 So in this video I'm going to show you how to price your products for maximum profitability. I did a video on this topic two to three years ago but as we know the online space changes pretty quickly and what worked two to three years ago doesn't necessarily work today. So I wanted to record this video and take you through the new set of rules that you can use to apply to your products to make as much money as possible. Pricing your products as an e-commerce business owner is obviously a very important aspect. Price them too expensively, customers get put off and ultimately they'll leave. Price them too cheaply, people will assume the products of a poor quality and again they'll leave. So in this video I'm going to take you through a set of rules that you can apply to no matter what product it is you are selling that will help you price it for maximum profitability. So firstly there is no one rule to suit every single product, it's a combination of many things. Give you an example of this, let's take this LED floor lamp here. If we apply a common rule you may hear of doubling the price of the cost of the product that would mean we would have to sell this lamp for 40 pounds. 40 pounds is probably about right in the ballpark number for this product so in this case it actually works. If we apply the same rule to this robotic vacuum it would mean we would have to retail this product at 440 pounds. That obviously makes these products really expensive and really difficult to compete with the other competitors selling this product. So to avoid this I'm going to take you through a set of rules that will help you price your products correctly. Number one as a minimum you must allow for 20 pound ad costs. So what this means is if we go back to this LED floor lamp the cost of this product to us is 20 pounds. Make sure you include any shipping costs on top of that. As we can see it's free shipping with the products like this so 20 pounds and 14 pence is the final price to us. As a very minimum then we would then have to retail this product at 40 pounds to make sure we have that 20 pound room for ad costs. Through my own experience 20 pounds is about right but when you do the math taken into account the averages of Shopify as a whole it works out at approximately the same. So if we do the maths we can see the average cost per link click according to HubSpot is 78 pence. The average Shopify store conversion rate with ads of put at 4%. If we take a look at blend commerce they say the average mobile conversion rate for Shopify store owners is 0.9%. If we look at trustmarry.com they say business owners getting into Facebook advertising can expect around two to three percent conversion rate right after the get-go but you should aim to improve that number to six percent. So the reason I've gone with four percent is because we're running ads. When you're running direct marketing your conversion rate will be a lot higher versus just relying on organic traffic. So if we apply this four percent conversion rate to a 78 pence cost per link click essentially we need approximately 25 visits for every single purchase and 25 visits times the 78 pence cost per link click is 19 pound 50 an ad spend. If we base our numbers on worst-case scenario like this a customer comes onto our site and buys one single product we can still make a profit on the front end this doesn't account for any upsells or any re-tagging. So the key takeaway from rule number one allow for a minimum of 20 pound for your ad spend and make sure you include upsells to bump up that average order value i.e. the profit per sale. Let's give you an example of what upsells might look like let's take a look at an example from conversionbear.com. So this is an example store of theirs the customer would come onto our site if they like the product they hit the add to cart button and it will take them to the cart page. The next step obviously for the customer is to hit that checkout button and this would be the point in which the customer is hit with an upsell offer. If you do this correctly and offer a product which is cheaper and falls in line with the initial trigger product the initial products they're buying then you can expect a conversion rate of anywhere between sort of three and ten percent on this. If you drop shipping just make sure the upsell product comes from the same supplier as the trigger product that way they'll be shipped in the same package and you'll only be paying one shipping cost and not two. Rule number two when it comes to pricing your products is what is the perceived value of the product so i'm going to show you some examples of where perceived value can make a difference. Example number one is if you're selling a product which is very technology based like this robotic vacuum everybody would expect a robot vacuum to be quite expensive they wouldn't expect them to be cheap because of the technology involved. Surprise this product as expensive as possible while staying cheaper than your competitors. So if we have a look on Curries which is a popular store in the UK which sells a lot of kind of gadgets and technology based things everything from appliances TV and auto computing etc. If we have a quick scroll through we can see 200 pounds 250 pounds 900 pounds 300 pounds 200 250 150 450. So if it was me I would put the sweet spot in and around the 300 pound mark. When it comes to perceived value then branding can be a point as well. Example number two is problem solving the bigger the problem you can solve for somebody the more they're willing to pay for it. Products on screen is a heated knee massager this can obviously drastically and literally change somebody's life for the good therefore the product has a significantly higher perceived value and therefore somebody be willing to pay a lot more for it. With products like this it's obviously really important that you target the right audience. For a young person who is an experienced in knee pain they would pay significantly less for a project like this versus somebody in their 70s who was an ex tennis player and experiences knee pain on a daily basis. Example number three is passion the more passionate somebody is about your product the more they will pay for it. As an example we can take this vegan t-shirt the vegan niche is obviously something people are super passionate about and therefore they would pay more for this t-shirt versus say and meat eater and because they're so passionate about veganism versus somebody who say eats meat they're obviously much more likely to pay more money for a product like this. This is one of the reasons why I love Facebook ads so much and I've used them for nearly five years now is because you can target people based on their interests. To sell a t-shirt like this to target an audience would be really simple because you can target interests like veganism and other vegan brands. Speaking of brands this moves me on nicely to point number three which is if you have a desirable sought-after brand then you can definitely charge more. One great example of this is coffee. If you go to a highly branded coffee shop like Starbucks or Custer then expect to pay a lot more versus a smaller privately owned coffee shop. The same for this can be applied to many of the different industries as well if you consider clothing, car industry, sports industry and definitely the technology industry as well. Just to go over a quick recap then of the main three points. Number one as a minimum allow for 20 pound ad costs. Make sure you also have an upsell trigger in your store to bump up that average order value. All number two is what is the perceived value of your product. People expect to pay more for your product don't be scared to then charge more for your product just make sure you charge a similar amount in line with other competitors. If your product solves a massive problem for somebody and can drastically improve their lives per se save them time make them healthier give them pain relief and a perceived value of your product is a lot higher and somebody would be willing to pay a premium price. An example number three is passion. The more passionate somebody is about your product or your brand the more money they're going to pay for it. If you're still not sure how to price your products then there's a last resort you can use competitors. You can use the Shopify products tab on sell the trend. I featured this in my video yesterday which will show you exactly how to use it. You can find the exact same products you find on AliExpress but what people are selling them for in their Shopify store and you can use that to mirror the prices on your Shopify store or you can use a simple Facebook search go into the top left put in your product followed by buy here and then you can filter by posts or by videos and you'll be able to see ads from companies selling the same product. You can go to their Shopify stores and see exactly what price they're selling it for and with that being said that's everything I wanted to cover in this video. Thanks for watching I really do appreciate all the support on these videos. If there's anything you feel like I missed make sure you let me know by leaving a comment in the comment section down below. Make sure you hit that subscribe button to stay up to date with my latest content. I'm one final very quick message before you go. If you are looking for a program to take you from day one the very beginning from scratch as a complete beginner all the way up to having a fully fledged functioning business on Shopify make sure you check out my e-commerce academy there will be a link in the video description below. Thanks again I'll see you guys in the next one.