If you run
an online dropshipping store, you should absolutely consider your pricing
approach.
When it
comes to pricing your goods, you can\’t just go with your gut instinct. You must
factor in costs such as product costs, marketing charges, taxes, hosting fees,
app costs, and psychology.
But don\’t
worry. This article will teach you what a dropshipping pricing plan is, how to
pick the optimal retail price for your goods, several pricing techniques you
may apply, how to round your product\’s price, and much more!
So, if
you\’re wondering what retail pricing you should set for your products, this
post is for you.
What exactly is a pricing strategy?
When adding
new items to your dropshipping store, you may wonder:
\”How
should I price my goods?\”
That is
exactly what a price plan addresses!
A pricing
plan normally takes into account all of your expenses and calculates an optimal
selling price as an output.
To select
your pricing plan, consider a variety of factors in order to maximize your
chances of profitability.
Consider the following:
·
How
does your target audience look? For example, if you target a more affluent
audience, you can certainly set your prices slightly higher than the average.
·
Perceived
Value: What is your product\’s perceived value? When selling a neck massager,
you can charge a larger price than when selling a neck pillow.
·
Pricing
Elasticity: How does your target market respond to price changes? If a 10%
price increase results in only a 5% increase in sales, it\’s probably a good
decision!
·
Company
Costs: What are the business costs that you must recoup? How much do you spend
on email, applications, domains, and other company expenses? Check out this Do
Dropshipping article if you want to set up a free business email.
·
Taxes:
The requirement to pay sales tax, VAT, or profit tax can significantly reduce
your profit margins, which is why it\’s a crucial factor to consider when
developing your product pricing plan. Check out our article about dropshipping
taxes to discover everything you need to know!
·
Marketing
expenses: One of the more important expenses to consider. Why? They fluctuate!
Your marketing costs will climb as you sell more things. It ultimately boils
down to your average Cost per Purchase across all of your marketing platforms.
·
Psychology:
What is an appealing pricing for your goods in terms of psychology? Do you
always round your prices? If so, was it at X.90, X.95, X.98, or X.99? These are
all valid concerns to consider, and they can vary from product to product (more
on that later)!
·
Product
prices: Finally, but not least! Your product\’s price, often known as COGS (Cost
of Goods Sold) is an important cost to consider. In fact, pricing schemes based
solely on someone\’s COGS exist!
Why do you need a
pricing strategy?
\”Why all this trouble?\” you may be thinking.
\”Can\’t I just go with my gut instinct or utilize the same price as my
competitors?\”
Simply put, you can\’t!
A well-thought-out pricing plan can make or ruin your firm.
You will almost certainly:
Set your price too high, and you will lose a lot of sales.
Alternatively, set your price too low, resulting in smaller
margins. You will lose potential earnings and income that you could have gained
with a suitable pricing plan.
That is not all.
Pricing strategies for
dropshipping
Are you ready to learn about the best strategy to price your
dropshipped products?
Because the ideal way to price a dropshipping goods can vary
depending on the product\’s pricing at the supplier, I\’ve divided this part into
three sections, and I\’ll tell you how to price low-ticket, medium-ticket, and
high-ticket products!
Don\’t worry if you prefer to learn through examples. I\’ll
choose an example product for each pricing level and show you how to price it!
Dropshipping pricing
strategy for low-ticket products ($0-$10)
We\’ll start with the low-cost items. Your provider will
charge you between $0 and $10 for these items. So, what factors should you take
into account while pricing low-ticket dropshipping products?
Perceived value: Low-ticket items typically do not have a
high perceived worth. With low-ticket items, having a profit margin of $20 or
more can be difficult.
Audience: If you\’re selling low-ticket items, your goal
should be to sell as many as possible. Try to persuade visitors to buy your
stuff on the spur of the moment. Because your COGS are so low, you can sell
your product at a reduced price.
Marketing expenses: A reasonable rule of thumb is to set
aside 30% of your product\’s selling price for marketing expenses. The marketing
expenditures are determined by the price of your product because purchasing a
$100 goods is a lot larger step than purchasing a $5 product. As a result, the
more expensive product necessitates a larger marketing spend.
In other words, low-ticket items have a reduced cost per
purchase. This makes them appealing to newcomers because your ad spend does not
need to be excessive!
Medium-priced item
($10-$25) Pricing approach for dropshipping
Next up: medium-priced items!
These products will cost you between $10 and $25 to purchase
and ship to your consumers.
Your COGS will continue to rise as we increase the price
range of the products. So, in order to maintain a healthy profit margin, keep
in mind that the retail price will be greater as well!
Here are some factors to think about when pricing
medium-priced items:
Audience: Don\’t forget to consider the type of audience
you\’re aiming for. Is your product, for example, aimed at hobbyists or at those
who will have a WOW moment after seeing your ad and then buy it on the spur of
the moment?
Hobbyists are likely to be passionate and knowledgeable about
the best deals for things related to their pastime. In such circumstance, you
can\’t afford to charge more than the majority of your competitors.
Perceived Worth: If the majority of your target audience is
unaware of the product, you can more readily price it at the product\’s
perceived worth. Depending on how high the perceived value is, this could be an
advantage or a drawback.
Product prices: Is there still room for profit when selling
this item? Assume the product costs you $20 to buy and transport, but you may
only charge $30 for it (without lowering the conversion rate significantly). In
that situation, you are unlikely to be profitable with this product.
Strategy of free plus
shipping
Another pricing technique that could work well for low-ticket
items!
If you\’re unfamiliar with the free plus shipping method, it\’s
an offer in which you sell a product for $0.00 and only charge the customer for
delivery charges.
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