- Want to learn how to price your products
for your e-commerce store.
Well, I'm gonna show you exactly how to do that
in this video.
Let's go.
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So you want to learn
how to price your products.
There are two main ways that I recommend right here.
One, cost plus pricing
and two, value-based pricing.
Okay. The first one is cost plus pricing.
This is where you work out
the cost of your products
and then add on a margin on top of that.
So you need to work out
the total cost of your products.
This includes
the actual cost of the product
from your supplier and all the overheads
that you can attribute to that product.
For example, you might pay your supplier $20 per product
and then you also add on
any overheads you have
like labor, subscription expenses
anything like that.
That might be $10.
So your total cost per product is $30.
Now what you have to do here
is attribute that rent or the labor expenses
for employees and that sort of thing per product.
Once you have that per product costs
you then add on the mark up.
This might be 50%.
So your total costs might be $30.
And then you add 50%,
which means you multiply it by 1.5
which means 30 times 1.5 equals $45.
Now you may have already seen something
a bit tricky here which is that
it's really easy to work out
your cost per product for the supplier,
but it's actually much harder to work it out
per product for your overheads.
What do I mean here?
Well, your total overheads
might be $1000 per month
for your whole store
and you sell 100 products.
This means that your overhead per product is $10,
1000 divided by 100.
But you only know that it's $10 per product
because you sold 100 products last month.
This is tricky because that happened in the past.
But if you're trying to start selling
you don't know how many you're actually going to sell.
And on top of that,
you don't know what price to sell them for.
Do you see the problem here?
You need past data to price your products
but you need pricing to actually sell your products.
This is why you need to create
some sort of hypothetical projections.
Imagine what might be reasonable for you to sell
on a monthly basis and then work from there.
Then after you are selling consistently
and you're making regular profit
switch to the next pricing model,
which is value-based pricing.
Okay. So what is value-based pricing?
Value-based pricing
is where you price your product
based on the perceived value from your customers.
This basically means
selling it for the price that your customers
are willing to pay.
Maybe you're selling a bottle of water
that costs 10 cents to produce,
but then you go to a music festival
where people are dying to get water.
You can now sell it for $8-$10 per bottle.
If you use the cost plus pricing model
then you're going to sell it for 20 cents.
It depends on your overheads
but it's gonna be a more than that 10 cents cost.
But now with value-based pricing,
you're going to sell at for
what people are willing to pay
for that bottle of water.
Suddenly you're able to charge much more
for those products
and you're able to win
a much higher profit amount per customer.
The customer is happy
because they get a product that they want.
They're paying a price that they believe is fair.
And then you get a lot of profit.
So how do you do this?
Well, I recommend starting with cost plus pricing
so that you can at least start by breaking even.
You want to make a profit guys.
And then on your website
start experimenting with your pricing.
Increase your pricing by five to 10%
and watch to see if the conversion rate drops.
Do less people buy?
If you already have a strong brand
for your e-commerce store,
then you'll probably be surprised
at how much you can raise your prices
without seeing a significant decrease
in the conversion rate.
The thing is even if the conversion rate
drops a little bit,
the increase in the profit per order
can actually cover to mean
that you actually get more profits per month,
for those orders.
Something to remember guys.
Value-based pricing is all about perceived value.
This means that the customers need to perceive
that the product is valuable for them to buy it
at that price.
It's much harder to do value-based pricing.
If you have 10 competitors
that all look exactly the same as you.
This is why if you are building a drop shipping store,
you need to really focus
on building a brand that has reviews,
trust and a great buying experience.
So the customers can perceive
that they're getting the value that they're paying for.
How else can you maximize the perceived value?
Well, what reasons do people have to buy your product
over competitors?
Do you have better videos, images,
a better product,
more reviews that show
that all your customers have had a fantastic experience
with your product?
Maybe your site is more professional
and it does a much better job
at speaking directly to your customer's needs,
desires and wants for your products.
This is really important, guys.
All these things guys
and I talk about them
in all my videos on this channel,
are all about creating the bigger perception
of value for your store.
Also, when you increase your pricing
you immediately increase your average order value
across your entire store.
This is huge.
And when you think about it
it's actually a really easy way to grow your store
without needing to get more customers.
It also translates into higher profits per order
because you're not increasing your overheads
or the cost of the product.
You're just increasing the pricing.
Guys. I also have another video
on increasing your average order value.
I'll leave a link in the description.
I really recommend you go check that video out
after this one.
I have a lot of tips
on improving your average order value
as well as how to actually calculate
the average order value for your store.
Anyway, guys, that's it for today's video.
If this video was helpful,
hit the thumbs up button,
and if you have any feedback at all,
leave them in the comments below.
I really wanna hear.
If you're not subscribed yet
consider subscribing and follow me
as you grow your e-commerce store.
Thanks for watching and I'll see you next time.
Bye for now.
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