As an online seller, setting a price that will appeal to your buyers shouldn’t be complicated nor difficult. There are approaches that can help make product pricing easy and less stressful for you:
Cost Pricing- This involves getting an understanding of your total costs and applying a “wage factor” (how much you want or need to make on each item). This approach is important as a baseline for your online business to break even or record profit.
Competition Based Pricing- This involves figuring out what your competitors are charge their buyers and adjust your prices accordingly. Once you have an appropriate pricing range with your competitors, compare your products with the similar products you found. It is important to think about who you are competing with as your competitors may not be making something very similar but rather, targeting the same buyers like you. For instance, think about your product not only as a wooden puzzle, but as a gift for a 6-year old boy. This way, you can compare your pricing more broadly. Here are a few questions you could ask yourself to help your decision:
- Why should a buyer purchase my product instead of the other products out there?
- What is the perceived value and benefits of my product? How much does my customer think my product is worth?
- Is my product made of better materials?
- Does my product have more intricate work or design elements?
- What is my reputation in comparison to the other artists making similar items?
- How differentiated is my product? What makes my product unique and special?
Demand Pricing - This concept is to help you identify what buyers are willing to pay for your product and setting the prices based on this demand. Sometimes this is described as the price “the market will bear” — which means exercising your ability to charge more for a product that is seen as valuable or unique to your customers. Test an increase in price on one of your products and track the progress, if you notice a fall in demand, then consider reducing your price till you get that desired balance with demand and price.
Most often, sellers put their pricing too low in order to attract buyers to their stores. When this happens, you run the risk of having difficulty in increasing your prices later. One way to get around this is to announce the pricing as “Special pricing” or “ Discounts” and let the buyer know what the expected regular price is immediately. This will give you flexibility to test the market price and improve your pricing later.
(Culled from The Esty Blog-The Art of Pricing: Staying Competitive)