The Product Pricing Strategies

Knowing how to price your products accurately is important. You don’t want to price it too high where no one wants to buy your products. You don’t want to price it too low either where you can’t get any profit. It’s also difficult to have a sure-fire way to price your products because it depends on a lot of elements like your niche, country of selling, target audience, and more. But in this article, we will lay down the foundation of several effective pricing strategies which you can choose and test which strategy fits your business best.

In order to know how to price your product, let’s first understand the psychology behind pricing.

Psychology Of Pricing 

In simpler words, the psychology of pricing means strategically pricing your products in a certain way to influence people to buy. All companies, big or small, ecommerce or not, have all come up with many ways to price their products as part of their marketing plan.


Almost every single store you go into, you see that a lot of their products have an ending price of “.99”. For example, instead of selling a hoodie for $50, you sell it for $49.99. That $0.01 actually makes a huge difference in the amount of sales that can be generated. Why? Because a lot of consumers perceive the price to be lower than it actually is. If the hoodie is $49.99, the price tends to appear in the $40 zone rather than the $50 zone. This is called the left-digit-effect. Majority of the people read prices from left to right, so when you see the 4 first instead of 5, you might just perceive the product to be cheaper.

Expensive = Good?

If this doesn’t sum up the marketing strategy for all luxury brands, we don’t know what does. Some people may think that it’s crazy to spend so much money on just an everyday product like a car. Yet, there doesn’t seem to be an end to lavish consumerism. Part of the reason is that when you pay for something so expensive, you tend to appreciate it more. If you compare a car from Mercedes Benz that costs $80,000 to a lower-end car that is $15,000, they serve the same purpose on the bottom line – getting you from point A to point B.

But consumers relate price with quality. Surely a car from Mercedes Benz might have better seating and interior design, but do they really worth 5 times the amount? Probably not.

Costs To Consider Before Pricing

Before we go ahead and just tell you what pricing strategies there are, we should go over some of the costs. Knowing your business expenses is important in calculating how you should price your products.

Some Costs To Consider

  • Shipping cost
  • Wholesale product cost
  • Marketing cost
  • Recurring monthly fees (Shopify, automation tools, apps)
  • Contractor/employee salaries
  • Emergency fund

Other things to consider

  • Know your margins: Lowest price doesn’t always win. Margins vary depending on which industry you’re in. If you are lowering your prices to the point where are losing money, considering finding a better supplier or adjust your product offerings.
  • Discount marketing: Consider the discounts and sales you want to offer. If your markup is only 1.5X, then you don’t have a lot of room left for profit when the price is discounted.
  • Know your unique selling proposition (USP): What sets your business apart from other businesses that offer similar products? Every company has to answer this question to determine their USP, thus advertise and price their products accordingly.

Pricing Strategies 

We will go over 3 main types of pricing strategies for ecommerce: cost-based, market-oriented, and consumer-oriented.

  1. Cost-Based Pricing

Cost-based pricing is the simplest way to determine a price. It’s a method in which a fixed quantity or percentage of the total cost is added to the cost of the product to set a price. In other words, after you’ve calculated the cost of a product, you just apply the profit margin you want to achieve. So, if a product costs you $5 and you want to achieve a profit margin of 3X, then you should be selling it for $15.

You always begin this pricing strategy by calculating the cost of a product. This can include production, promotion, fulfillment, and management. Lucky enough, you don’t have to worry about production cost if you’re in the dropshipping business. Cost-based pricing is very simple. It allows you to set prices without doing in-depth customer and market research, while still maintaining a consistent return on each product sold.

  1. Market-Oriented Pricing

Market-oriented pricing is based on market conditions and competition. You compare prices of products similar to yours that are offered from your competitors. To do this pricing method, you need to first figure out how your business compare against your competitors. You can go on Facebook and Instagram to find stores that are similar to yours.

Product prices shouldn’t be the only thing that you should compare. You should also consider your USP to help you learn where you stand in comparison to your competitors. If you find a store that is selling similar products as you but they are selling them at much higher prices, you should find out why they are able to do so. Is it because of their branding? Is it because they have a strong cult-following? Is it because they have exceptional customer service? What your competitors have to offer can ultimately sets you apart from them.

You can also combine market-oriented pricing with cost-based pricing. This can help you keep your profit margin consistent while also taking into account of where your current competition stands.

  1. Consumer-Oriented Pricing

This pricing method probably seems a little ambiguous. Consumer-oriented pricing sets prices according to the perceived value of the product to the customer. To do this right, you need to have a clear understanding of who your customers are, what they expect from you, and what their motivations are when buying your products. You might not even have just one group of customers. For example, you might have some customers that are complete experts in your industry that know the small differences between products like why one costs $56 and the other $59. Or, you might have customers that are only looking for coupons and discounts only.

Being customer-centric about your pricing enhances your customer loyalty. You’ll be able to build a notable brand recognition and loyal customer following because what you are offering is what they expect, and the value they are willing to pay for.

Other Types Of Pricing Strategies

Product Bundling

This pricing method offers more than one product for a single price. For example, you can sell a bundle with pens, pencils, and rulers together. The bundle creates a higher perceived value because it seems like you are paying the same amount for more. With Shopzie, you can create your own bundles of products based on quantity, variants, or suppliers, and Shopzie will automatically fulfill the bundle for you.

Trip-Wire Pricing

Trip-wire pricing is a strategy when a business offers products for free but customers have to pay for the shipping. You generate profit by inflating your shipping prices. This method catches the attention of many customers by using the keyword “free”.

Pricing Above Market Value

Following similar idea of market-oriented pricing, this strategy uses the prices of your competitors as a baseline and purposely sell your products higher than them. You can market and differentiate your products as luxurious and exclusive to defend the more expensive pricing.

Pricing Below Market Value

Selling your products at a discounted price encourage customers to buy more overall. You can use this method to upsell to increase your average order value (AOV). For example, if you are selling a bag of tea at a discounted price of $4.99, you can upsell them for a tea pot that sells for $19.99. Your total order value would be $24.98 instead of just $4.99. The goal here is to sacrifice some money on one item to make a larger profit on other products sold.

Offer Incentives

No business can sustain a super low price for too long. What you can do is offer limited time pricing to encourage the incentive to buy. You can have a limited buy one get one 50% off sale, but in reality, customers are only getting a 25% discount.


Being savvy with your pricing strategies provides you the ability to catch attention to your products, and building a reputation of having great prices without breaking the bank. There’s no perfect way to price your products. The best way to find out if your prices are right is understand your market, know your customers, and test different pricing strategies by putting them out for advertisement.