Here is how to price handmade items for sales. Price can be one of the most important factors in an online purchase. If pricing is too low, your business could lose money on each sale.

If pricing is too high, you may miss opportunities to gain market share and increase sales. If pricing is not considered with other marketing strategies, you may fail to capitalize on your strengths or lure customers away from competitors.

PRICING YOUR HANDMADE PRODUCTS FOR ONLINE SALES

How can pricing affect online sales?

Pricing too high makes it so people don't want to buy the product and stick with buying from competitors. Pricing too low makes it so customers question the quality of your product.

With online sales, there is no time limit on how long something has been sitting in your inventory. This can be one of the most frustrating parts about online sales because customers could potentially wait until you price your products to what they feel is fair or something that isn't even close to what it should be priced at.

People struggle with pricing

Pricing too low makes it so people don't think you're worth buying from.

Pricing too high makes it so people don't think you're worth buying from.

Pricing too low makes it so people don't know if they should buy the product or not. They may instantly feel the product is of bad quality. Pricing too high makes it so people think that there must be something out there similar that they can get for a better deal. And they WILL look for that deal.

Basically, pricing online has a million different scenarios to it and pricing just isn't as easy as pricing for retail sales. When pricing online, it is important to know your market and exactly what you are pricing your product at. Remember to do research on competition pricing before you set yours.

The other four things to consider are product, place, promotion and distribution.

When pricing a product, managers must consider each element of its marketing mix as part of pricing decisions. For example:

Product - Is the company's pricing philosophy to maximize profit or market share? How does pricing strategy match with overall business objectives?

Place - Where will customers buy the product? Online sales can be fast and easy but it is important to know your margins and pricing them accordingly. However, pricing too high can scare customers away before they even give you a chance so you have to find that perfect spot where customers want to buy from you at an affordable price without feeling like they're getting ripped off.

Promotion - How much promotion will go into pricing? How much pricing will be advertised online and offline? Pricing is very important to overall marketing because it's what brings us revenue. However, if we price too high, then nobody will want to buy from us and pricing too low can result in customers constantly pushing back their expenses onto us and not giving us enough of a profit margin.

Distribution - Where does the product fit in the overall distribution strategy (in-store vs. online)? Of course pricing for retail sales is easier than pricing for online sales because you actually have people there handling your product but pricing products for online sales has its own set of challenges that make pricing much more difficult than pricing items for in store purchase.

So pricing online sales is definitely more difficult than pricing for retail sales. It's important to know your market and figure out how you will price your products before you actually start selling them online because pricing could affect revenue pretty drastically if done incorrectly.

How does pricing affect competition? Pricing too high can set you apart from competitors, pricing too low makes it easy for competitors to play pricing games against you (price wars).

Pricing below cost can allow you to take market share from competitors but pricing below cost can also force you into a "price war" and may not be sustainable

Pricing at or near your competitor's pricing will help get customers attention and show that you are a viable alternative, pricing too high has higher risk of losing the sale to competitors

Basically, pricing online has a million different scenarios to it and pricing just isn't as easy as pricing for retail sales. When pricing online, it is important to know your market and exactly what you are pricing your product at. Remember to do research on competition pricing before you set yours. How does price affect marketing strategy? Price needs must be evaluated alongside the other three variables (product, place & promotion) in the mix (marketing mix).

Cost pricing When the price is equal to all costs involved in production, distribution and marketing so you can't make any money from it.

Profit pricing The price at which the product will sell at a profit. This pricing strategy is usually preferred because most businesses aim for a profitable bottom line every year.

Price is a very important piece of your marketing strategy and needs to be evaluated alongside your other elements of the marketing mix before setting prices for products/services online. Research on pricing strategies should also be completed before pricing your products online.

What pricing strategies can I use to sell my product online?

Market penetration pricing Pricing low in order to penetrate the market and get as many customers as possible, you will eventually raise the price once your product gains traction.

Product positioning pricing Pricing products at certain levels that allow them to be placed into different segments of the market (good for mass marketing).

Price lining pricing Pricing all items within a line at certain price points so they are viewed by customers as "inexpensive alternatives".

Psychologically segmented pricing Using discounts or premiums on products with the same physical attributes but different psychological benefits.

Discount pricing  Pricing products below the current market price because you are encouraging customers to buy while the product is in stock.

Psychological pricing Pricing items with 9's or 99's instead of round numbers, pricing products that end in .95, pricing products that are priced lower rather than higher above competitors pricing etc.

These are all different ways to approach online sales pricing strategies. Obviously each one has their own benefits and risks associated with them but many small business owners will experiment with different pricing strategies before deciding on one pricing method for use moving forward.

Remember not to make rash decisions when it comes to marketing online because your marketing strategy will be heavily affected if you change any aspect of marketing drastically (including price).

When should I lower pricing?

Prices can be lowered when competitors undercut you and begin to take market share

Prices must be lowered if pricing is above costs of production/marketing and you want to make a profit.

Pricing should not be changed for emotional reasons like "feeling like prices aren't high enough" or "feeling prices are too high" because pricing strategies need to have evidence behind them from research, not feelings. 

When should I increase pricing?

If there is a product shortage, prices can rise as demand rises without likely losing customers

If your pricing strategy relies on charging more than the competition so you can have higher profits, then increasing pricing will allow this pricing strategy to remain valid.

After all of this pricing for online sales can seem difficult but if you make logical choices and research pricing strategies well, you can do it! Your pricing strategy should reflect your market and potential customers.

It is part of the marketing mix which means that pricing will affect your other elements just as much as they affect pricing.

Be sure to keep all segments of your target market in mind when setting prices online for your products/services and continuously adjust pricing based on feedback from current or potential customers.

Some additional information about pricing

Discount pricing This pricing strategy is not recommended by most experts because it devalues the product and makes it seem less valuable. It also encourages customers to wait for a sale before making a purchase.

This pricing method also makes products more difficult to price in the future, especially when selling online where prices are fluid and variable.

Psychologically priced pricing This pricing strategy is highly effective because research has shown that consumers will often pay more for products that end with the number 9 or .95 instead of rounding up to the nearest whole dollar amount (as we tend to do with pricing ending in round numbers).

Customers can feel like they are getting a good deal when buying an item and perceive it as being less expensive than items listed at $100.00 even if the $100.00 product includes more bells and whistles than the $99.95 item does.

Research has shown that pricing items with 9's and .95 instead of whole dollar pricing is a sound pricing strategy online to use for marketing products, especially when selling physical products or services.

Pricing by competitor pricing. This pricing strategy often works well because it allows your customers to see immediately how much money they can save by using your service/buying from you instead of going somewhere.

Remember that many experts advise against charging prices higher than what competitors charge because this will likely cause you to lose business rather than gain it.

Conclusion

Pricing is an important step in marketing products online, even more so when pricing physical goods because pricing affects other marketing efforts.

There are many pricing strategies to utilize but successful pricing depends on the product or service you are selling, who your audience is and what attributes of your product/service make it different from competitors.

It takes research and testing to find pricing strategies that work for you and your target market so remember to be very patient with this process!

Never forget: If you've done proper market research then it will be much easier for you to price products correctly whether those products are physical or digital.

Remember, pricing isn't only an important part of marketing products online, it's also a key component of the marketing mix! Effective pricing strategies will help you make more money and attract more customers.

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