One of the most crucial business decisions you make is the price of your product or service. The right price will give your business profit and boost. Setting a price that is too high or too low may restrict the expansion of your business. At worst, it might significantly impact your sales and cash flow.
Before you launch your business, thoroughly evaluate your pricing plan. Regular price reviews for established enterprises can increase their profitability.
You must ensure that the price and sales levels you choose will enable your business to be profitable when setting your prices. Additionally, you need to consider how your product or service stands up against the competitors.
This article explains how to develop a pricing strategy, calculate the right price to ensure that your business is profitable. Additionally, it examines various pricing strategies. You can also use any pricing calculator for calculating the selling price of your products.
What is the Right Price for an Online Product?
Creating a pricing strategy for your online business is important, but it certainly isn’t simple.
Finding the right price for your products may take time. No matter how much business experience you have, it is true.
However, developing a price strategy is particularly difficult when starting an online business for the first time.
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You must take into account all of the expenses you’ll have when selling your products (including marketing campaigns) and determine prices that appeal to your target market while maximizing your profit margins.
We’ll examine the popular pricing strategies used by online companies and analyze which one is ideal for your business.
You’ll have all the information you need to develop a pricing strategy that you can use right away by the end of this article.
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Right Pricing Strategies for your Online Business
- Competition Based Pricing
Competition-based pricing is focused on providing better prices than your competitors, and is most commonly used for commodities. This means comparing your prices to those of comparable goods sold across channels by your competitors and adjusting your pricing as necessary.
You might need to utilize a pricing strategy based on competition if, for instance, you run a Jeans brand that caters to members of specific age people. The time and effort you put into studying your clients will pay off for your business.
- Cost Based Pricing
The cost-based pricing,” makes money by raising a product’s cost by a certain percentage margin.
Because of its simplicity and ease of calculation, cost is one of the most fundamental and simple pricing strategies for new and/or smaller ecommerce enterprises.
Say you operate an online hand bags store. In order to use cost based pricing, you would first collect and calculate the expenses of labor, materials, and fixed costs for each product:
Materials: $20
Labor: $30
Fixed costs: $40
Variable costs: $20
Total cost: $110
You have to sell the hand bag more than $110 to make the profit. Most ecommerce businesses achieve a profit margin between 50-100%. If your goal is a 100% profit margin, you have to charge $220 for one hand bag.
- Value Based Pricing
Value-based pricing concentrates on determining the highest price a consumer will pay for your product. Customers who place a higher value on quality and “fairness” than anything else do. Customers like this need to be aware that the item you’re offering is of the highest caliber, was obtained legitimately, is environmentally friendly, and/or is difficult to locate.
For instance, since the client is aware that costume jewelry is created using inexpensive materials, it would be priced lower if it were being sold online. Because people are willing to spend more money on quality materials who sell for a greater price.
- Dynamic Pricing
Flexible pricing is the key to dynamic pricing; because to the ongoing shifts in demand, prices are never fixed and may alter at any time.
Surge pricing is another name for dynamic pricing. Dynamic pricing is used by apps like Uber and Careem when there is an increase in the number of people in the area who require a trip due to bad weather, significant events, etc.
Using a Free Product Pricing Calculator
To determine a competitive selling price for your products, use a free product selling price calculator. This will simplify your life and enable you to assess the potential effects of various pricing tiers on your business.
Benefits of using of Product Pricing Calculator
It is fast: The use of paper and a pen is not necessary. It takes less than a minute to get results using this calculator.
Free: There is no charge to use it. You are not required to pay anything to utilize this selling price calculator. Simply download it from the Google Chrome Store and add it to your Google Chrome as an extension.
It is dependable and convenient: This calculator provides precise results. The useful pricing is the one you arrive at through computation. The calculator is easily accessible and may be accessed from anywhere.
How to use this pricing calculator: An excellent method to determine the right price of the product is to use the selling price calculator. It employs a selling price formula and considers a number of pricing elements, including the cost of the goods, the cost of shipping, the cost of taxes, and a number of additional expenses. This calculator for product selling prices is simple to use; just enter your intended profit, and bingo! It provides you with the product’s best-selling price.
You can read more about this free product selling price calculator here.
FAQs
What is the meaning of right price?
It is a good value at a very fair price.
What is the importance of right pricing?
To remain competitive in marketplaces under rising volume and price pressure, the right pricing strategy is crucial. It gives you the rewards you are due for the goods and services you provide and ensures the earnings you need to make investments in change and growth.
What is the best pricing strategy?
One of the best pricing strategies for retail businesses is the cost-based approach. The cost-based pricing,” makes money by raising a product’s cost by a certain percentage margin.
How do you calculate how much to charge for a product?
The general formula for selling price is :
Selling price = Cost price + Profit margin
How do I calculate my cost?
Cost of Goods Sold (COGS) = Beginning Inventory + (Purchase Costs + Labor Costs + Materials Costs + Supplies Costs + Miscellaneous Costs) – Ending Inventory.
