How to Price a Product: Stepwise Guide You Won't Miss

Before reaching a customer, a product passes through several processes, and pricing is one of them. And the price depends on a few metrics. Besides, this price will influence and determine your risk involved in the business, your profit margin, and how much other expenses you can cover. Hence, one is interconnected with the other. If you’re planning to start your own business but can’t understand how to price a product, read the post and learn the process.

Pricing is crucial; you must calculate it during your market research. It depends on the production, transport, demand, marketing, and how much tax you have to pay per unit. All these factors determine a product's price. The entire business base stands on calculation; product price determines your risk strategy. So, roll out the crucial step of your business, and let’s learn the product price and how to do it.

What Is the Price of a Product

As per the definition, the price is the amount a customer needs to pay to use a product or service. In the current economy, the currency is the payment medium for any product or service. So if you want to purchase something, you need to pay currency for the payment, and in return, you can own the item.

But how do you calculate what should the price of any product be? Scratching your head? Not anymore. Let’s find it out here!

How to Price a Product

If you go for simplification, three measures determine the price of a product: Unit cost, Unit expenses, and Unit profit. However, this is not the end. You must include the following:

• Variable cost per product
• Your profit margin
• Unchanged cost

Before setting up a product price, you have to go through several calculations. For example, the cost of raw materials and how many products you can prepare using the material. With raw materials, you need to check labor costs, the electric expenses for the production, packaging of the items, and transport of the ready items to the market. At last, how fast or slow time you can spare to return the money you invest in the production.

All these parameters determine the price of a product. We will show you a sample to get a clear idea.

The above price is associated with its production cost. So again, you have to add a few more that include Profit margin and how much price your competitor keeps per unit.  

Now you have to calculate the profit margin you want to keep. Once you are ready with the variable cost of your product, the cost chart should look something like this:

The variable cost of the product ÷ 1 - your desired profit margin ( the profit margin displayed as a decimal)

If you want to keep a 20% profit margin, it'll show as 0.2, and divide your variable cost by 0.8. For example, if you follow the formula, the price per product would cost approximately $17.85, which you can round up to $18.00, which suits the market demand and aligns with your competitor's price.

The pricing of a product is different in the retail and wholesale markets. The wholesale market charges a relatively low price for the product. On the other hand, retail charges are a bit higher than wholesale prices. The silver line between the wholesale and retail price is the profit margin the business owner keeps for him.

Different businesses fetch different profit slabs, and you can tally your product price with the market and modify it based on the product's usability and quality and your selling strategy. For example, if you want to earn a good profit, try different products with various price ranges that have demand in the market. We suggest the best business option on which you can sell multiple products and experience various profit slabs under one store: dropshipping online business.

DSers Dropshipping Online Business: Multiple Products with Different Pricing Slabs

If you want to experience different price slabs for various products, start dropshipping with DSers. The best AliExpress dropshipping tool, DSers, provides you with multiple brands and other products with several product pricing ranges. For example, you can place bulk orders and get a good return; all are possible with DSers. However, as e-commerce is the most promising online business of the recent trend, you can reduce the risk and earn a reasonable return with DSers.

What are the benefits of starting a business with DSers?

• Integrating with AliExpress, Shopify, WooCommerce, and Wix can give you broad business opportunities.
• You can place bulk orders.
• You can filter the supplier and optimize with the best to deal
• Bundle products with comparatively low prices with a great offer price
• Auto sync tracking number helps in tracking the items to be delivered and payment to PayPal
• Order status auto update gives you a clear picture of the current location during the shipment of the product
• Better stock management
• As per the order destination, you can customize the shipping settings
• Pre-set pricing module helps you to mark up your product
• You can link and manage multiple stores
• Provide offer price
• You can divide the product based on categories
• You can control the AliExpress product list and import them into one place
• You can hide the product you don't want to sell anymore
• You can map your store products to any of the brands associated with DSers
• You can earn affiliate points once you integrate the program with your account

Why DSers provide a better business experience?

Dropshipping business involves a low amount of risks, minimal investment, and can generate a good return. When you start your online venture with DSers, you will get the branded suppliers for your customers. As the brands ensure the  products’ quality, you can show them on your store display without worrying too much and try to have your customers buy them.

The profit margin of AliExpress products you sell in e-commerce online stores enables you to potentially earn a significant amount of money. Here with DSers, you can automatically apply some pricing rules which you can pre-set to all products you import.

You can have a seamless, hassle-free business experience with DSers dropshipping tool as it would reduce your efforts by providing supplier lists, product variations, pricing lists, and shipment arrangements.

Check our FAQs to know more about dropshipping and the benefits if you want to start as early as possible.

Frequently Asked Questions

How much investment is required to start a dropshipping business?

You need a minimum of $100 to $500 to start a dropshipping business and a PC with active internet access, research time, and good marketing sense.

Is there any country access limitations on dropshipping business?

With dropshipping, a successful enterprise can operate almost anywhere with an Internet connection. As long as you and suppliers reach agreement, provide timely service and support, and meet customer expectations, you can run and manage your business. While there are some countries or regions you can’t reach, like army bases.

Can I earn affiliates from dropshipping?

Yes, you can earn an affiliate commission if you start a business with DSers dropshipping tool, as DSers supports the affiliate program.

Wrap up

If you know how to price a product, you can lower down the risk associated with your pricing policy. Besides, you can sense the demand for your product and revise the price later.

However, as pricing fixes the profit margin and risks ratio, you must be calculative when you first chart out the cost of your products. Finally, we have covered the price metrics and how to calculate the price of a product so that it can help you to create your own and scale your growth.