Pricing Strategy Guide
Your products are probably priced too cheap. And it's costing you more than you think.
Most eCommerce founders price based on cost-plus: "It costs me $20 to make, I'll sell it for $40." Or they price based on competitors: "They charge $45, I'll charge $39 to undercut them." Both approaches are wrong.
Cost-plus ignores perceived value. Competitive pricing starts a race to the bottom. The brands that grow fastest price based on value, what the product is worth to the customer, not what it costs to make. And they charge more than they're comfortable with, because margin is what funds growth.
Every extra dollar of margin funds better marketing, better customer experience, and better products. Here's how to find the right price.
150+
Clients
$70M+
Revenue
$23M+
Ad Spend
Klaviyo Gold Partner
Klaviyo Gold Partner
How to fix this, step by step
Calculate your true cost basis including hidden costs
Your cost isn't just COGS. Add: shipping to your warehouse, packaging, transaction fees on Shopify, returns processing (budget a return-rate allowance for apparel), and customer service costs per order. The real cost per order is usually higher than the product cost alone. You need accurate cost data before you can price profitably.
Target a healthy gross margin to fund growth
A thin margin sounds fine until you subtract marketing, operations, and platform costs. You're left with a thin net profit. Where it should be gross margin, you have room to invest in marketing, absorb returns, and still profit. If your margins are too low, you either need to reduce costs or raise prices. Most brands should raise prices.
Research perceived value, not just competitor prices
What would your ideal customer expect to pay? Study brands your customers admire (not just your direct competitors). If you sell premium skincare and your customers shop at Sephora, they're accustomed to $30-80 price points. Pricing at $15 actually hurts you, it signals "cheap" and "not premium." Price anchoring against aspirational brands positions you correctly in the customer's mind.
Test prices, don't guess
Run A/B price tests using tools like Intelligems on Shopify. Test 3 price points: your current price, a bit higher, and a bit lower. Measure total revenue (not just conversion rate). Many brands find that a modest price increase reduces conversions only slightly, which means significantly more revenue and much more profit. Price sensitivity varies by product and audience. Test before assuming your customers won't pay more.
Use pricing psychology to increase perceived value
Charm pricing ($49 vs. $50) still works for sub-$100 products. For premium products, round numbers ($150, not $149) signal quality. Show "compare at" or MSRP prices to anchor value. Bundle 2-3 products at a "savings" price that increases AOV while maintaining margin. Offer good-better-best pricing tiers (small/medium/large or starter/pro/premium), the middle option is chosen much of the time.
Want us to handle this?
Pricing is one of the highest-impact decisions in your business. A modest price increase with no change in costs flows directly to your bottom line. We help eCommerce brands with the full picture, pricing, positioning, marketing, and retention. If you want a pricing analysis alongside your growth strategy, book a call.
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