If you’re struggling to realize enough profit to be comfortable with in your ecommerce business, it may be time for a price increase.
The problem with raising your prices is that you have to do so gradually and not too much, or you risk losing long-term customers.
Imagine how you’d feel if your favorite coffee shop started charging $12 for a latte! You’d probably go somewhere else for your coffee fix, right?
That’s why you need to get a pricing strategy together so that you increase your prices without losing your customer base.
1. Decide How Much to Raise Prices
You want to make your price increase enough so that you cover your expenses (product, overhead, human labor) and have a little cushion.
Profit margin for ecommerce can vary but is usually around 40%. Look at the average number of products you sell in a month. Then look at the deficit you have revenue-wise, and divide it across your average monthly sales number.
Let’s say you need another $5,000 a month to cover expenses. You sell 5,000 products a month. If you increase prices by just $1, you will have enough profit to cover what you need.
2. Determine Which Prices Will Get Raised
There are several options when it comes to your increased pricing strategy. You can raise prices for all products by a certain percent (like 5%), or you can pick a certain category.
Maybe your costs for your lipstick line went up, so you raise prices there to cover the hike.
You can also choose to only increase prices for new customers, though it can get tricky to keep up with who’s new and who’s not in an ecommerce store.
3. Give Customers Fair Warning
No one likes to feel like the rug’s been pulled out from under them, so make sure to warn your customers several months in advance that you plan to increase product prices.
Let them know which products will be affected and what the new prices will be.
It can be a good marketing strategy to offer existing customers a sizeable discount as a way to ease them into your new prices.
They might be irked that you’re increasing prices on their favorite products, but will be happy when they see they can save 25% one time only.
4. Aim for the Right Timing
The start of a new year is a fresh beginning, so it makes sense to increase prices then.
Leading up to January, you can offer bargain basement pricing on items you want to clear off the shelves, reminding people that this is their last chance to get such low products.
This can help you boost sales in Q4 and get more people hooked on your products so that they’re willing to pay more for them in the new year.
5. Find Other Ways to Add Value
While you shouldn’t apologize for your pricing increase, understand that customers may be disappointed.
In that case, find ways to still provide value and keep them happy.
For example: you could include a handwritten thank you note in an order, or send a discount on the next purchase whenever a customer buys something.
You can throw in freebies or bundle products so customers feel like they’re getting more… even if they’re paying more for it.