Dropshipping Basics Marketing

Dropshipping Pricing Strategy: How to Price Smarter

If you are a dropshipper or online seller, one of the common problems you may have is pricing. Perhaps, you may be asking, “What price should I put on my products?” or “Am I overpricing or underpricing my products?”

Your price can determine the success and failure of your business. Depending on the products you are selling, you should have a flexible pricing strategy. Your approach can vary as it involves testing what works better and what’s not. 

Your pricing strategy should be aligned with your customer’s purchasing behavior and your desired profit margin. In this blog post, let us look at the best strategies on how to price your products correctly so that you can achieve optimum success.

1. Fixed Dollar Markup vs Fixed Percentage Markup

The first step is to determine the average costs of your products. Assuming that your products cost around $12, adding a 15% percentage markup, that would be $1.8 per product. 

On the other side, if you are using a fixed dollar markup of $3 or $5 per item, you are earning more profit. This pricing strategy is ideal if you are selling low-cost products.

2. Tiered Markup on Cost

This approach uses a combination of markups of both lower and higher-priced products. The idea is to have an edge over your competitors particularly if you have similar products.

Most sellers use a set tier markup to save time but it’s better to have varied pricing.

For example, both of you are selling computers and accessories.

Let’s assume the computer costs $600 and the accessories cost $250.

Your competitor used a set tier of 30% markup. 

$600 (30%) = $780   Profit: $180

$250 (30%) = $325   Profit: $75

You use a tiered markup where you put 25% markup on a computer and 40% markup on accessories. 

$600 (25%) = $750   Profit: $150

$250 (45%) = $362   Profit: $112

This simple change can significantly affect your sales. When a customer looking for a computer, visits different stores and compares prices, he will likely purchase from your store because you have a lesser markup. And even if he has to spend slightly higher on accessories, the customer is still happy because he gets the computer at a cheaper price than other stores.

The idea is to add a lower markup on higher products and a higher markup on lower products. These price levels attract customers to the shopping cart and make a purchase.

3. MSRP (Manufacturer’s Suggested Retail Price)

If you want to avoid price wars, setting your price based on MSRP is an ideal choice. This allows you to be competitive and still maintain a decent profit. The main selling point here is the discount provided by the manufacturer. If the MSRP is $100 and you have a 15% discount, it will not be very difficult for you to sell. You are still making a profit while ensuring that consumers are paying the price they expect. 

4. Psychological Pricing

Perhaps, you have seen a $9.99 price shown in convenience stores instead of $10. This cent difference plays a trick to make customers believe that they’re getting a lower price. This pricing method is known as “odd-pricing” where you use cents with 5,7, or 9 ending values. Rather than selling your product at $10, you can price it at $9.99, $9.97, or $9.95. You can see this approach in most e-commerce stores. The few cents difference can give you an edge over the competition.

5. Discount pricing

It is a pricing method where you price your products high and use discounts to attract buyers, making it seem that they are getting the best deal. For example, you mark-up a product at 50% and offer a special coupon or discount sale at 25%, you are still getting a 25% profit. 

When offering discounts, make sure that you start with higher prices so that you still have a wiggle room to be flexible with your prices. If you start at the lowest price you can sell it, then you will not get enough profit if you sell it at a discounted price.

6. Shipping Markup vs Price Markup

Since you need to sell a product at a competitive price, you are taking into consideration of your competitor’s prices as well. Store owners don’t want to overprice their products as it can turn the customers away. With this, sellers lower the cost of the product and add a hidden charge on shipping costs.

Others offer a free shipping promotion by pricing the products high enough to also cover the shipping costs. Both are good methods but you need to study the market and customer behavior. Are they preferring lower pricing or want to save shipping costs? Conduct a survey and base your pricing strategy on the results.

Wrapping Up

There is no best pricing strategy. Different products have their most appropriate pricing methods. To be successful, you need to constantly study your competitors and your target audience. Don’t be afraid to change your price approach. Sometimes it needs a few tweaks to find the right price that will attract your customers to click the add to cart button. 

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How to Improve Customer Service in your E-commerce Store

E-commerce is not just about selling a product to a customer. It’s also about providing assistance to your customers in their purchasing decisions and resolving any issues and concerns. 

Since e-commerce is not a face-to-face interaction between a customer, you need to develop a system that provides them with a seamless shopping experience. Customer service directly impacts brand loyalty. If you are not paying attention and properly engaging with your customers, you can lose potential sales and build a bad reputation. 

Here are some effective ways to ensure superior customer service.

1. Get Organized 

If you are just handling your online business alone, chances are you’ll get bombarded with a lot of tasks and inquiries. Organize the buyer’s journey and the processing of orders. 

If you have a dedicated team, equip them with tools that will help them handle customer service efficiently. Communication and collaboration are important to solve customers’ requests and purchases.

2. Offer Live Chat Support

A typical website has a contact form but that can be boring. Instead, offer a more interactive option which is a live chat or a toll-free number to call. Live chat gives you a ton of advantages from proactive selling, answering inquiries, up to post-sales support. Create pre-written transcripts to handle common questions and timely responses. 

3. Utilize FAQs

It can be tiring and time-consuming to answer the same question again and again. This is why it’s recommended to have an FAQ section on your e-commerce website. Put the frequently asked questions and the corresponding replies in them. 

Through this, your customers can just hover to your webpage and get the information they need. This keeps them informed about your products and policies; helping them find quick answers and stay on your website longer.

4. Offer Phone Support

Offering messaging options to your customers enhances a shopping experience. While some can leave a message on the contact form, others prefer text messaging especially when they are shopping through their mobile phones. 

You can send them a response to their order confirmation or requests via SMS. This makes customer service fast and convenient. You can easily connect with them about the product details they need, answer urgent questions, solve complaints, and increase shopping cart conversion. 

5. Social Media Messaging

Social media enables your customers to get in touch with you without going to your website. Integrate social media channels such as Facebook, Instagram, and Twitter into your online store. Establish a strong social media presence and use these platforms to boost brand awareness and enhance customer support. 

Social media can highlight your brand and reach a broader audience. It’s a great channel to start conversations and share customer reviews.

Final Thoughts

Customer service is a vital part of your e-commerce business. In the competitive e-commerce landscape, managing customers’ feedback and expectation is a deciding factor for success. Invest in tools and systems to improve your customers’ shopping experience. This will help your business retain and acquire more customers, and build long-term loyalty.  

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How to Boost Brand Loyalty for your Dropshipping Business

With growing competition in the e-commerce space, businesses need to focus on building customer loyalty. The cost of retaining a customer is lower than customer acquisition. This means that remarketing to your current and existing customers costs lower advertising spend than creating new Ads for potential customers.

Are your customers coming back to your store or are they just happy with their one-time purchase?

What is Customer Loyalty?

Customer loyalty means that your customers are willing to engage with your business and repeatedly purchase your products. These returning customers do not easily switch to your competitors and choose your business’ offerings based on certain positive factors.

How do you make your customers not switch from site to site and stick to your store? 

By knowing how to create long-lasting relationships and implementing the right client retention approach, you can create lifetime value and generate more sales from your current customers. 

1. Improve your customer experience

The way you treat your customers has a huge impact on your business. Customers who are treated poorly will likely leave your store and jump to your competitors. Customer service matters. Your business should invest in customer service to enhance customers’ experiences online. 

Show patience, clear communication, and empathy to your customers. Pay attention to their inquiries and guide them through the buying journey. The last thing you want is to give them a bad experience. The negative encounter can be easily spread to a wider audience and can ruin your business reputation. 

2. Offer multiple channels for communication

Customers have different preferences regarding communication channels. You need to adapt methods to reach your customers better. The easier for your customers to communicate with you, the better brand experience they’ll get. 

The popular communication channels that e-commerce stores should utilise are email, social media, and phone. Customers who don’t spend much time on social media can be reached through email inboxes while social media users can be reached on platforms such as Facebook and Instagram. 

Messaging apps like Webchat offer chatbot feature to provide helpful resources to help answer customers’ frequently asked questions. A phone call option is also a good way to reach customers directly whenever they feel stuck with automated prompts. 

3. Give exclusive perks and offers

To encourage repeat purchases, you need to make your customers excited about your brand. Offer customers with discount codes, free shipping vouchers, and other exciting perks. This encourages target customers to consider shopping in your store because of the value you provide.

However, don’t offer discounts often as this can hurt your branding. You want your customers to constantly check your products and get excited with your latest offerings. 

4. Develop a customer loyalty program

One of the best ways to encourage your new customers to make their next purchase is to reward them with incentives. You can kickstart a customer loyalty program and offer interesting perks and irresistible gifts to your customers. 

Many brands implement a point-system customer loyalty program where a customer earns points for every purchase they make. Then, they can use the accumulated points as credit for their next purchase or get an exclusive item as a reward when the target points are met. 

5. Add more Payment Options

One reason why customer abandons their carts is due to your store not offering quick payment options. Add multiple payment methods to your Shopify store to accommodate customers’ different payment preferences. Allowing customers to conveniently purchase your products electronically will make them happy. 

Putting limited and complicated payment options can be annoying to the customers as they have to sign up to a new payment platform and enter into a tiring process.

Wrapping Up 

According to e-commerce studies, a repeat customer is 9 times more likely to convert than a first-time customer. This is why businesses should exert effort in customer retention. A 5-10% increase in customer retention can boost profits by 25-30%. With a proper remarketing strategy and customer loyalty program, you can double and triple your sales and become a successful online entrepreneur.