Order confirmation on an e-commerce platform usually takes place at the end of the buying process a customer goes through. Customers end up choosing a product based on whether it is the best possible option in terms of look, feel, value, and price. It is still the price of a product that makes or breaks the deal, and is one of the trickiest processes to crack in the e-com ecosystem.
The whole process of the buyer’s decision-making can be used to determine what the ‘reasonable’ price for a product should be like. This forward thinking is beneficial when it comes to making a sale in this industry where buyers have many options.
You can use any or all of the following few approaches when it comes to pricing your products right:
1. Account for your costs
Start off basic – and account the cost of materials, labor, overheads. The first idea to create a pricing strategy is to get all your basic costs covered.
Factor in the costs associated with your products, and price them accordingly. Overheads like packaging material you use, your fuel costs for driving to your factory or workplace, electricity and rent etc., should be adjusted on the per unit product price to determine your product prices.
2. Identify your Target Audience
Another exercise you should undertaken before you fix up your product prices is to do a bit of initial research and understand who your target audience are. If your products are popular among a certain age group, a certain demographic, or people from a particular place, it gets easier to derive a pricing strategy for them.
One of our sellers says getting the price right is key to selling successfully online: “I sell casual jewelry for women. I know that most of my buyers are women who aren’t older than 30. My audience is more interested in buying slightly lower priced products, which look attractive. They want to buy more in quantity, and don’t really care about precious materials. They are however, willing to pay almost Rs. 700 for even junk jewelry for designs they really like. This often depends on whether they are purchasing for an occasion, or daily needs.”
3. Perception Value of Your Products
The perception price of a product is determined by its use to a customer. For example, customers who are buying gifting items like handmade drawers or boxes, or even handmade bags, will be prepared to pay slightly higher prices, than customers who are buying daily wear clothes. Personalized goods, for instance, sell at a higher value than goods which feel mass produced. The value that customers attach to a product, makes it easy to price them according to what they will be ready to pay.
4. Pricing Goals
Goals for your shop’s overall profitability are also an important consideration while pricing your products. If your business is just being set up, breaking even with product prices should be your short-term goal. If you’re a new business and trying to break even, it might be a good idea to incur some goodwill costs like paying shipping and COD from the shop. Well reputed older shops can still sell products which are priced slightly on the higher side, owing to the trust they have built over time.
5. Competitor Pricing
Once you have factored all internal costs and arrived at an optimal price, the next step is to check market prices. Check the average prices for products in your category. Keep your prices close to this. Price it too high, and there will be no sales. Too low, and buyers will start doubting the quality of the product. Keep it attractive, and keep it fair!
6. Lastly, Find ‘your’ Golden Middle
Despite all types of research of market prices, and accounting against your fixed and overhead costs, what really counts by the end is how fairly your customers think your products are priced. It is important to find a price point or range, which covers your basic costs, and the customers also think is a fair price to pay. This price point or range varies from shop to shop, and shop to customer. Only you will know with pricing, what strategy works best and is most relevant to your audience.
That’s all from us. Do your research, find that sweet spot, make your product prices fair, yet attractive, and bring in lots of new sales to your shop!