Many store owners, both old and new, struggle to find the sweet spot for pricing products. Learning how to price your products correctly affects not only how much you will make, but how successful your store will be against competitors.
Guessing your prices is a surefire way to make some big mistakes that’ll cost you in the long run. So let’s look at some basics of pricing, and give you tips and tricks to help you choose the right prices for your store.
Determining your costs is the first step to pricing. It’s the total value of everything it costs to create your product. Below are a few costs to consider.
Design Cost: To determine design cost, you want to divide the price of the design by the number of designs you hope to sell. If you’re starting out and uncertain how many designs you’ll sell, try determining the cost by dividing the design price by your profit margin. This will tell you the minimum number of designs you’ll need to sell to break even at your determined price.
If you’re creating designs yourself, you’ll still want to make sure it’s worth your time. Determine what your hourly rate would be, and then multiply by the hours you spend on the design. This will give you an idea of how much it’s costing you to create designs you want to sell.
Production Cost: One of the best parts of print-on-demand is the lack of warehousing costs. You don’t have to worry about having space to store products.
Shipping is easy because each product has a base price for shipping, so you’ll need to take that into consideration when you set your price. Customers love free shipping and according to one survey, 88% of customers are more likely to shop online if you offer free shipping!
What does that mean for you? If you offer free shipping, your production costs will be higher, but it may balance out if you are able to sell more products.
Taxes: Customers will be charged taxes based on where they live. In the U.S., the sum varies from 4% to 10%, and from 17% to 27% in the EU. It’s tricky to determine what your customer will pay before they place the order because you won’t know where they live. These expenses may need to go into your pricing if taxes or VAT will push the cost of the product outside the reasonable expectations of your customers.
Platform Fees: Depending on the platform you use, there could be some charges. The GearLaunch platform doesn’t charge any fees and Shopify has a free version as well. If you upgrade your Shopify platform, there are monthly charges associated with it. You’ll want to keep those costs in mind as you set your price.
Now that you have an idea of what your costs are, it’s time to choose a pricing strategy. There are 7 common approaches to pricing and you can read more about each strategy here. The most common strategies are:
As you consider your strategy, it is important to keep in mind the 5 key elements of a good pricing strategy for maximum profitability.
The key elements include:
Pricing your products is one of the most important parts of having a successful business, so take your time and do some research.
Once you have all your costs added up and a solid idea of what strategy you’ll use, it’s time to add a profit margin. Take the overall market into consideration so you don’t set your prices too high or too low. Then, add in your profit to determine the final retail price.
Don’t forget about the fixed monthly costs it takes to run your store! If there are any other costs related to running your business, you’ll want to add those up before finally setting your price. You may have costs related to hosting a website or paying for your domain. Once you determine your other costs, divide that by your profit margin, which will give you the minimum number of orders you need to make in a month to break even. You may need to adjust your pricing at this point.
As your business grows, your pricing strategies may change. Reviewing your pricing regularly will help you track what works best for your business goals and your customers. Over time, you’ll be able to gather more data which will help you make better decisions for future campaigns.
Check out our top GearLaunch tips for how to price your products in your store!
Tip #1: Upselling is one of the most successful ways to increase your revenue. Remember, if you set a high price on your product, the pricing on the product you’re upselling should also be high. If you set a lower price, your upsell should also be priced lower.
Learn how to add an upsell to your store in our GearLaunch Academy lesson here.
Tip #2: Use a Promo Code! Offer customers free shipping, a percentage off, or a dollar amount off their purchase. Everybody loves a deal!
Tip #3: Cross-sell! With GearLaunch it’s easy. Similar campaigns are automatically shown on the checkout screen for your customers. You can build on that within your advertising by showing similar designs together. Impulse buying works best when you target items in which your customer has already shown interest.
Now, put together everything you’ve learned and check out our nifty spreadsheet! Download your own copy and plug in your numbers to see how you’re doing. It will give you a place to start as you learn how to price your products perfectly.
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