If you’re jumpstarting your practice’s online store, you’re taking a big step. Ecommerce is one of the best ways to generate extra revenue and give your patients easier access to their favorite products. As you know, however, it’s never as easy as adding a new link to your website. There’s a lot of thought that needs to be put into your products’ individual pricing so you can maximize your profit and keep your patients happy with their decision to purchase. Here’s what to know about pricing your ecommerce products and how our marketing specialists can help.

What is Product Pricing?

Product pricing is the process of using both internal and external factors to determine the value of a product. Product pricing strategies can vary widely based on your industry and area, but it’s important to know that your strategy has a direct impact on the overall success of your ecommerce efforts and your practice as a whole. Product pricing requires some in-depth knowledge of your business, industry, and competition, so make sure to continually look at other practices in your area offering similar products.

How Should I Price My Products?

Advice about product pricing can vary widely in its quality. The best way to begin developing your pricing strategy is by having a rock-solid understanding of your ideal customers and the local market you’re participating in. That’s because pricing will incorporate a variety of factors like your business finances, your online store, your product’s positioning in the market, and even whether there’s short-term or long-term demand for it.

Fortunately, setting a price for your product isn’t a one-time decision. The best strategy is to set an initial price and adjust it as you go.

Your Pricing Model

To find an initial price, start by adding up all your product costs and determine your profit margin. This process is called cost-plus pricing and it’s one of the most basic ways to set a price on your products. If it seems too simple, that’s because it can be – your pricing strategy will ultimately include a lot of other factors that are unique to your practice. These aren’t always something you can account for, either. Some other factors that may come up include consumer trends, competitors in your area, and insight from your customers.

Here are the biggest factors to consider when establishing a pricing model.

Variable Costs

Variable costs are the basic costs like the cost of ordering your products (or the labor and raw materials if you make them yourself), called the cost of goods sold. However, variable costs can also include things like your time spent ordering, preparing, sorting, and shipping your products to your customers. It can also include product marketing and promotions, as well as maintaining your ecommerce site.

Profit Margin

Profit margin is typically a percentage of each product sold on top of your variable costs. When you’re choosing a percentage, keep in mind that:

• Fixed costs haven’t been included yet
• Your price range still falls within the market’s acceptable price for your product (and doesn’t totally outprice your competitors)

Once you have your profit margin determined, take the percentage and turn it into a decimal (so 20% becomes 0.2) and follow this formula:

Target price = (variable cost per product) / (1 – profit margin as a decimal)

Fixed Costs

Fixed costs (or overhead costs) are costs that don’t change based on the number of products you sell. They’re typically not tied to product sales and can include things like building costs, salaries, taxes, website maintenance, and more. Regardless, it’s important to include them in your product pricing since they ultimately impact your overall profit – something that can be boosted by a well-managed ecommerce campaign.

Let’s Get in Touch

Interested in starting your own ecommerce site to boost revenue and become your patients’ source for their favorite products? At Digital Limelight Media, our marketing specialists can help you transform your ecommerce presence with industry-leading web marketing and strategy. Give us a call or fill out our online form to get started.