Which Dropshipping Pricing Strategy Should You Follow for Your Business?

Dropshipping pricing strategies

Starting a dropshipping business is not just building your website and exhibiting the products. The next and most important aspect is zeroing in on a pricing strategy and setting up prices for every product based on the strategies.

Like every store, you would also want to maximize your profits by jacking up your prices. However, it might lead to lesser sales and decreased revenue. But, reducing your prices won’t be beneficial either as it would increase your work and bring in fewer profits.

So how can we find the perfect balance between pricing and profits? For that, let’s understand what is the importance of pricing strategies and what different types of pricing strategies can be employed for your dropshipping business.

What is a pricing strategy and why is it important?

Pricing strategy is a method of approach used to fix prices of products being sold. It is one of the P’s of marketing and is used to project a perception around a brand or product. Pricing strategy is important because in absence of a strategy chances are that you are incurring a loss on every order. High prices will stop people from adding products to their carts, and low prices will make you lose profits.

What are the different pricing strategies?

There is no singular pricing strategy that works for everyone, but many strategies there are many strategies that can be understood and employed for the best profits. The one you choose will define your brand and how will it be perceived by the audience.

Some of the most popular dropshipping pricing strategies are listed below:

Fixed Markup

Fixed markup is one of the simples pricing strategies. In this strategy, you will figure out a set margin for profit that will be constant across all the products. For example, if you are looking at a 20% markup on every product, on every product add a margin of 20%, and that would be the selling cost of the product.

Prices are easy to set up and manage with fixed markup, but the profits can increase or decrease dramatically depending upon the retail price of the product.

Tiered Markup

If you are selling many different types of products, tired markup is an ideal choice of pricing strategies. Based on the overall price of the item, you can tweak the markup percentage. This allows you to focus on every individual product.

For example, you may want a 50% markup on a lower-cost product to cover the cost and get revenue too. However, for a high-cost product, a 20% markup would be also jack up the price more than your competitors and more than what your targeted audience wants to spend.

MSRP (Manufacturer Suggested Retail Price)

If you are looking for a middle ground when it comes to in’s and out’s of pricing, MSRP is one of the safest choices as a pricing strategy. With this pricing strategy, you price your products according to the worth of the products while staying out of the competition.

The MSRP strategy can be paired with discounts to advertise the products, bring in the customers, and compete with sites that have the same products but for even lower prices.

Competition-Based Pricing

Competiton-based pricing is exactly what it sounds like; you base your prices based on what your competitors are doing. Many tools can be used to keep a track of the prices, and while you might think of undercutting your competitors, realize that they too use the same tools.

This is a pricing strategy that is not generally recommended as lower prices might translate to lower quality of the products in the mind of the customers. A dropshipping business on the lines of “beating your competition” will never flourish.

Psychological Pricing

Using prices that appeal to human psychology has been a win-win situation for many drop-shippers in the past. Using odd numbers, using uneven numbers instead of whole numbers, and other such pricing techniques are very common.

Playing with the psychology of the customers in terms of pricing is known to bring in more conversions than conventional methods of pricing strategies.

Final Thoughts on How to Price a Product

When choosing a pricing strategy, it is important to remember that one should never stick to one pricing strategy. Experimenting and understanding what works and what does not is important when finding out the perfect strategy for your dropshipping business.

The end goal is to make profits in dropshipping business, and it can only be achieved if one tries out different strategies and stick to the perfect one.

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Arjun Chhabra

Sr. Specialist - Content Marketing at Shiprocket

Seasoned content writer with experience in blogs, articles, micro descriptions related to the field of finance and the loan market (read FinTech) of the UK and the USA. Every content is completely key ... Read more

1 Comment

  1. Dai Software Reply

    This is an informative post. Got a lot of info and details from here. Thank you for sharing this and looking forward to reading more of your post.
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