fees (Shopify, Shopify apps)

  6. Website fees (store theme, logo design)

  7. Contractor/Employee salaries/Your salary

  8. Emergency Fund

Direct advertising can be very rewarding but in the early stages can eat away at your budget, before you've even made your first sale, so you need to take that into account as well. The average influencer fee for my phone case store was only about $30, but for my yoga store, Facebook ads were more important. The precise amount you'll need to consider will depend on your skillset and niche; however, I typically estimate about a $2000 advertising loss for the first couple months as I refine my target audience.

Consider competitors in your niche rather than big-box retailers like Amazon, Walmart, or AliExpress when examining competitor pricing. Are there online shops that only sell your product? If so, what are their prices? How well-known is their brand? For instance, if a competitor is selling a product at a certain price but only has 1,000 in stock, it can be difficult to determine whether or not customers are purchasing the item. If you're analyzing competitors, you should make sure that at least some of them are well-known.

Discount Marketing: When pricing your goods, consider the percentage discounts you want to provide. On my most profitable store, as I previously mentioned, we had a 50% discount that was still in line with market value. Discounts can help you get your first few sales when you're just starting out and trying to get proof of concept, but offering too many discounts can harm a brand over time.

When dropshipping products, there is no benefit to breaking even; instead, you need to make a profit. Some niches, like electronics, are known for having smaller profit margins, while niches, like fashion, tend to have higher profit margins. There is some room for flexibility, especially if you decide to position yourself as a luxury brand, but you do need to think about industry standards for the products you're selling.

Product Pricing Formulas

These pricing formulas won't necessarily work for every situation so feel free to fiddle with the numbers a little. When I price products on my store, I look at a variety of factors: business costs like advertising, product costs, profit margins, and market value.

Retail price for a product between $0.01 and $4.99 is $19.99.

Product cost between $5.00 and $9.99 equals $29.99 in retail.

I typically markup items over $9.99 by 2.5–3 times.

If your product costs $19.99 in total (product cost plus ePacket shipping cost), you would retail it for $59.97 and round up to the nearest dollar.

Following that, you will have $19.99 to cover the cost of your product, $19.99 to put toward your expenses, which include advertising, and $19.99 in profit.

Remember that the majority of business owners put the $19.99 back into their companies, so it's not cash you put in your pockets.

In the past, the majority of my prices typically ended in 9s, for example, $19.99, $29.99, or $39.99. This is a psychological ploy many marketers employ. If the price is still fair in the market, you can increase it or decrease it to the nearest $x9.99.

What's more, If there is a better way to have a transparent pricing location on your products, that is use the tool called [SimplyTrends](<- https://www.simplytrends.co>). With this tool, you'll be more capable of making wise pricing decisions by learning about your competitors' activities of selling products. Maybe you can make a suggestion of what the highest sales with a relatively high price. And what SimplyTrends will provide you with relevant products price if you research competitors in your niche. After knowing the average price of similar products, may you sell them at a lower price then more customers will patronage your store. If the traffic increase, congratulations, you got a wise price.

It is vitally important for you to pay attention to the popular products of the season, the products with the highest ring rate, and what kind of product is used for promotional discounts. Before running your online store, these key points that can make your products get higher views and purchase rates, must be clearly known.

It has been very successful for me. For instance, the data showed from this tool that win competitors sold this product for $25 sale might perform better than a buy two for $29.99 sale in the women's fashion industry. So it proves that sometimes different products with different prices and the best selling regular, we need to learn the real-time data from some analysis tool will ensure both market value and profit maximize.

Getting Paid in USD

You can see that the price on my product page is $38.61 USD, which is definitely not the price I entered. I noticed that my prices were still set in Canadian dollars after adding them to my store because I added my prices in the backend in $x9.99, but the numbers I added were altered.

I still need to finish my account setup, according to the information displayed under Settings > Payments > Shopify Payments.

The payment gateways available to you may vary depending on what products you sell and which country you reside in, but I intend to sell through the same two I always use for this store: Shopify Payments and PayPal. Shopify Payments and PayPal are both widely used enough that I can rely solely on these two channels. I could add other payment gateways to the mix, but I don't want to overwhelm people with payment options.

I start by entering the information for my birthday and the product information under Shopify Payments.

You'll need to visit your bank to open up a USD bank account if you don't already have one, but the process to set one up is typically quite simple. I scroll down to "Banking Information" so I can change my currency to USD. You can find your account information on a direct deposit form for your USD account, and you might even be able to do it online rather than in person.

Completing the Finishing Touches

The majority of the website is now finished; the final step before launching the store is to complete any outstanding tasks.

Refund and Privacy Policies

Alternately, under Settings > Checkout> Refund, Policy, and TOS statements, these policies can be generated automatically. You don't need to spend money on hiring a lawyer to create these policies for you; you can simply copy and paste templates from Shopify's tools section onto your website. I literally copied and pasted both of the policies directly to my website, only adding in my business name and address.

The inclusion of these two policies on an online store is fairly standard. The refund policy informs customers of the procedure for requesting a refund through your store, while the privacy policy informs them of how their data is used.

Make sure you carefully read the policies so you are aware of what you are promising your clients, and feel free to make any necessary adjustments.

I created pages for the customized policies under Sales Channels on my website after copying them.

After that, I included those pages in the Navigation footer.

Although it only took a few minutes, you must remember to complete the process.

Shipping Zones

Shopify automatically includes weight based rates; however, this needs to be changed to a price based rate because I'm dropshipping products.

The first step is to remove these choices from your store by clicking the xs next to weight-based rates.

Once you've changed the title to "Free Shipping," click "Free Shipping" under "Add Price Based Rate" and then "Rate."

Your country will likely already be listed under Countries, but you now need to add the rest of the world. At the time I was adding countries, the Rest of the World button was not working, so I manually clicked each continent. Some retailers, who don't dropship, choose countries based on the affordability of shipping costs; if there are some countries you don't want to sell to, you're free to remove those countries from your options. However, because I dropship, I don't have to pay exorbitant shipping fees, so I typically do business abroad.

I've been trying to keep my costs down throughout the entire store build, so when the time came to create a logo, I knew that it was up to me to create it.

My objective is to achieve a clean, text-based design that is easy to read and matches the feel of my brand. Obviously, I'm not a graphic designer, so my logo won't be anything out of the ordinary.

Since the majority of the letter boards I sell are square in shape, I initially thought adding a graphic, like a square shape icon, would be appropriate.

I went to FlatIcon, typed in square, browsed the collections, and played around with a few icons to find a vector icon I could use in my design. The look of it was unfortunately limited because I was unable to significantly alter any of them.

So I just stuck with one font that had a bold option so it was in the same font family and added text inside the square using a little Photoshop.

Here is my initial creation:

The logo looked terrible on my website because I tried to rush the logo design process and thought I was done when I added it right away.

I was thus compelled to start over.

The icon would serve as the logo moving forward, sans the text from the "letter boards."

I detested how much room it took up and how ugly it made my top navigation look.

I then concentrated on removing the icon and leaving only the text.

Much better, I was hoping the thicker font would help people remember the brand name more vividly, but it didn't match the font of the top navigation, I liked that it added some emphasis.

Now that I've finished my logo, it's time to remove the password from the website!

Next Week

Additionally, I've been asked to extend this case study so you can receive a few more weeks' worth of marketing tips. I finally get to start marketing my store for the first time next week, and I'll be walking you through my step-by-step marketing process to hopefully produce some successful results. I'll be experimenting with different marketing strategies to see what results in my first sale.

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