Guide to Pricing your Ecommerce Products to be Competitive and Profitable
Frank Jackson, 03/14/2018,
Setting prices for products in your ecommerce store can be both an exciting and nerve-wracking time.
You may worry if you price your products too low your profit margin by the end of the month might not be worth all the effort you put in.
If you price your products on the higher end, you might give off an aura of luxury and exclusivity that will bring in the kind of customers with the dough to spend, but the volume may be too small to launch your business.
High Level Guidelines
We find these concepts helpful in creating an “educated guess” for how to determine retail pricing. In the end, your end users are unique and thus their tolerance for price points will often be very different. We won’t truly know what these tolerances are until the products are live in the market and we can test and tweak pricing. That said, pricing products in line with existing alternatives (e.g., competitors with similar solutions) is usually the best place to start. From there, we can talk about adjusting prices based on the concepts below.
Expectations and Value
Users often don’t know the difference in quality of print products between print competitors. Thus, they don’t know the true value of products being offered by different competitors. The following factors become the primary purchase drivers (i.e., unique value propositions) on a product level:
Final Product Costs: The user doesn’t necessarily consider costs of shipping when selecting a product and just goes with low price product.
Shipping Costs: The user is willing to shop multiple competitors to get lowest total order price.
Promotion and “Perceived Value:” To establish the “perception” of value, we often recommend showing a high MSRP as a strikeout, and then show a lower actual price; this price could of course also be lowered further via a sale and/or coupon code.
Convenience: How much trouble does the user have to go to in order to make a purchase? For example, does the user have to download their image, re-upload it to another competitor and get a better price? This is often the biggest value that our partners are providing via Gooten powered print solutions. It takes a lot of time to customize a product and get it into a cart with any competitor, so pricing products in line with competitors (even slightly higher) helps make convenience the biggest differentiation (and the biggest one to replicate by competition).
Return / Replacement Policies: Having fair but favorable return and replacement policies can help guide the perception of value and the willingness to purchase (and these can obviously be easily changed at any time), despite the fact that products are custom made and a refund can’t be received from the vendor. Costs related to returns and replacements should be considered upfront when thinking about expected.
Pricing in Practice
Many competitors operate using a “low price game” in order to attract users, but the final consumer experience ends up being the same cost as the rest of the market due the following factors (or truly lower product quality):
Lower quality products (for example, compare a Shutterfly canvas vs. Gooten)
Separate / high shipping costs
Add-on features to get the same product
Prices and Promotions
Generally, we suggest showing a higher MSRP as strikeout price and presenting the sales price (redeemable by either coupon code usage and/or integrated sale) as the offered solution.
For our photo partners out there, know that printing customized products tends to be “addictive” for consumers because there are unlimited possibilities of creating unique products. Thus, offering a free first purchase (or highly discounted product) can often be a fantastic way to introduce print to an existing user base. This is the reason so many competitors in the market offer free prints (the product “gateway drug”) and Shutterfly (perhaps, the king of photobooks) offers free or heavily discounted books.
It is important to note that with so many free print offerings in the market, this tactic is becoming less effective since the perceived value is diminishing. Thus, offering a different free (low-cost) product can often help acquire print customers in the early stages (e.g., 5x7 canvas, canvas mini, mug, or magnets).
Coupons and Discounts
The Gooten Admin platform enables you to create both one-time use and “never ending” coupon codes for your customers. You can offer $$ off, % discounts, and free shipping by the SKU-level, enabling you to be targeted with your promotions and drive specific customer buying behavior.
Always test a coupon before releasing it to the wild. You don’t want to accidentally give away 3,000 free prints…
How to create one-time use coupon codes:
Click coupons in left navigation of Gooten Admin
Click “new coupon” button (upper right)
Select “redeemed via” dropdown (second attribute)
Type in your desired coupon code or generate it (this will be the prefix for the one time codes)
Complete the remainder of the required coupon attributes, and then click save (you’ll be taken to active coupon list)
Click coupon you want to use to create one time codes
Click create one time codes tab (located at top of page)
Enter number of codes desired and click “generate”
Click download CSV
Contact Your Gooten Success Manager
Pricing is both an art and a science that requires an experimental attitude coupled with an intuitive feel for how you want your brand and by extension your products to be perceived.
The Gooten team is made up of experienced support professionals who can provide one-on-one guidance to optimize your store’s potential. If you are a partner using the Gooten platform, contact our support team to be put in touch with your Success Manager who can answer any questions you have about how to use print on demand to reach your business goals.