As an ecommerce coach and owner of Cabooties (a handmade business) and KMB Prints (a print on demand brand) I'm often asked how to price products for profit and ensure sustainable growth for your online business. Today, we'll take a look at my top pricing tips for online sellers.
Understanding the Foundations of Pricing
Setting the right price for your products is a delicate dance between covering costs, staying competitive, and ensuring a healthy profit margin. Here’s a breakdown tailored to different types of online businesses:
Handmade Products
If you're selling handmade products, it's crucial to account for not just the cost of materials, but also the time and skill invested in creating each piece. Factor in your hourly wage, overhead costs, and any additional expenses. If you're selling on a marketplace like Etsy, remember to take all of their fees into account when calculating your price. Remember, customers value craftsmanship, so don't shy away from pricing your handmade goods accordingly.
I've created a handy pricing tool for handmade business owners. You can access it here.
Print on Demand Products
For those in the print on demand realm, striking a balance between quality and affordability is key. Consider the cost of production, shipping, and platform fees and add room for offering discounts while still creating a profit. POD services like Printful will tell you all of your costs up front to make this easy to calculate. While it's tempting to lower prices for a competitive edge, ensure you're not sacrificing your profit margin. Customers are willing to pay for quality, so don't undervalue your unique designs.
Digital Products
Digital products offer incredible scalability, but that doesn’t mean pricing should be an afterthought. Factor in the value your digital product provides to customers, the time spent creating it, and the platform fees. Digital products often have lower production costs, but their value lies in the expertise and convenience they offer. Price accordingly to reflect this. Remember that pricing your digital products too low can actual make potential customers trust you less.
Building in Room to Scale
As an eCommerce coach, one of the key lessons I emphasize is the importance of scalability in pricing. Here’s how you can ensure your pricing strategy allows room for growth:
1. Factor in Future Costs
Anticipate future expenses such as increased production volumes, marketing efforts, and potential expansion. Your pricing should accommodate these aspects to prevent financial strain as your business grows.
2. Stay Agile and Responsive
The market is dynamic, and so should be your pricing strategy. Keep an eye on industry trends, adjust prices when necessary, and be responsive to customer feedback. This agility will help you stay competitive and relevant. However, don't pay too much much attention to comments from people who complain about your price on social media posts. Feedback from qualified buyers is important - whining from strangers who aren't likely to buy from you is not.
3. Value Your Time and Expertise
As an entrepreneur, your time and expertise are invaluable. Factor in your personal and professional growth into your pricing structure. This not only accounts for your dedication but also positions your brand as one that continually delivers exceptional value. I hear this often, especially from makers, "no one will pay THAT for THIS!" but it's important to remember that your potential customers don't have your skills, knowledge, or talent. They likely don't have time to learn those things either. Charge what you're worth, and the right audience will respect you for it.
Pricing for profit is an art that evolves with your business. By understanding the unique considerations for handmade, print on demand, and digital products, and by building in room to scale, you set the foundation for a thriving online business. Remember, your pricing strategy is a reflection of the value you provide, so be confident in pricing your products for the success you envision.