Lesson 4: Price your products

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When pricing your products, it’s important to strike a balance between being competitive in the market while also making a profit. If the price is too high, your business might never get off the ground. If the price is too low, you might have a lot of initial sales, but you won’t fund the continued operation. To find balance, you need to consider a couple of factors.

Determine your profit margin

The first is your profit margin. Your profit margin will determine how much money you will make off each sale and be the metric for profitability. Find your production cost, which will come from any overhead, materials, or time invested in making the product. Add that number to your marketing product cost, the cost to promote and sell your product. This number is the actual cost of the product.

Decide on your listing price

Next, take your product’s actual cost and add to it your ideal profit margin, or the amount of money you’d like to make off your product. By adding these two numbers together, you’ve determined the listing price of your product.

A QUICK RECAP

  • Cost of Production + Cost of Marketing = Actual Cost
  • Actual Cost + Profit Margin = Listing Price

Pay attention to your competitor’s pricing

Before you commit to your listing price, you want to do some homework on your competition. Remember, your competition isn’t just other online retailers, but brick and mortar stores as well. How do you want customers to view your products in comparison to your competition? Will you be a low-cost provider, or do you want to be known for providing a higher quality product that comes at a higher premium?

Seven competitive pricing strategies to make a profit | GoDaddy
For further reading, take a look at our guide on seven competitive pricing strategies to make a profit.
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Now that you’ve got a good idea of how you’d like to price your offerings, let’s talk through some of the tactical elements of an eCommerce site like shipping, taxes, and payment solutions. But! Before we do, take a couple of minutes and answer the following discussion question.