How To Set the Selling Price for an Online Store Product?

Pricing strategy for products is both an art and a science. Once you know the selling price formula, it can be a fairly easy calculation for you.
selling price formula

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Although the success of your online business is significantly influenced by product pricing, many eCommerce entrepreneurs and enterprises treat selling prices as an afterthought. They go for the first price that comes to mind, copy competitors, or, or (worse) guess.

Pricing strategy for products is both an art and a science. Once you know the selling price formula, it can be a fairly easy calculation for you.

Additionally, it affects your clients. Your profit margin is based on your price setting. Price sensitivity is one of the most crucial elements in deciding on a selling price. Customers today are aware of the items they buy, and they are price conscious because they want to get the most for their time and money.

This article will help you to set the selling price for your business including any type of online stores products using selling price formula or you can even use FREE google chrome extension selling price calculator for quick results.

What is Selling Price?

The selling price, whether it be for a product or a service, represents the total cost to the consumer or client.

Understanding how to calculate selling price is crucial since your business won’t survive if you don’t turn a profit and establish a place in the market. In other words, calculating a product’s selling price correctly benefits both you and your client. If done correctly, you get a fair price and they get a good deal. Online stores may be able to charge more if their brand image is highly desired.

However, you’ll need a strong marketing strategy or a strong portfolio to support your charges. Your selling price can be easily calculated using the selling price formula.


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Selling Price Formula

The selling price formula is:


Selling Price = Base Product Cost + Your Profit Margin


Here Base Product Cost = Costs for materials + labor + shipping  + marketplace fees + other costs


For instance:


$200 for mobile phone supplies + $40 for labor+ $20 for shipping, $40 for marketplace fees (if sold in-person) =  $300 for the base production cost.


Now Profit Margin= Base Production cost x Markup


For example, if we want Markup 50% on $300 base production cost then,

Base Product cost 300 x 50% markup = 150$ Profit Margin



Here because


Selling Price = Base Product Cost + Your Profit Margin


Selling Price = 300$+150$= 450$

Selling Price Strategies

selling price strategies
  • Cost Based Pricing

Finding an item’s actual cost to the business is the first step in pricing anything.

To accomplish this, you must consider ALL of the expenses related to any product you sell. Unit costs, shipping costs, advertising, website management, fabrication management, delivery management, and returns need to be taken into consideration.

You should also consider risk, storage, and insurance if you are selling a slow-moving item that needs storage.

You now know the required sales volume for the product to break even. The profit margins are applied on top of your break-even price to determine your final price.

The calculations begin once you have the exact cost per item.

Now that you know what the break-even price is, many individuals just add 100 percent to 150 percent to that and refer to it as a profit. Basic profit is more complicated than that, though.

You must also account for your overhead costs and wages.

Naturally, it is impossible to determine exactly how many cents from each commodity correspond to a wage, but you still have to pay them. Once your business has been operating for a while, you will know exactly how much you can anticipate selling in a specific period of time.

You are also aware of your projected overhead costs. If you don’t want overheads eating into your profit, you must spread out those costs across your anticipated total sales and modify your price accordingly.

  • Market Based Pricing

There are 25 million ecommerce businesses like the one you run. Because of this, when setting your price, you must consider your competition.

Finding your place in the market is the first step. Do you support bargain shoppers, luxury-only buyers, or a middle ground? Knowing what your competitors are charging is crucial, and not only so you can beat them. Keep in mind that if you price yourself too low, your brand may be perceived by the public as being “cheap” rather than just an honest salesperson.

Examining other people’s pricing tactics in your industry is a good idea. In accordance with your brand strategy, you should align your actions.

  • Consumer Based Pricing

This pricing strategy combines market- and cost-based strategies. It is a little trickier than the previous pricing techniques because it is always focused on the value you give to your clients through your products.

 For this pricing approach to be effective, it must be a price that is fair to both you and your consumer, but it can also encourage client loyalty. It may be the greatest pricing plan, but it will require a little more work and research.

Determine the lowest price at which you may sell your product. Take the previously discovered average selling price after that. Your potential profit is the difference, as determined by our earlier calculations.

The choice is now yours: sell for the average selling price and accept the calculated profit, or add your USP (unique selling point), so enhancing the value and seizing the chance to raise your pricing — and your profit.

Final Words

The nature of your business and your objectives will always play a significant role in determining the ideal eCommerce pricing approach for you.

You must keep in mind that prices might change at any time, therefore you must regularly review your pricing strategy. It’s fairly uncommon for you to be required to use many pricing methods at once.

Be just and make sure your customers are getting value from you. Since they are intelligent, so must your pricing plan.

I would recommend to use this free selling price calculator to set the selling price of your products and save time and money.

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Mark Kennedy

Mark Kennedy

Mark Kennedy is an Ecommerce Consultant & Dropshipping Trainer at eComWiser California. He has 12 years of experience in Ecommerce industry. He likes to write articles about dropshipping, ecommerce and online business.

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