One of the most important questions every business owner or entrepreneur will need to ask themselves is: what price should I sell my products at?
On one hand, you could sell at low cost and end up receiving plenty of sales, but not much profit.
On the other hand, a high price could provide you with a niche customer base that expects high quality for the price.
Ecommerce Pricing Formula
Whether you mark-up your product high or low will be dependent on your unique situation. However, this simple formula can come in handy when you are calculating your retail selling price.
Retail Price = [(cost of product) ÷ (100 – markup %)] x 100
Ecommerce Pricing Strategies
Keystone pricing – This kind of pricing strategy is fairly common and involves doubling up the wholesale cost that was paid for the product in order to decide the price. However, whether this strategy is the right way to go will depend on a few different factors including the type of product, inventory turnover rate, scarcity of item, and shipping and handling costs.
Discount pricing – It isn’t uncommon for businesses to use discounts as a way to draw in customers and it can be a great way to clean out any unsold inventory that’s been taking up space. However, using this strategy too often can end up giving you a poor reputation as a bargain retailer.
Psychological pricing – A little psychology can go a long way when it comes to pricing. For example, when the researchers at the MIT and the University of Chicago conducted an experiment where they priced a standard piece of women’s clothing at these prices: $34, $39, and $44. It was the item priced at $39 that sold the rest despite being priced in the middle.