How To Build A Profitable Business With A Powerful Pricing Strategy


With the entire internet at our fingertips, it’s easier than ever to find exactly what we want to buy at the price we want to pay. What does that mean for you if you’ve started your own online store and want to start selling products as soon as possible? It may seem like the best way to start is by keeping profit margins low so that you can start moving merchandise, but that can stand in the way of your goal of becoming a profitable business and give rise to a slew of headaches that we’ll discuss in this article.

A big-picture approach to your pricing strategy is necessary if you’re to set prices that reflect your worth, are cohesive with your brand, help you increase sales and give you the edge over your competitors.


1. Don’t Sell Your Brand Short

One of the first things to remember in your pricing strategy is that everything -- from the colours on your website to the prices of your merchandise -- affects your customers’ overall perception of your brand. You want your online business to be successful and stable, so there’s no point in boosting sales in the short term if they don’t build value into your brand. Plus, you’ll never be able to convince customers who have already paid rock-bottom prices to continue to support your business if you are eventually forced to raise your prices. That’s why it’s so important to put a lot of energy and focus into your pricing strategy NOW, rather than waiting for it to sort itself out.

Ask yourself: is your brand high-end or low-end? Does it love a bargain, or would it never even deign to look at the price tag? Often, handmade or design-focused brands carry a premium price tag because they cater to an audience that wants something unique and is willing to pay for it. You’re not a big box store and customers looking for boutique designs don’t want you to be, so don’t feel that you need to compete with the ruthless pricing strategy of the Amazons of the world. Be wary of pricing your products as a ‘bargain,’ as it can take away the ‘cool’ factor of your work, make your target customer think that your low prices mean low quality, or otherwise erode the exclusivity of your brand.

People will always pay more for: luxury, exclusivity, uniqueness/scarcity, and coolness. If these are not part of your brand, that’s another matter! But chances are, your online boutique uses on one of these key ingredients to differentiate yourself from other brands, so take advantage of this to boost your profit margins!

2. Know Your Business Goal Before You Plan Your Pricing Strategy

Different goals call for different pricing strategies, so you should know in advance where you want your business to be headed. If you want to increase sales volume by 30%, that would require competitive prices, or even wholesale prices so that you could sell to other retailers and make up for slim profit margins with volume.


Example by Kate Spade, offering an alluring 30% off sale items! Using beautiful, bold, crisp banners with strong copy are a great way to grab anyone's attention

If you want to just make sure that you have a profitable business, you’ll need to look at your costs and ensure your profit margins make sense for your goals. What would the impact of your bottom line be if you raised prices just 1%? Would you meet your profitability goals without your customers feeling the impact, or do you need to do more?

3. Play The Semantics Game

It’s possible to make customers feel they’re getting a real bargain without hugely impacting your bottom line. It’s all in the psychology of your phrasing. You can increase a customer’s sense of urgency and therefore increase your conversion rate by offering an incentive to complete their transaction quickly (“10% off if you buy within the next hour!” or something to that effect). “2 for 1” deals are great when you have a surplus of stock, but often big percentages off are what customers are looking for. Why not try the “Buy one get one 50% off” tactic? Customers see 50% and feel they’re getting a steep discount, when the discount is really only 25% if you do the math. The cold, hard numbers are for you to know, while the way you phrase your deals are for your customers to enjoy their shopping experience more as they snap up bargains.

4. Price Your Inventory According To How Long It’s Been Around

Setting a price with an ample profit margin is extremely important so that when you want to introduce new inventory, you can put your older inventory on sale without losing money. Putting last season’s collection on sale is also a great way to gain attention for your latest collection’s launch!

Remember, if you have a sale, use the anchor pricing method: show the original price next to the sales price, so that customers see that anchor price as ‘normal’ and view the new price as a bargain! Some people advise setting your anchor price high to really drive home the point to consumers, but this can often backfire because savvy shoppers use the internet to compare prices and often already know what a ‘real’ market anchor price would be. Inflated anchor pricing, which websites like Groupon often do, can turn consumers off to your brand quickly.

5. Add Value To Your Brand Experience:

Another way to increase sales and turn your online store into a profitable business is to add value to a customer’s overall shopping experience. You’ll have to factor these things into your pricing strategy, but adding value lets you get away with higher prices (which, in turn, often make people think of higher quality).

a) Free Shipping

Free shipping is proven to be one of the biggest factors that turns shoppers into buyers. You’ve felt it too: it just seems like an overall ‘safer’ shopping experience when you know that you won’t be hit with any extra costs at checkout. This will push up your price margin, but the psychology of free shipping often boosts sales while making customers feel like they’ve gotten great value anyway.

b). Fast Delivery

Offering a range of delivery options, as well as being ready to ship items immediately, will need to be factored into your pricing margin but will give you the edge on competitors. This is especially true if you are competing with sellers on websites like eBay that charge very little, but ship their products from as far away as China. More and more shoppers want an expected delivery date at checkout, tracking numbers so they can track their package, and will come back for repeat business if their delivery expectations are met.


Online fashion store, Boohoo, have played it smart by offering a competitive NEXT DAY DELIVERY. How can anyone resist?

c). Money Back Guarantees

You’ll also need to take the cost of this kind of policy into account, but the confidence that you inspire with a guarantee can often turn a window shopper into a new customer. Don’t be afraid to experiment with implementing any of these policies in your online store. Yes, you’ll need to price your goods higher, but these policies add value in the minds of consumers and the added level of professionalism, security and authority also add value to your brand.

6. Boost Sales By Intentionally Creating Impulse-Buy Products

Many of your customers will have been thinking about purchasing from you long before they actually hit the ‘buy’ button, but that doesn’t mean there’s no room for impulse shopping in the world of boutique ecommerce! Plan your pricing strategy so that you have a few smaller, lower-cost products that people can throw into their cart, especially if you have a minimum that customers need to meet in order to get free shipping. It’s completely fine (and normal) to have a few products that are priced to sell, giving consumers more value in their shopping experience because they feel like they’re getting a bargain. Don’t price all of your products with a slim profit margin, but pricing a few that way can really drive sales and increase repeat business.

7. Simple Pricing In 3 Steps

The Three As

1) Awareness
The first step in your pricing strategy is to be aware: both of your own costs as a business owner, designer and creator, and of what your competitors are already doing. You know that your price margin will need to be higher than your costs in order to make a profit, but what constitutes a ‘cost’ for you? We’ve discussed many of the hidden costs (like your monthly transportation costs, costs of packaging, etc) that you need to factor into your pricing margin in a previous article, 5 Tips to Price Your Products for Your Online Store. We even covered some basic math formulas that you can use to help you set a baseline price based on your costs. But there’s more to a brilliant pricing strategy than just calculating your costs and factoring in a profit. What is your competition charging, and what products are they offering? Can you compete with that price and, if not, what value can you add to your online boutique shopping experience to make it worth the extra few quid?

2) Action
Now that you’ve surveyed the industry and know what your competition is charging, it’s time to take action and tweak your own prices. Experts often advise people to price their goods somewhere in the middle of the market’s range of prices to avoid looking ‘cheap’ but also avoid pricing out your target consumer. Much higher prices than your competition will also require tweaking. Decide if your products provide much higher value than your competition, if they reflect the cost of your work and labour, and if those prices are justified -- and adjust accordingly.

3) Analysis
This step is crucial. Never start a new social media plan, marketing strategy or pricing strategy without knowing what your metrics were before you started. You need something to compare to so that you can make further tweaks to your strategy. How have sales performed since you started your new pricing strategy? Do your prices and your brand make sense with one another? Move forward with what works, and don’t worry about what doesn’t -- trial and error is part of the process!

Pricing isn’t fixed -- it’s a moving target that will change as your suppliers, costs, and the market changes. You’ll need to look at the hard data while experimenting with your prices, but also listen to your intuition when it comes to what your prices say about your brand and how you want your brand to be perceived. Know your worth, keep prices consistent with your brand, and keep up with the changing nature of the market: these key factors will increase revenue and help build a profitable, valuable brand that customers will remember.

By Fede