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How To Set A Price For Your Online Product

Internet marketing, by its very name is about promoting your products online. But to believe that internet marketing is all about, well, marketing, would be quite restrictive.

Assuming that you have already acquainted yourself with the intricacies of product creation as well as the myriad forms of advertising tactics that can be implemented online, we will now discuss a matter that could make or break your success in internet marketing.

Now, what we will be discussing i...

Internet marketing, by its very name is about promoting your products online. But to believe that internet marketing is all about, well, marketing, would be quite restrictive.

Assuming that you have already acquainted yourself with the intricacies of product creation as well as the myriad forms of advertising tactics that can be implemented online, we will now discuss a matter that could make or break your success in internet marketing.

Now, what we will be discussing is a subject that many online businessmen have taken for granted. It is that very thing that would connect your business to the affirmative action of your visitors. It is that very thing that would convert your visitors into paying customers.

We’re talking about the price for your product.

How exactly should you price your product? Naturally, you would want to reach a range that would recover the investments you have made for its creation and promotion. This is called the break even point. Anything above the break even point would be considered as your profit. Naturally, again, you would want to attain as much profit as possible.

So these are the two things that determine price:

1. How much you have invested; and
2. How much you want to earn per item

There are two approaches that are generally used when it comes to pricing. Let’s take a look at them.

1. Price your product a little over the break even point, and rely on the volume of items you will be able to sell.

2. Price your product substantially higher than the break even point, so that every sale would reap some substantial rewards.

If you foresee your product to be a hot seller, then the first approach would be the best one for your needs. You could just rake in your earnings through the several sales you will be able to achieve.

If you foresee slow sales for your product, then the second approach would be more appropriate. Each sale would give you what you need, and you won’t be pressured to sell a lot of items to realize your earnings.

But both approaches have their own shares of problems. Pricing your product too low might just give your prospective customers the impression that your product is of inferior quality. Pricing your product too high would alienate a large segment of the market.

Personally, I say that you should price your product for what it’s worth. Let the market forces take care of themselves. If you bestow a fair price for your product, you won’t have to worry about the backlash of consequences. Each product is a different case, and it merits special attention when it comes to pricing. Keep this in mind when deciding on the right price for the same.

But here’s a very secret tip: you could use the price of your product to tremendously boost your sales. Yes, you read that right. YOU CAN USE THE PRICE OF YOUR PRODUCT TO TREMENDOUSLY BOOST YOUR SALES. This is through a process called dynamic pricing. Dynamic pricing can create an urgency that would compel people to purchase your product as soon as possible.

There are some tools that would allow you to implement dynamic pricing for your offers. The way it works is that you’d offer a product for an amazingly low price, with a warning that after a specified period of time, the price would increase. This increase would continue until the offer is priced beyond your market’s budget.

For example, an eBook can be offered for a mere $5 today. After 25 hours, its price would increase by $5. And after another 24 hours, the price would again increase by $5… and so on and so forth. The result would be mass hysteria, as the members of your target market would line up in a hurry to purchase your offer while it is cheap.

Dynamic pricing is one of those novel marketing strategies that has proved successful for many online businessmen. It’s worth the try if you want to experience an immediate rush of incoming orders.

NOTE: You have full permission to reprint this article within your website or newsletter as long as you leave the article fully intact and include the "About The Author" resource box. Thanks! :-

 

Price Check: How To Set Your Product Prices

How you price your products has a tremendous impact on your business’ bottom line. That’s why you, as an online seller, need to find the pricing strategy that works for your web store and allows you to achieve your business goals.

Costly Mistakes

Bad pricing can have serious repercussions in the form of lost business and lost revenues, yet many e-tailers disregard its importance. Many new, and not so new, sellers seem prone to certain common mistakes:

•Not tracking t...

price, pricing, strategy, eBiz

How you price your products has a tremendous impact on your business’ bottom line. That’s why you, as an online seller, need to find the pricing strategy that works for your web store and allows you to achieve your business goals.

Costly Mistakes

Bad pricing can have serious repercussions in the form of lost business and lost revenues, yet many e-tailers disregard its importance. Many new, and not so new, sellers seem prone to certain common mistakes:

•Not tracking the consequences of pricing decisions. Says Frank Luby, of http://Simon-Kucher.com, “In a lot of cases, people are making pricing decisions very information-starved.” You should be able to defend your prices with market research. Monitor the affect of pricing changes on your profit margins, so you know how to adjust your prices in the future.

•Trying to match or beat the lowest prices. A “lowest price” strategy is only practical if you have a sustainable cost advantage over your competitors. If you can’t maintain those super-low costs, you can’t afford to maintain super-low prices either.

•Using “standard markup” pricing. The problem with simply adding X dollars to your cost to determine your price is that you may be charging less than what your customers are willing to pay. Even a slightly higher price, with a small loss in sales volume, can result in significantly greater profits. Or your price tag may be too high, and generate much less business than if you had the right prices.

Proven Practices

So how should you be setting your prices? There are multiple strategies that work well, but whatever strategy you choose, keep the following in mind:

•Your pricing strategy should fit your business goal. For instance, if your goal is achieving a certain market share, your price points may be lower than if your goal is maximizing your profits.

•Your customers will have a price range in mind when they’re shopping. You don’t want to be drastically higher or lower than every other seller. If you’re dramatically higher, buyers may feel they can do better elsewhere. If you’re dramatically lower, they may feel suspicious and wonder what’s wrong with your products. Check out your competition, and see what they’re charging and how their products and services compare with your own.

•Pricing’s a trade-off. Buyers aren’t just paying for the product—they’re also paying for the value you add, whether in the form of convenience, better service, or faster delivery. You have to determine what benefits you bring to the table—versus your competitors—and what those commodities are worth to your customers, and adjust your pricing accordingly.

•No rule works every time—you’ll need to adapt your pricing to accommodate different products, target markets, and sales mediums. If you can’t afford expensive market research software right now, then take the above factors into consideration, and just experiment. Start high, try different price points, and see where your products sell best.

Don’t underestimate the power of pricing. It’s not impossible to find those ideal price points that will allow you to accomplish your business objectives. Says Luby, “All you’re really doing is finding a way to get (customers) to pay what they’re willing to pay and not leaving that money in their pockets.”

 

The Price Is Right - How To Arrive At The Best Price For Your Products

Avoiding Common Mistakes

A trap many E-Biz owners fall into is trying to set their prices by simply adding a percentage or flat amount to an item’s cost — they buy a watch for $20, slap another $20 on the price tag, and pass it along to their customers. The problem with this type of pricing is that your costs aren’t fixed. For example, your wholesale costs for buying and reselling 100 blow-dryers will differ substantially from your wholesale costs for buying and reselling ...

ecommerce,products,sell,estore,online store,internet,ebiz,home ebiz,ebay,auction,market research

Avoiding Common Mistakes

A trap many E-Biz owners fall into is trying to set their prices by simply adding a percentage or flat amount to an item’s cost — they buy a watch for $20, slap another $20 on the price tag, and pass it along to their customers. The problem with this type of pricing is that your costs aren’t fixed. For example, your wholesale costs for buying and reselling 100 blow-dryers will differ substantially from your wholesale costs for buying and reselling 10,000 of the exact same blow-dryer.

Another problem with this kind of pricing is that your customers may be willing to pay more. Let's say you added $20 to the cost of your watch and it sold well. But it may have sold just as well if you added $40, and your profits would have greatly increased.

7-Step Pricing Strategy

Marlene Johnson, of http://PricingPsychology.com, recommends a 7-step approach to pricing your products:

1. Look at your competitors’ prices and get a range.

According to Johnson, “Your consumer has in their mind some idea of what’s the right price to pay for your product. If your prices are going to be dramatically different, higher or lower, you’re going to have problems.”

2. Objectively compare your product to your competitors’.

Compare features that a consumer would notice and value. Determine if your product is better than similar products, or if it's lesser. Don’t be emotional when comparing — it’s not better just because it’s yours. If you can’t clearly specify what makes it better, then it’s not better.

3. Decide how you want your product to be perceived in comparison with your competitors'.

Are you the “quality” brand? The “low-cost, cheap” brand? The “value-added” brand? Your web site should reflect your conclusion. Your customers won’t pay top prices for an item from a shoddy-looking web site. But if you’re going to be the budget brand, you don’t need a fancy web site either — just something simple and unelaborate.

4. Calculate your costs.

What’s the cost of goods if you buy this many vs. this many? What’s the cost of shipping? Factor in the variables — any costs you forget come directly out of your profit margin.

5. Determine the quantity you need to sell to make a profit.

Look at the price range you can charge and the costs of selling your products.

6. Take a reality check.

Ask yourself, “Given what the market is willing to pay and what I think I can sell, can I make a profit?” If not, you did your research, thought it out, and saved yourself a lot of wasted time and money — move on. Look at something else.

7. Run tests to see at which price your product sells best.

At this point, you should have reached an acceptable range of prices — find a software program that lets you perform AB split testing. This testing method will quickly show you at which price point your goods sell best. For $12 at http://www.wilsonweb.com/ebooks/splittest.htm, you can get How To Optimize Your Landing Pages Scientifically, a book that lists 13 different online software-testing programs, several of which are free.

According to Johnson, there’s one more rule of thumb that sellers should always keep in mind: “If people accept your price immediately — you should charge more.”

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