Instantly Make More With Proper Pricing Strategies For Your Shopify Store
Ever ran a conversion-optimized Facebook ad only to get a lot of traffic but minimal sales?
Getting a lot of traffic would mean that the video or image ad is good, or there’s a demand for your product. So why are they not buying?
Something’s wrong with your funnel, and 9 out of 10 times, it is the pricing.
A lot of people in the e-commerce space overlook the importance of pricing their products correctly. They either price it too low, or too high, making customers not able to afford it, or if it’s too low, you lose money due to low-profit margins.
Why should you read this article?
- Three factors to consider when pricing your product
- The psychology behind clean price endings and how it can help you
- How to find the maximum price of a certain product
- How to add value to your offer to compete with Dirt cheap Amazon prices
- How you can use comparison pricing to get more sales
Three factors that are crucial for pricing your product
The number one rule of thumb is to have at least a minimum of $15 profit margin per product. That’s because you have to take into account acquiring the customer, transaction fees (stripe 3.9% & PayPal), shipping fees, and many more expenses that will eat up your profits. Pricing a product with a profit margin below $15 is simply not worth the effort and time.
Instead, what many Shopify eCommerce gurus recommend to price your product $30 more for real profits (2x – 3x market).
As you should already know, for Facebook and Google shopping ads, the cost of purchase for each purchase that comes through starts to go higher and higher each time the ad-set budget is raised. Basically, working with thin margins will make it really hard to scale to 6 or 7 figures.
If possible, your product can be priced higher, depending on the following 2 factors.
This is the value which customers are willing to pay for the particular product or service based on their perception of the product.
Another example are luxury watches; The production cost is far lower than the actual price and the customer knows this and still pays for the huge mark-up. Here, customers are not concerned about the price, they are paying for the brand, the experience, and the social status it portrays when the customer wears it.
Brand equity is a marketing term that refers to the brand’s value. That value is determined by the perception made by consumers, based on the feel, quality, or product and the experience it gives the consumer.
Positive brand equity means that the products they sell can be charged at a higher price.
One example has to be Apple. Ranked by the world’s most popular brand in 2015, whenever Apple releases a product, customers line up around the block to be the first few to get their hands on the product, no matter the cost. With such a staggering amount of positive brand equity, Apple can set obtain a high-profit margin without losing customers.
Adding value to increase your price
Competing based on pricing is a loser’s game. Stay in the winner’s circle by highlighting and adding value.
If you’re dropshipping, you may find that your winning product comes and goes really quickly, and that’s because of so many other competitors are selling the same products and it gets saturated. You start cutting your prices to compete, and they follow as well, and the next thing you know, it’s a race to the bottom and you’re netting $5 of profit a sale.
Even worse if Amazon and Walmart are selling the same product as the customer would probably buy the one with faster shipping and credibility.
So how can you price your product higher than all your competitors, while still taking all of their customers? It’s pretty simple, the key is to provide an insane amount of value, far more than any other Shopify store or amazon listing out there.
Let’s say you’re selling a videographer light at $29.99, and there are multiple Amazon listings selling the same type of product at $26.32.
The first thing you want to do is to figure out what problems you can solve for the customer.
Some problems a videographer would face include; light running out of batteries in the middle of a shoot, light being too fragile and could break easily, light doesn’t come with a stand.
Tackle each of these problems and see if you can add value to the customer
Light running out of batteries – Add three extra batteries as complimentary for the light
Light may break easily – Add in a case or cover for the light
Light doesn’t come with a stand – Add in a suitable stand for the light
With these complementary items, sure you may have to increase your price a little, but it’ll definitely be much more worth it in the customer’s eyes.
What else can you add, without incurring any cost on your end? How about throwing in an ebook or a course? The topic can be of anything that adds value to the customer; 5 tips to properly angle the light for a perfect video, compilation of the best type of shots to mimic, How to play with shadows for the best effect, literally add anything as long as it gives value.
Also, any kind of community is ridiculously powerful. Your customer is probably really into videography to want to purchase a light specifically to do just that. Humans always want to hang out with people that have the same interests or goals as them. So what you can actually do is to create a community with your offer.
Tatiana distinguishes herself from other brands by growing a community of 20k Facebook group members for her brand – Luxxcurves
To summarise, by packaging these low to no cost items to your product, it’ll give you an edge compared to other stores
- Complimentary product
- Community around the product
- Course – add information that would be tedious for the customer to source
Finding your max price
Once you have some sort of consistency in your winning adsets, I would suggest to incrementally increase the pricing and let the data tell you the perceived value of the product.
What I meant by that is to increase the product price by 1 to 5 dollars a day and see if there is a drop in ROAS for your winning ad-sets. Once there’s a steep drop in ROAS, you would find your maximum pricing value. This only works if the ad-set is consistent and there are no other factors involved that changed.
How you can use comparison pricing to get more sales
Comparison pricing is a powerful marketing tactic that uses psychology to get the customer to buy into an offer, in which the price of on offer is directly contrasted to the other to make them feel it’s a good deal.
One example would be Williams-Sonoma. In a study published by The Wall Street Journal, it is stated that Williams-Sonoma doubled its sales for a particular bread maker product priced at $275 by using comparison pricing.
How they did it is by introducing a similar bread-maker for $429, which is marginally better only, and place it next to the $275 bread maker in a print ad. Customers would think they had a good deal by buying the cheaper model, as it’s just as good as the more expensive model.
The psychology behind clean price endings
The widely regarded industry standard is to end prices just below a round number, for customers to underestimate the price. For example, a store will convert prices of 19.95 or 19.99 instead of a round number of 20, so that it’s perceived as more favorable than the $20 rounded up the price. Almost all Shopify store owners know of this and fully embraced this tactic.
But do you know that each price ending gives off a different vibe and symbolic meaning to the customer? Robert Schinder suggested that a variety of symbolic meanings can be derived by different price endings.
Here’s a cool breakdown of each:
5, 8, 9, 95, 99 – Item has a low price
9, 99 – item is of poor quality
9, 99 – Seller is trying to manipulate the shopper
9, 99 – It’s of good value
3, 7 – price is discounted or on sale
0 – price is not fixed and could be negotiable
0 – item price is too high
0- perceived as high quality, sophisticated and classy
2,3,4,5,6,7 – product perceived as unique or seller has given thought to the pricing
As you can see from the list, different price-endings can produce different, even contradictory perceptions of the product. However, the most important part is the perception that the buyer is having a good deal, which makes them willing to pull the trigger.
Now with all these knowledge bombs, you can finally price your product the correct way.
So go out there and make some money!