
Your profitability will always be affected when you’re planning to switch your prices, even with the slightest changes. Especially when you are a vast company that receives tons of orders each day, you should be careful in implementing pricing strategies. According to a study by McKinsey, a 1% change in a business’s prices will result in an 8% change in the operating profit. Without proper knowledge and utmost diligence in pricing, your business might get into a huge problem. Luckily, this blog will tackle different pricing strategies that can help your business optimize prices to maximize profitability.
Know Your Industry
Before trying to meddle with strategies and techniques in pricing, you should first learn more about the industry you’re in. Knowing deeply the products you are selling, what market you will sell them, and the industry you are dealing with will increase the chances of the price change. The thing with changing your prices is that it should be the right move at the right time. Different products may mean different selling strategies; thus, different pricing strategies should be implemented. For example, when you’re in the appliances industry, the typical move is to sell them in a smaller volume to gain higher profits. While on the retail of clothes, the higher the volume means, the higher the profits.
Computing Your Dropshipping Business’ Profit
Keeping track of numbers such as sales and expenses will let you identify the effectiveness of your chosen strategies. Fortunately, when you have an online store with a dropshipping model, calculating profit is a piece of cake.
You only have to compare two prices: the price of the products on your website and the price you bought the products for, including additional costs such as returns, shipping, miscellaneous, and other extra costs. Being clear from the get-go with your prices will prevent other unwanted costs due to customer problems. Premium delivery program like what Dropship China Pro offers is what you should be looking for. Aside from shipping options not having extra fees, we can ensure that the products will reach your customers’ premises without any defect nor damages. We are connected with hundreds of couriers to best suit your business location, giving you the most affordable shipping alternatives. There are also online dropshipping calculators for you available in just a single Google search.
The biggest factor that affects your price
Well, one of the most important things you should factor in when setting prices is shipping. Aside from the product price itself, the cost of bringing products from warehouses to your customers is a relevant cost.
Speaking of shipping, you should always consider your customers’ preferences, but mostly, all of them will always opt to have fast deliveries. However, some people may accept shipping times of 1-2 weeks since they think that the products and services they have availed of are good for their price.
An online store should have a “free” shipping option, not simply because it is a trend but because it can deliver more conversions in your store. Trust our experts; people will buy a good for $60 with a free shipping fee than a $55 good with $5 shipping costs. The “free” word will always be attractive and an effective way of persuading customers to buy. Free shipping terms don’t mean it is free; you only incorporated into your price the shipping cost. Being competitive is an option business owner should always choose. When is the last time you’ve visited your competitor’s site? And when did you notice a site without any free shipping term? Maybe a decade ago!
Pricing Strategy Development
A non-knowledgeable person may think that pricing is easy, and it’s not the truth. Pricing is crucial. That’s why it is also extremely complex. You’ll have to undergo tons of calculations, measurements, risk takings, and analysis. Pricing is your business’ profitability lever. With more strategically priced products and services, you will certainly gain increased profits.
Pricing is not entirely a quantifiable process. You should also consider your company’s brand name and patents. How much do you think your customers would be willing to pay for when your company sells a certain product? This is why even though pricing could seem like an objective topic, there will be a slight difference in its definition from different authors.

Pricing strategies will help you determine what your products should truly cost. In a dropshipping business, a product cost would always be the cost of the purchase price plus additional costs. So let’s get into it. Here are the best retail pricing strategies for dropshipping businesses:
- Markup Pricing or Fixed Markup on Cost
This type of pricing strategy typically adds a preset to the original price of the product. It can be in the form of a percentage or an amount. For example, you think that a markup of $2 is appropriate to a $10 item. This is when you can decide whether to keep the $2 markup on every product you have or turn it into a percentage. If you think it would be best for you to have the markup percentage, just divide the planned marked up of $2 by the product price, which is $10. 2/10= 20%. You can apply this to every other product that you sell to price them easily. You can also get a markup percentage for every type of product you sell or even for every niche market you are targeting, depending on your preference.
2.Manufacturer suggested retail price (MSRP) or Vendor Pricing
A more common way of pricing a business’ products is to refer to the suggested prices by the supplier or manufacturer. This strategy aims for a decent profit despite getting required to adhere to the minimum advertised prices or MAP that the suppliers normally suggest. This rule disallows your business from offering products below the prices your manufacturer has set.
Since MSRP is way above the product price, you’ll have a decent profit even after offering discounts. For example, the manufacturer allowed you to sell the products for as low as $80; you can offer the product at $100 with a 20% discount. Take note that any promotion, especially a discount, will always be eye candy for your customers.
3.Psychological Pricing
As a buyer, if a certain product’s price didn’t reach your maximum planned spending, you’ll buy it whatever happens. This is also true when it comes to your customers. Some people may think that spending $100 on a single product is too much, but after seeing a product that costs $99, they’ll instantly think that it’s worth the price. You can diversify this tactic by putting cents in your prices. For example, instead of $20, you can price it at $19.99. Although the difference is only a single cent, people tend to choose it over another price.
4.Competitive Pricing
Guess what? Not every single customer that you have is not buying your products due to their quality. Many choose your company since you have a competitive price due to your strong brand name and/or excellent customer service. Based on these factors, you can either price your products below or above the competition.

- Lower than competitor’s price: If you can negotiate with your dropshipping agent to lower some costs, or better yet, source similar products with a lower purchase price, then reducing your price below the competition will be easier. Shopify dropshipping with trusted agents such as Dropship China Pro will allow you to do this.
- Higher than competitor’s price: When you have quality customer service, unique and innovative products, or simply an unrivaled branding in your niche market, it is a good option for you to overprice your products. If you wonder how some brands have the same products as other businesses, they are selling their products at a seemingly unreasonable price. Yet, people are still buying from them; it’s mainly because of the company’s customer service and brand. The higher the price you set, the higher the profit you will gain.
5.Keystone Pricing
If you want to have a quick and easy rule of thumb in pricing, keystone pricing could be your way. This strategy is simple: double the wholesale price, and you’re good to go. The worst downside of this pricing strategy is its negligence in being objective. No one knows if the price will be too high, too low, or just fine for your business and customers.
For example, you have bought a product that’s worth $20 from your supplier. You will multiply it by 200%, so you’ll now be selling that product to your customers for $40. This method assumes that the doubling of the price will cover the expenses in putting up the product and bringing it to your customers. This might seem easy, but you should always monitor if you’re still gaining profits or you’re already incurring losses. More often than not, this pricing type will result in a little bit higher prices unless you have found a supplier that offers extra cheap products.
6.Multiple Pricing
You can offer different prices for the same product based on the ordered quantity, customer type, delivery time, place of sale, and payment terms. The main goal behind this strategy is to offer the best price to a certain customer while taking into account the other factors of the sale, such as place and delivery. Many people think that this method is unethical, although some say it is justifiable.
One famous example of multiple pricing is bundle pricing, wherein a discount will be given to products that are bundled into one. For example, a computer mouse and mouse pad will be sold for $80 when their prices are $55 and $45, respectively. This allows a $20 discount all in all and is undoubtedly attractive. Although you’ll undoubtedly have boosted sales after implementing bundle pricing, the only problem here is decreased profits since you have to offer both the products at a lower price. However, it wouldn’t matter if the total profit due to a boosted sale offsets the opportunity costs.
7.Discount Pricing
Who doesn’t want sales, promotions, coupons, and seasonal discounts? It triggers everybody to buy even without planning. Lowering your merchandise price every now and then is healthy for your sales and business growth. It gives diversity to your strategies. As occasions approach you, your business should implement different marketing ideas. For example, Christmas is fast approaching. You should consider having a sale day, weeks before the arrival of data, to persuade your customers to buy from you.

8.Economy Pricing
It is a method of pricing that aims to lower the price of the products as much as possible by minimizing or even getting rid of some marketing and production costs. The business has to gain revenue based on the number of consumers buying the products. You have to bring many customers and maintain them consistently to profit from this method successfully.
In any business that aims to maximize profitability, one should always be careful in dealing with pricing. A single change in price poses a huge impact on the overall business run. Implementing a new pricing strategy might improve or degrade the overall value of the company. This is why as an online retail store owner, being careful is a must. Do you need help regarding pricing or sourcing products? Dropship China Pro is here to rescue your dropshipping store! We take pride in our effective dropshipping solutions as we aim to improve your business by a mile. Visit our website for more blogs.