![]() ![]() Disadvantages of Cost-based Pricing Strategy If you can land sales with the marketing budget that you’ve afforded yourself in your pricing strategy, you’ll be able to rest easy knowing that every sale you land is bringing in profit.Īnd, of course, you can then reinvest that profit into your marketing campaigns, and try to bring in even more sales. You can create a pricing strategy without in-depth research into your customers, or the market you’re operating in. Honestly, cost-based pricing is just so simple, which is why it’s a good option for beginner entrepreneurs. Advantages of Cost-based Pricing Strategies You could try selling the crop tops at $15 each, or even $20, and see if you can land the sales – you’d be earning a decent profit at both of those prices. Next, you’ll need to decide the amount of money that you want to charge per product to complete this cost-based pricing strategy. So, in total you’ll spend $12 to source a product, make a sale, and ship it to our customer. Then you set a cost of $5 more per product for Facebook ads to draw in traffic to your online store and land a conversion. It costs you $5 to source your products from your supplier, and $2 to ship the products to your customers. ![]() You’re dropshipping, so you won’t need to worry about production costs, as you’re purchasing your products directly from your supplier every time you make a sale. Let’s say that you’re running an online women’s clothing store, and you’re selling crop tops. So, let’s use an example to show exactly how cost-based pricing works. The total cost that you incur when you’re making a sale, and the profit margin that you want to make per sale. When you’re creating a cost-based pricing strategy for your business, there are two main things that you need to worry about. Of course, you’ll need to factor in the marketing costs into these prices too, otherwise you’ll run the chance that you could makesales without actually making any profit. We’re kicking off with this pricing strategy because it’s undoubtedly the simplest one.Ĭost-based pricing is essentially coming up with a price for your products by adding the cost of your products (including shipping costs) and the margin that you want to make from each product. Okay, first up we’ve got the cost-based pricing strategy. Pricing Strategies for Ecommerce: Cost-based Pricing You need to have a pricing strategy in place when you’re running an online business so you can make sure that you don’t price your products too high, or worse, too low. Running an online business without a pricing strategy is like running a race without a track. Make no mistakes, pricing strategies are marketing tactics, and nailing your pricing is one of the best ways to improve your conversion rate. Essentially, a pricing strategy is a a set of rules or methods that businesses can use to price their products and services. We’re going to dive into the popular pricing strategies that ecommerce businesses use, and break down which one is best for your business.Īt the end of this post you’ll know everything that you need to come up with a pricing strategy that you can implement today.īefore we dive too deep, let’s take a step back and explain what a pricing strategy is. That’s exactly why we’ve created this post. You need to factor in all of the costs that you’ll incur when you’re selling your products (including marketing campaigns) and come up with prices that your customers love and allow you to maximize your profit margins.Īnd when you consider that price is one of, it not the most important factor that helps shoppers decide where they’re going to shop, you’re going to want to nail your pricing strategy. That’s true regardless of how much experience you have as an entrepreneur.īut, when it’s your first time launching an online business, coming up with a pricing strategy is especially tricky. It takes time to land on the “right” price for your products. Creating a pricing strategy for your ecommerce business is essential, but it certainly isn’t simple.
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