5 Pricing Mistakes Most Shopify and Etsy Sellers Make (and How to Avoid Them)

Pricing your product is more than two times the cost of your products.

For many business owners pricing is a very hit-and-miss situation. They assume prices. Many can’t find the right strategy that works for them. Others go with gut-based pricing. 

Pricing is more than the price tag of your product. It conveys what your product is worth and why.

It also represents your brand, market position, and whether or not your business is going to be profitable.

Here are some of the most common pricing mistakes small business owners make and how to avoid them: 

Mistake #1 – Doubling your Cost price = Selling price

Doubling the cost price equals the selling price (Cost Price x2 = Selling Price) or 

Adding a few dollars to the cost price is equal to the selling price. (Cost Price + $$ = Selling Price) 

This is one of the most common strategies that small business owners use when pricing. Which is to double their cost price. While this is the simplest approach but not a strategic way, Here is why: 

A lot of things go into pricing your products, not just the cost of the product. You also need to consider the costs that are required to run a business. Such as business overheads, like rent, utilities, equipment costs, marketing, branding, advertising expenses, and more. 

Here are 7 key things to consider before you price your products – Read here.

Without factoring in these expenses, you may unintentionally price your product too low, leaving you with minimal or no profit. This brings me to my next point which is pricing your products low.

Mistake #2 – Lowering the price of your products.

Sometimes this works as a strategy but most of the time business owners do this because they think it will get them more customers.

Here is why you should not lower your pricing:

Lower the perception of your product:

When you offer products at lower prices people will associate that price with the product. Hence lowering the perception of your brand. Even if you are offering a premium product people will assume something isn’t right. Think about it this way, would you buy a known luxury handbag for $50? While this brand’s handbags start with a retail price between $800 – $1000?

It lowers your profits:

This is obvious, lowering your selling price will result in lowering your profits. Depending on the pricing there could be minimal to no profits at all. 

To sustainably grow your business you need to be making some profits if not at least reach a Break Even – A point in a business where you are not making any profits nor being in loss. 

You attract a different customer base:

Product prices indirectly influence your brand. Every brand has an Ideal customer base.  When you lower your price you will be attracting a different type of customer base who always expect you to give those prices. 

They may or may not be the type of audience you wish to attract to your brand. That’s why it is important to segment your audience based on the price range you can offer. This brings me to my next point. 

Mistake #3 – Not understanding your customers

Apart from knowing the psychographics and demographics of your customers. You need to understand their purchasing power. 

Every brand can have three types of customers. 

1. The superfans: They buy everything and anything from you. They will be repeat buyers, buying from your business again and again. 
2. The testers: They are new to your brand and just checking your products out. They are first-time buyers. 
3. Discount shoppers: They shop only when you are running discounts. 

Now, based on these types of customers, you need to have a range of pricing that will guide and help them to shop your products based on their purchasing power. 

Segmenting your customers will help you curate your products based on different price ranges that will appeal to these shoppers. This brings me to the next mistake business owners make – Not having a variety of products. 

Mistake #4 – Not having a variety of products:

Offering more variety of products gives your audience a chance to choose products from different pricing and product ranges. 

In the previous mistake we learned about types of customers, think of Tester for a minute, these people are new to your business, and they have no idea if they like your products or not. What kind of products can you offer that will help them like your brand? 

Now, here is a key point to note here, offering a variety of products doesn’t mean diluting your brand niche. This means to offer more within your niche product type. This could be in various sizes, colors, and complimentary products. 

This depends on how you curate inventory for your business. If you wish to learn how to strategically and effectively curate your inventory that your customers love. Check out – Inventory Curation Mastery. 

Mistake #5 – Not updating your pricing:

There are a lot of factors that influence the pricing of your products. Some direct and indirect causes can influence the cost of the products that you are selling. Such as an increase in product cost at source, shipping cost, increase in material cost, warehouse rent, etc.

It is best practice to regularly calculate and update the pricing of your products. A slight miscalculation can lead to many consequences in your business. 

What’s Next

Pricing your products is a very strategic decision and should not be done arbitrarily. If you wish to learn how to price your products strategically, where you not only help you sell more but also make sure you are running your business profitably. Check out the course – Pricing to Profit

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