Although choosing products and marketing are very important for successful dropshipping, pricing can determine whether your business will be profitable and sustainable or not. There are many different dropshipping pricing strategies, every having some benefit.
Profit in dropshipping is easy to calculate. You take the price you are selling the product for, subtract the money you need to pay to get it, and that’s your profit. However this is not the total profit. There is money you need to pay for marketing, apps and plug-ins like Reviify’s PRO plan that allows you to skip blacklisted words when importing reviews alongside tons of unlimited features. Another thing to consider are returns. They aren’t that frequent, and you can prevent many with good customer service, but they are inevitable.
Manufacturer suggested retail price
Or MSRP for short, is one of the safest strategies, especially for new dropshippers. Because this price is suggested by the retailer it is the price that most customers expect for such a product. This helps those that are just starting with dropshipping to not overprice their product, but also to avoid underpricing the product leading your business to bankrupt.
This method is not solely used by dropshippers but by all different types of merchandise. A well known psychological trick is to make your prices seem lower by having them end in .99 instead of rounding the number. So instead of 100$ you can put 99.99$. Although the real difference is in only one cent it seems much less to your customer.
Fixed markup on cost (FMOC) is a strategy where there is a fixed percentage added to the price your retailer offers. The strategy allows for an easy profit calculation. Downside of this strategy is that sometimes when the prices are too low it might not cover all your expenses or it would pump the prices too high for expensive products. One solution for this is to have fixed dollar markup, that way you’ll be sure that all your expenses are covered no matter what the price of the product is.
Another solution for the aforementioned problem is to have pricing categories. For example you can make one category 0-10$ and have a markup of 50%, then from 10 to 100 with a markup of 20% etc. categories will vary according to the pricing range in your product offer. This prevents you from charging too much for higher priced products, but also allows you to earn enough from lower priced items.
This method also utilises the power of psychology. In the time of Amazon one day shipping some customers are dissatisfied with paying for long shipping common in dropshipping. Thankfully they are okay if they can get it for free, then it’s worth waiting some extra time. To accomplish this you can look for suppliers that offer free shipping or include the shipping price in the product price.
If you feel like standing out from the competition with your prices consider increasing them significantly. This can also be complemented with any of the above mentioned strategies.