Deciding the drop shipping prices can be a cumbersome task for any dropshipping seller. The seller often gets confused about whether the price is too high or is if he is losing potential profits by underpricing. But there is a secret formula of how to price your dropshipping products right.
Today, dropshipping business has become quite common and can be defined as a method of retail fulfillment where a store does not keep the products it sells in stocks. Instead, the dropshipping model features purchasing the item from a third party and is shipped directly to the customer. It means that the seller doesn’t have to handle the product directly. Using Apps such as Sell The Trend can help you find thousands of winning products easily and then adding them to your store in 1-click using push to store feature .
But another thing that is common to the contemporary dropshipping business is that pricing is not only focused on covering the costs and providing an adequate profit margin. The pricing of the product is seen as a marketing tool, which means that retailers use and manipulate the prices of their products to drive traffic to their stores. That makes a proper pricing strategy essential to create more sales and more profits.
How to Price Dropshipping Products?
Anyone who has a drop shipping business might feel the pricing of products as an overwhelming task. But believe us it is not that difficult as it seems. While it is essential to have an optimum price point for your products, there are various established pricing strategies for dropshipping business owners. Here is a handy guide on pricing strategies.
Cost-based Pricing Strategy
This strategy is used by most of the conventional sellers. It is one of the best strategy for beginners as it has a simple logic, is easy to implement, and allows you to pre-calculate your profits. The method is straightforward. You need to estimate all the costs associated with your product.
These costs involve shipping cost, supplier price, selling platform fees, marketing cost, shopping cart transaction fees, payment gateway fees, taxes, currency exchange margins, and your profit.
This traditional method is based on a simple logic, but it does not take competition and market conditions into account. Without that, your products can be overpriced or underpriced.
Competition-based Pricing Strategy
This method is basically spying on other dropshipping businesses and adjusting prices accordingly. Now, if you are thinking of setting your prices lower than your competitors, it’s not going to work. You might be avoiding all your potential profits and setting a mindset among your customers that your products are of poor quality. Similarly, you cannot set the price too high.
The trick to this strategy is offering excellent quality products with some good customer support due to which you can easily target an average customer. And in case you believe that your products and services are better than an average store, then increase the price accordingly.
Customer-Based Pricing Strategy
As an owner of a dropshipping business, you need to realize that a business is developed around its customers. So your strategies should be altered according to their behaviors and needs. Customers cannot be left out when deciding the price.
Some people visit websites just to check and compare the prices. Nearly half of the customers look for discounts and coupons, and ¼ look for promotions. With this in mind, you get a fair idea of the customers you are getting.
In case you are selling luxurious products, people do not compare the prices a lot. So most of the people visiting your store are worried about the quality. It means you can improve your customer support and after-sales service and increase the prices accordingly.
In case you are selling hobbyists, people already know the prices. Since customers have a passion for these products, they will know the difference between $40 and $42. So you need to be price-conscious. You can also offer a few coupons to attract your target audience.
For low-end products, people are not much concerned about the quality and service, so they expect a lower price. The customer might not indulge in a lot of market research, and if they feel the price is low, they will buy the product.
This traditional method involves creating price tags. Believe us or not, but a $9.99 does way better than a $10. But remember that this strategy works only for mid-range products. Also, it is often said that prices ending in odd numbers work well. You can try that for yourself.
While talking about psychological pricing, having complex prices can damage your sales conversion rate. If there are two price tags – one with $387.25 and another with $388.03, people will go for the second one as it seems much simpler and smaller than the first tag.
FREE Plus Shipping
The word ‘free’ triggers impulsive buyers. In this strategy, you need to promote the product as a giveaway but increase the shipping price to cover your expenses and have a tiny margin. The main motive behind this strategy is to bring new customers. Once you have a new customer on your e-commerce store, you must have a mechanism for cross-selling or converting that customer into a returning customer. Without such a mechanism, this strategy is of no use and won’t work for long.
When using this strategy, remember to come up with a good reason for the promotion so that customers don’t find it a scam and actually take an interest in it.
In this strategy, you price your products below the lowest price in the market. If you have sufficient marketing power, then you can promote this as a limited time offer and gradually start increasing the price.
It will help you to enter the market with a new brand that attracts the customers. But here also, you must have a mechanism to retain your first-time customers.
Since now you are well-acquainted with all the pricing strategies, you need to decide for yourself what strategy you want for your dropshipping business. For a successful dropshipping business, you need to play with different strategies and combine multiple approaches to use them to price your products.
Easy Pricing Method
By far the easiest method is letting an app like Sell The Trend do all the hard work for you by setting the optimal price that you should charge for a product. By going to the included Push To Store page, you will be able to see the best price that any product should be sold for. This number is based on the mean price that other stores are selling this product from around the world. Now that’s easy!