Most ecommerce stores set prices by adding a markup to cost and checking what competitors charge. That produces mediocre margins and a race to the bottom. Profitable ecommerce pricing requires understanding what drives perceived value — and using it deliberately.
Cost-Plus Pricing: The Floor, Not the Strategy
Cost-plus pricing gives you a minimum. Your landed cost per unit, plus your shipping cost, plus your overhead allocation, plus a margin target — that is the floor below which you cannot price without losing money. Every product should have this number calculated.
The mistake is treating the floor as the price. Cost-plus tells you where you must not go below. It says nothing about where the market will bear going above.
A handmade soap bar that costs $3.80 to produce might sell profitably at $8.99, $12.99, or $18.99 — depending on positioning, packaging, and the story around it. Cost-plus gets you to $8.99. Positioning strategy gets you to $18.99.
Calculating Your True Landed Cost
Include every cost between “raw materials” and “product in customer’s hands”:
- Cost of goods (materials, manufacturing, or wholesale price)
- Shipping to your warehouse
- Storage/warehousing costs allocated per unit
- Payment processing fees (typically 2.9% + $0.30 via Stripe)
- Returns allocation (if 5% of items get returned and refunded, that is a per-unit cost)
- Packaging materials
Most stores forget payment processing fees and returns allocation. On a $30 product at 3% return rate, payment processing alone adds $0.87 per unit sold. At scale, these numbers are significant.
Competitive Pricing: Research Without Racing to the Bottom
Check what competitors charge. But do not match them by default. Price matching is a strategy only when your cost structure is genuinely lower than theirs and you intend to compete on volume. For most small ecommerce stores, that is not true.
The productive question when researching competitors is not “what do they charge?” but “why do they charge that?” Are they competing on price because they have low-cost manufacturing? Or are they underpriced because they have not figured out positioning yet? Those are different situations with different implications for how you respond.
Priya ran a specialty hot sauce store. Her competitors priced at $7.99–$9.99. She ran the math: at $9.99, her margin after all costs was 31%. At $13.99, it was 52%. She repackaged her product, added detailed tasting notes to the product page, and priced at $13.99. Sales volume dropped 18% initially. Margin per unit more than compensated. Total profit increased 41% in the following quarter.
Psychological Pricing Tactics That Work
These are not tricks. They are accurate descriptions of how buyers process numbers.
Charm pricing — prices ending in .99 or .97 consistently outperform round numbers for most product categories. $49.99 outsells $50.00 not because buyers do not know the difference, but because the left-most digit anchors perception. This effect is smaller for luxury items, where round numbers signal premium quality.
Price anchoring — showing a “compare at” or “was” price makes the current price feel like a deal, regardless of the absolute amount. A $45 item listed as “Was $65, Now $45” converts better than “$45” with no context. This only works if the original price is real — manufactured “was” prices are deceptive and increasingly illegal.
Bundle pricing — grouping products at a bundle price that is below individual item total. A “starter kit” at $89 when the individual items total $112 gives the customer a clear reason to buy more. Bundle pricing lifts AOV and is one of the cleanest ways to improve margin per transaction.
Tiered options — presenting three versions (good, better, best) anchors the middle option as the reasonable choice. Most buyers select the middle tier when three options are presented. If your highest-margin product is in the middle, this structure works in your favor.
Price Testing in WooCommerce
WooCommerce does not have native A/B price testing — you need a plugin or external tool. Options:
Nelio A/B Testing — runs split tests on product pages including price. Requires some technical setup but works cleanly with WooCommerce.
Google Optimize (now deprecated) — was the standard; Google shut it down in 2023. Alternatives include VWO and Optimizely, both of which integrate with WooCommerce but carry a cost.
Manual rotation — for stores without budget for testing tools, price products at one rate for 30 days, switch to a different rate for 30 days, and compare revenue-per-visitor. This is not a controlled test, but it gives directional data.
Testing prices on your 5–10 best-selling products will have significantly more impact than testing anything else. Find your highest-volume SKUs and test those first.
Discount Strategy: When to Use It and When Not To
Discounts are a tool with a cost. Every discount trains a segment of your customers to wait for discounts. Run deep discounts frequently enough and you create a customer base that will not pay full price — ever.
The situations where discounts work without poisoning your pricing:
- New product introduction — a launch price that expires creates urgency and does not become the new normal
- Inventory liquidation — clearing specific SKUs, not site-wide discounts
- Abandoned cart recovery — offered at step 3 of the email sequence, not immediately
- Loyalty rewards — exclusive discounts for repeat customers feel earned rather than expected
Site-wide “20% off everything” sales train your customers to buy only during sales. If you run one major sale per year (Black Friday), you condition customers to wait. If you run them every few weeks, you have effectively lowered your prices by 20% while maintaining the fiction of a higher price.
See our custom WooCommerce stores for how pricing rules, bundle configuration, and dynamic discount logic are built into stores that handle this complexity cleanly.
Pricing for Profitability Across a Catalog
A product catalog is not flat — some SKUs carry your margins, others exist to drive traffic and capture customers who then buy the higher-margin products.
Loss leaders — priced at or near cost, designed to drive traffic and first purchases. The logic: acquire a customer cheaply, then retain them.
Core products — your bread and butter, priced for sustainable margin. These are where your business lives.
Premium/hero products — your highest-margin SKUs, priced for buyers who want the best version. These are where profit per unit is highest.
Knowing which products play which role changes how you price each one. A loss leader should not be priced for margin. A premium product should not be priced by cost-plus alone.
Tom ran a photography accessories store. He mapped every SKU to one of these three roles. His tripod adapters were loss leaders — cheap, high-search-volume items that brought photographers to the store. His tripod heads were core products. His carbon fiber tripod kits were hero products. He repriced each category accordingly. Three months later, his net margin per order had increased from 24% to 39%.
Communicating Price Changes
When you raise prices — and at some point you will need to — the approach matters.
For existing customers: notify them in advance if you have a subscription or repeat-order product. Give them time to stock up at the old price if they want. This maintains trust even through an uncomfortable change.
For new visitors: the new price is the price. No explanation needed.
Do not apologize for pricing. Confidence in your pricing signals confidence in your product. A store that explains at length why its prices are what they are is signaling uncertainty.
If you are building or rebuilding your WooCommerce store, the pricing architecture is worth getting right from day one. See our fixed-price packages for what is included in a WooCommerce build that handles complex pricing rules.
FAQ
What margin should I target for an ecommerce product? It depends on your category, but 40–60% gross margin is a common target for direct-to-consumer physical goods. Below 30%, you have very little room for customer acquisition costs, returns, and discounts. Above 70%, you may have pricing headroom you are not capturing. Calculate gross margin after all landed costs, not just cost-of-goods.
Should I charge $X.99 or round numbers for my products? Use .99 pricing for standard consumer goods. Use round numbers for premium or luxury items where the .99 ending signals discount rather than value. Test both on your highest-volume SKUs — the right answer depends on your specific audience and positioning.
How often should I review my product pricing? At minimum, quarterly. Your cost of goods may change with supplier pricing, your carrier rates may shift, and your competitive landscape evolves. Prices that were right 12 months ago may be underpriced today.
Is it legal to show a “was” price that was never the actual price? No. The FTC and most state consumer protection agencies require that “compare at” or “was” prices reflect actual previous selling prices. Manufacturing fake “was” prices is deceptive pricing and can result in legal action. Only show comparison prices that are real.
How do I handle pricing for products I sell on both my website and Amazon? Amazon MAP (Minimum Advertised Price) agreements with suppliers typically set a floor. Your own website pricing should be at or above that floor. Some brands offer website-exclusive bundles or gifts-with-purchase to create a better-value offer on their own site without violating marketplace price agreements.