Pricing a product is one of the most important decisions for any eCommerce business owner.
A well-thought-out pricing model not only affects your profits but also shapes how customers see your product, helps you stay competitive, and supports long-term growth.
Whether you are selling physical goods, digital downloads, or subscription-based services, choosing the right price can be challenging.
At WPBeginner, we have over a decade of experience successfully selling top-rated plugins like WPForms, MonsterInsights, and OptinMonster. This extensive experience has given us deep insights into product pricing, including which pricing models work best for different types of tools and how to use them to grow a business.
In this article, we will walk you through proven pricing strategies, explain how to price a product effectively, and share insights to make sure your products attract customers without hurting your profit margins.
We will cover a few different topics in this guide, and you can use the quick links below to jump to the one you want to read about:
What Is an eCommerce Pricing Model?
An eCommerce pricing model is a strategy that business owners use to decide how much to charge for their products or services in an online store.
It acts as a guideline for setting prices by considering key factors like production costs, market demand, competition, and the perceived value of your product.
Choosing the right eCommerce price model can help you scale your business, boost profits, attract new customers, and stay competitive in the market.
Unlike relying on guesswork or personal intuition, a structured pricing model makes sure that your prices are fair when considering your costs and market conditions. It provides valuable insights into customer behavior and willingness to pay, which can improve sales and customer satisfaction.
Additionally, using a pricing model promotes consistency, making it easier to adjust your prices as your business grows or the market evolves.
Overall, a strategic eCommerce pricing model reduces the risks of overpricing or underpricing, helping you boost revenue and build a sustainable, long-term business.
Types of eCommerce Price Models
Here is a list of some common eCommerce pricing models that are used by successful brands and businesses online.
Cost-Plus Pricing Model
The cost-plus pricing model is one of the simplest and most popular pricing strategies used by eCommerce businesses.
In this model, the price of a product is set by calculating the total cost of producing it and adding a fixed markup to ensure a profit.
The total cost includes direct expenses like manufacturing, shipping, and raw materials, along with indirect costs such as overhead. The markup is usually a percentage of the total cost, making sure the business makes a profit on each sale.
For instance, if you are selling clothes and it costs you about $25 to manufacture a T-shirt, you can set its price at $30, and you will make a profit of $5.
One of the main advantages of the cost-plus pricing model is its simplicity. Since it’s based on actual costs, it’s easy to calculate and implement, making it a popular choice for beginners who are just opening an online store.
Value-Based Pricing Model
In the value-based pricing model, the price of a product is determined based on its perceived value to the customer rather than the cost of production.
Here, businesses focus on what customers are willing to pay for the benefits their product provides.
A popular example of the value-based pricing model is Apple products, such as the iPhone, iPad, and MacBook. They are priced based on the perceived value they offer to customers rather than just the cost of production.
However, businesses must invest time in learning what their target audience values most and how they view the product’s worth. Additionally, strong customer loyalty is essential for this model to work effectively.
Competitor-Based Pricing Model
In this eCommerce pricing strategy, businesses set their prices based on what their competitors are charging for similar products.
After research, businesses can choose to match, slightly undercut, or price higher than competitors depending on their position in the market and the value they offer.
For example, if you research the most popular contact form plugins on the market, you’ll notice that most pricing plans start at $30–$60. This is an example of competitor-based pricing, as all of them are offering similar products at similar prices.
However, this model also has some downsides. It doesn’t consider the unique value your product might offer, and it can lead to constantly lowering prices to beat competitors.
This reduces profit margins and makes it harder to stand out.
Dynamic Pricing Model
The dynamic pricing model is a strategy where the price of a product changes based on factors like demand, time, or market conditions.
This model allows businesses to adjust their prices in real-time to maximize profits. For example, prices might be higher during peak demand times, like holidays or special events, and lower when demand is slower.
Even so, we don’t like that this model requires constant monitoring to ensure the right prices are set at the right time, which can be tiresome.
Dynamic pricing is commonly used in industries like travel, hospitality, and eCommerce, where prices can fluctuate based on supply and demand.
For example, you have probably noticed that hotel prices in places like Bali are higher during peak season and lower in the off-season when there’s less tourism.
Freemium Pricing Model
The freemium pricing model offers a basic version of a product or service for free while charging for premium or advanced features. This strategy allows businesses to attract a larger user base by giving away the core functionality for free and encouraging users to upgrade to paid plans for more advanced features or better performance.
It’s commonly used in software, plugins, and online services.
Over the years, we have used this model to price products like PushEngage, Duplicator, and MonsterInsights. We offer a free version of each product, and you can upgrade to the pro version if you want more features.
Bundle Pricing Model
The bundle pricing model involves offering multiple products or services together as a package at a lower price than if they were purchased individually. This encourages customers to buy more by giving a discount for buying in bulk.
It is often used by online stores to increase sales, clear out slow-moving inventory, promote related products, or boost revenue during the holiday season.
For instance, Smash Balloon offers an all-access bundle deal at a better price than buying each plugin separately.
This helps them boost sales and gives customers a feeling of getting more value for their money.
Tiered Pricing Model
The tiered pricing model is when a business offers various levels of a product or service, each at a different price with different features. Each level is meant for different customer needs or budgets.
For example, a membership website might offer three plans: a basic plan with limited access, a mid-tier plan with more content or benefits, and a premium plan with full access to everything. This way, customers can choose the plan that best fits what they need and are willing to pay for.
As customers’ needs grow, they may upgrade to a higher tier to access more features, which can increase revenue for your business over time.
Tiered pricing is commonly used in subscription-based services and membership sites.
Psychological Pricing Model
The psychological pricing model uses pricing tricks to influence customers and make products seem more affordable or valuable. The idea is to set prices that trigger emotional responses and encourage a purchase.
A common example is pricing something at $9.99 instead of $10.00. Customers often see the price as closer to $9, even though it’s only a one-cent difference. This small change can make the product seem like a better deal, even if the difference is minimal.
Another example of psychological pricing is offering a “premium” version of a product at a higher price, which makes the regular version look more affordable. This is often done in online stores to persuade customers to buy.
The goal of psychological pricing is to make the price feel just right for the customer’s mindset, encouraging them to make a purchase without feeling like they are spending too much.
This model is often used alongside other pricing strategies, like cost-plus or value-based pricing, to make your product seem more affordable.
Effective Tips for Pricing Your eCommerce Products
Pricing an eCommerce product can be tricky because it is more than just picking a reasonable number. It involves understanding your costs, market, and customers’ willingness to pay.
Here are some effective tips that can help you choose the right price for your eCommerce products:
- Understand Your Costs: Before setting any price, you will need to calculate all costs involved in producing and selling the product. This includes manufacturing, shipping, marketing, and platform fees. Knowing your costs helps ensure that you are not underpricing and losing money.
- Know Your Market and Competitors: It is crucial to research your competitors to see how they price similar products. If you plan to use the competitor-based pricing model, then you will want to stay competitive without overpricing or undervaluing your product. Make sure to consider any unique features or benefits your product offers compared to others.
- Consider Customer Perception: You need to research and understand how much customers are willing to pay based on the perceived value of your product. For this, we recommend doing customer surveys to find out what your target audience values the most.
- Test Different Prices: You can run A/B tests with different price points and strategies to see which one performs best on your online store.
- Offer Discounts: If you are just starting your store, it’s a great idea to offer discount coupons to motivate customers to buy more, increasing your average order value. This is an effective strategy for both bundle pricing and tiered pricing.
- Seasonal Trends: Remember to adjust your pricing during certain times of the year, like holiday sales or seasonal promotions. For example, you can lower product prices during Christmas to increase conversions.
By combining these tips, you will be able to price your products accurately and grow your business.
How to Price a Product in WooCommerce
If you are selling physical products in WooCommerce, the first step is to choose a pricing model that aligns with your business needs. For most online stores, we recommend cost-plus pricing because it’s beginner-friendly and ensures your costs are covered while leaving room for profitability.
However, if your store operates in a competitive market, such as clothing, cosmetics, or home decor, then competitor-based pricing is the way to go. On the other hand, you can consider a value-based pricing model for selling premium or unique items.
To determine which model is best for you, start by calculating all costs involved in creating your product. Next, research similar products in the market to understand how competitors are pricing their items and use analytics tools to monitor your sales performance.
Once you have chosen the right model, it’s time to price your product in WooCommerce. For this, visit the Products » Add New Product page from the WordPress dashboard.
Once there, add a name, description, and images for your item according to your liking.
After that, scroll down to the Product Data section where you can add the determined price for your item in the ‘Regular Price’ section.
If you want to offer discounts, enter the discounted price in the ‘Sale Price’ field. You can also schedule the sale to start and end on specific dates by clicking the ‘Schedule’ link.
Once you are done, just scroll back to the top and click the ‘Publish’ button to store your settings. For more details on building your store, see our complete WooCommerce guide.
You can now visit your website to see the product live.
How to Price a Product in Easy Digital Downloads
When selling digital products with Easy Digital Downloads, the right pricing model can significantly affect your revenue.
For instance, value-based pricing is an excellent choice for selling digital goods like software, plugins, or eBooks because it emphasizes the perceived value of your product to customers.
Freemium pricing is also a proven strategy, where you offer a basic version for free and encourage users to upgrade to a premium version with additional features. On the other hand, tiered pricing is a great fit if you offer multiple versions of software, with each level unlocking new features or capabilities.
Over the years, we’ve successfully used both freemium and tiered pricing strategies to sell our plugins, and the results have been outstanding. These models have allowed us to cater to a wide range of users, from those seeking basic functionality to people needing advanced features.
However, before you select a strategy, you must understand your target customers and their willingness to pay for your product. You can use surveys or customer feedback for that. We also recommend clearly communicating the unique benefits of your product on your website to justify its price.
That said, to add a product price in Easy Digital Downloads, you need to visit the Downloads page and click the ‘Add New’ button.
This will open the block editor, where you can add a name, description, and image for your digital item.
Next, scroll down to the “Download Files” section and upload the file you want to sell from your computer. You can also give the file a name to help customers identify it.
Then, move to the ‘Download Details’ section, where you can add a price for your product.
You can also add variable pricing by checking the box at the top. This will allow you to set different pricing tiers based on the product’s features or versions.
However, if you choose this option, then you must scroll back to the ‘Download Files’ section and upload additional files that correspond to each pricing tier.
Once uploaded, you can assign each file to the appropriate tier using the dropdown menu.
For example, if one file contains the first 10 chapters of your eBook, then you can select the corresponding price tier and name it accordingly, such as ‘Chapters 1-10.’ This allows you to offer different levels of access or content based on the customer’s chosen price tier.
Finally, click the ‘Publish’ button at the top to store your settings. To learn more, see our tutorial on how to sell digital downloads in WordPress.
You can now visit your website to see the product in action.
How to Price a Product in MemberPress
When pricing subscriptions or memberships in MemberPress, we recommend choosing the tiered, freemium, or usage-based pricing structures.
Tiered pricing allows you to offer different membership levels with varying benefits, which can appeal to a wide range of users. For example, you might have a basic, premium, and elite subscription, each offering additional features or content.
The freemium model lets you offer free access to basic features with the option to upgrade to a paid plan for more advanced options. This model can help attract a large user base and convert some of them into paying members.
Similarly, usage-based pricing charges users based on the frequency or volume of use, ideal for services like SaaS platforms.
Each of these models has its benefits depending on your product and audience, and MemberPress makes it easy to implement them.
To add a pricing plan, you need to head to the MemberPress » Memberships page and click the ‘Add New’ button.
This will open a new screen where you can add a name and description for the membership plan. Then, add a price in the ‘Membership Terms’ section.
If you want to accept one-time payments from customers, then you can just click the ‘Publish’ button.
However, to accept recurring payments for the membership, choose the ‘Recurring’ option as the billing type.
This will open some extra settings where you can choose the billing interval for your membership plan from the dropdown menu. This is how often your members will be charged.
You can also offer a free trial by checking the ‘Trial Period’ box. After that, you can specify the duration of the trial.
Finally, click the ‘Publish’ button to store your changes. You can now repeat the process to add other subscription or membership plans to your website.
For more details, see our tutorial on how to accept recurring payments in WordPress.
Here’s a preview of the membership plan in action.
Bonus: Simplify Calculations for Custom Products With WPForms
Pricing can be challenging for custom products. Unlike standard products with set prices, custom items often have to factor in each order’s unique specifications.
For instance, if you sell custom t-shirts where customers can choose the design, fabric, and other features, it’s impossible to list a fixed price for each item ahead of time.
In these cases, a pricing calculator becomes essential to give shoppers an estimate before they decide to make a purchase.
This calculator will allow customers to enter their preferences and get an immediate price estimate based on their selections. Customers can select the fabric, color, size, and additional customizations, and the form will automatically generate an estimated cost based on these options.
So, if you plan to sell custom products, we recommend adding a cost calculator with WPForms. It is the best calculator plugin on the market, and it comes with a drag-and-drop builder and 2000+ premade templates, including a shipping cost calculator, instant estimate calculator, dynamic pricing calculator, and more.
We have used WPForms to create all kinds of forms for our websites, and it has consistently delivered great results. To learn more, see our WPForms review.
The plugin even features an AI builder that lets you type in a prompt describing the kind of cost calculator you need for your website, and the AI will create it for you automatically.
For instance, to create a cost calculator for a custom product, you can use the following prompt:
Create a cost calculator form for a custom product where customers can get an immediate price estimate. The form should include the following fields:
A dropdown for selecting the fabric type (e.g., Cotton, Polyester, Silk) with different price points.
A color selector with no additional cost.
A dropdown for size options (e.g., Small, Medium, Large), each with a different base price.
Checkboxes for additional customizations (e.g., Add a logo, Custom text) with fixed extra costs.
A quantity field to calculate the total price based on the selected options and the number of items.
Include real-time price calculation and display the total price dynamically at the bottom of the form.
WPForms’ AI Builder will then generate a form for you.
If you are satisfied, just click the ‘Use This Form’ button to launch it in the form builder.
Once there, you can easily edit, rearrange, or delete form fields to suit your needs. The AI will have already added the calculation fields for you, so you don’t need to worry about setting those up yourself.
Finally, just click the ‘Save’ button at the top to store your settings.
You can now add the product cost calculator to your website with the WPForms block.
To learn more, see our beginner’s guide on how to create a custom calculator in WordPress.
Frequently Asked Questions About Pricing Products
Here are some questions that are frequently asked by our readers about pricing an eCommerce product:
How can I test and adjust my pricing strategy?
To test and adjust your pricing strategy, you can start by experimenting with different price points to see how they affect your sales.
One common method is A/B testing, where you offer the same product at different prices to separate groups of customers and compare the results. You can also use tools like MonsterInsights to track changes in conversion rates and customer behavior after adjusting your prices.
We also recommend paying attention to customer feedback and analyzing your competitors’ pricing strategies. You can then adjust your product prices based on factors like demand, market trends, and how your customers perceive your product.
How can I choose the best pricing model for my products?
Choosing the right eCommerce pricing model depends on several factors, including your product type, business goals, market conditions, and customer preferences.
For instance, if you sell products similar to your competition, then competitor-based pricing might be suitable. If you offer premium or unique items like homemade products, value-based pricing could help you capture higher margins.
However, if you are looking for a simpler approach, then cost-plus pricing ensures you cover your costs while earning a profit. You can also experiment with a combination of models to see what works best for your specific market.
Can I change my pricing model later?
Yes, pricing models can evolve as your business grows or as market conditions change.
For example, you might start with cost-plus pricing when you are testing your product and later switch to value-based pricing as you better understand your customers’ willingness to pay.
Even so, we recommend clearly communicating any changes to your pricing plan with your customers to avoid confusion or frustration.
Is psychological pricing always effective?
Psychological pricing, like ending prices at .99, is widely used and can improve sales by making prices feel more affordable.
However, its effectiveness depends on your target audience and the type of product you sell. For high-end luxury products, this tactic may not work well, as customers might perceive prices like $999.99 as less premium.
That is why we recommend using psychological pricing with caution and considering your target audience before making any changes.
We hope this article helped you learn how to easily price an eCommerce product. You may also want to see our beginner’s guide on how to choose the best products to sell online and our top picks for profitable eCommerce business ideas for WordPress.
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