Learn how to research and set the price for your new product in ecommerce.
the author
Angela Sokolovska
Ecommerce expert
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Pricing can make or break a new product launch. Set the price too low and you leave money on the table. Set it too high and you risk low conversions before the product even gets traction. Many ecommerce merchants fall into the trap of guessing or copying competitors’ prices without fully understanding their costs, market, or customer psychology.
This article walks through how to build a data-driven, profitable, and competitive pricing strategy for a new product in ecommerce. You’ll learn how to define your objectives, choose a pricing model, factor in costs and margins, test your assumptions, and adjust intelligently after launch.
Understanding the Role of Pricing in Ecommerce Success
Pricing is strategy and storytelling rolled into one. It does not just cover costs. It influences perceived quality, brand positioning, and every click between product page and checkout. Advanced merchants do not simply set prices. They continually test, monitor, and optimize pricing as a dynamic growth lever.
The Psychological Impact of Pricing
Shoppers rarely evaluate prices in isolation. They anchor, compare, and rationalize. For ecommerce merchants, that means:
Anchoring works both ways: Displaying a higher “original” price next to a discounted offer increases perceived value. But anchoring also happens against competitor pricing. If your product is twice as expensive with no clear differentiation, the anchor works against you.
Charm pricing vs. prestige pricing: For commodity products, prices ending in .99 can increase conversions. For premium goods such as jewelry or luxury apparel, rounded pricing (for example, $300 instead of $299.99) signals confidence and exclusivity.
Price-quality inference: Consumers often equate price with quality. If your product is truly superior, underpricing can unintentionally erode trust.
Actionable tip: Run a value perception survey. Ask customers what they expect to pay and compare it to your actual price point. This identifies whether you are undercutting perceived quality or pricing beyond expectations.
The Conversion Impact of Pricing
Price touches every stage of the conversion funnel:
Add-to-cart behavior: Small differences in price presentation (such as $20 vs. $19.95) can swing add-to-cart rates, especially in low-margin verticals like supplements or fast fashion.
Shipping transparency: Baymard Institute data shows 48% of shoppers abandon carts due to unexpected costs. Pricing strategy is not just about the product. It also includes how shipping, taxes, and fees are communicated.
Bundle and tiered pricing: Offering tiered bundles (for example, buy 3 for $50 instead of $19 each) can increase average order value (AOV) while improving conversion rates.
Actionable tip: Use cart abandonment analytics to identify the exact price-related friction points. Is it shipping? Is it perceived product value? Address those specifically rather than assuming your base price is wrong.
The Positioning Impact of Pricing
Your pricing is not just about profit. It defines where you sit in the market.
Premium positioning: If your goal is luxury, your price must reinforce exclusivity. Dropping prices to chase sales undermines long-term positioning.
Mid-tier positioning: The sweet spot for many ecommerce brands. Price should balance accessibility and quality, often paired with strong social proof.
Budget positioning: Competing on price alone is risky without economies of scale. Merchants here must rely on operational efficiency and volume-driven strategies.
Actionable tip: Create a competitive pricing map by plotting your key competitors by price and positioning. This visual makes it easier to spot opportunities for differentiation instead of joining the race to the bottom.
Defining Your Pricing Objectives
Before you calculate costs or look at competitors, you need clarity on your pricing objectives. Price is not just a number. It is a tool to achieve specific business goals. Your objectives dictate whether you should be more aggressive, more protective, or more flexible with pricing decisions.
Common Pricing Objectives in Ecommerce
Profit maximization: Set prices to achieve the highest possible margins. This works best when you already have strong demand or when your product has clear differentiation. For example, a brand with a patented skincare formula can safely prioritize margin because substitutes are limited.
Market penetration: Enter the market at a low price to gain traction quickly and scale your customer base. This is effective for fast-moving consumer goods or subscription products, where the goal is volume and recurring revenue. The risk is that raising prices later may cause pushback if customers get used to deep discounts.
Brand positioning: Use pricing to shape perception. A luxury brand might intentionally price higher to reinforce exclusivity. An everyday essentials brand might set lower prices to be perceived as affordable and accessible.
Aligning Objectives with Business Stage
Early stage: Penetration pricing can help win attention, but be prepared to shift once reviews, traffic, and customer loyalty grow.
Growth stage: Profitability becomes more important. Here, value-based pricing allows you to capitalize on customer trust while sustaining healthy margins.
Established brand: Positioning is critical. At this point, consistency matters more than aggressive experimentation. Sudden deep discounting can confuse loyal customers and damage long-term equity.
Actionable Steps for Merchants
Write down your primary objective before setting a single price. Is it revenue growth, margin protection, or brand equity? Clarity prevents reactive decisions later.
Create objective-driven KPIs. If your goal is penetration, measure success by customer acquisition cost and repeat purchase rate. If your goal is margin, monitor net profit per unit and overall contribution margin.
Plan for shifts. Objectives evolve. Map out how you will transition from penetration to profit focus or from margin-driven pricing to long-term positioning.
Pro tip: Many successful ecommerce brands operate with dual objectives. For example, launch with penetration pricing on one product line to build traffic, while keeping premium pricing on a flagship product to maintain margins.
Choosing the Right Pricing Model for a New Product
Once you know your objectives, you need to choose the pricing model that best aligns with them. The model you select will influence not just revenue, but also how customers perceive and interact with your brand.
Key Pricing Models in Ecommerce
Cost-plus pricing
How it works: Add a fixed percentage markup to your total costs.
When to use: Simple products with stable costs and little differentiation. For example, generic accessories or replenishable goods.
Risk: Ignores market perception and customer willingness to pay. Competitors may undercut you easily.
Value-based pricing
How it works: Set prices based on what customers are willing to pay, often determined by surveys, testing, and customer research.
When to use: Unique products with strong differentiation or emotional value, such as sustainable fashion or personalized gifts.
Actionable tip: Run willingness-to-pay surveys or test with Shogun A/B Testing [price testing feature coming soon] to validate assumptions.
Penetration pricing
How it works: Start with a low price to gain market share quickly, then raise gradually once customer loyalty is established.
When to use: Competitive markets where you need to build trust fast, such as wellness supplements or home goods.
Risk: Customers may resist when prices increase. Requires strong retention strategies.
Skimming pricing
How it works: Launch at a high price to maximize early adopters, then lower over time as competitors enter the market.
When to use: Innovative or limited-edition products. For example, a new tech gadget or exclusive collaboration in apparel.
Risk: May alienate price-sensitive customers. Timing the price drop is critical.
Competitive pricing
How it works: Set your price relative to competitor offerings, either slightly lower, equal, or strategically higher.
When to use: Commoditized products where differentiation is limited. Works best if paired with superior service or faster delivery.
Actionable tip: Build a real-time competitor price tracker to adjust dynamically instead of relying on occasional manual checks.
Combining Pricing Models for Stronger Results
The most successful ecommerce brands rarely stick to one model. They combine approaches to balance short-term traction with long-term sustainability.
Launch with penetration pricing on a new product line to drive acquisition, while maintaining value-based pricing on a flagship product to protect margins.
Use skimming pricing for exclusive drops, then pivot to competitive pricing when supply expands.
Layer bundles and volume discounts on top of value-based pricing to increase AOV without discounting your brand.
Pro tip: Revisit your chosen model every quarter. A model that works at launch may no longer serve you once your brand scales.
Factoring in Costs and Margins
Even the smartest pricing model will collapse if you miscalculate your costs. Many ecommerce merchants only account for product and shipping, forgetting the hidden costs that eat into profitability. To set a price that protects margins, you need a full cost picture.
Breaking Down Costs Accurately
Product cost: Raw materials, manufacturing, or wholesale purchase price.
Shipping and fulfillment: Warehousing fees, pick-and-pack labor, last-mile delivery.
Payment processing fees: Stripe, PayPal, or Shopify Payments usually take 2.9% + $0.30 per transaction. At scale, this becomes significant.
Returns and exchanges: Factor in the average return rate for your industry. For example, apparel averages 20–30 percent.
Marketing and acquisition: Paid ads, influencer collaborations, affiliate commissions, or content creation.
Overhead: Staff salaries, customer service, software subscriptions, and other operational expenses.
Actionable tip: Build a unit economics spreadsheet. For every SKU, calculate true cost per unit, factoring in overhead allocation. This prevents you from setting prices that look profitable on paper but lose money in practice.
Setting Margins Strategically
Margins are not just about protecting profit. They also give you room to experiment with offers and incentives.
Promotions and discounts: If your margin is razor-thin, running a 20 percent discount wipes out profitability. Build margins with enough buffer to support seasonal campaigns.
Free shipping thresholds: Customers expect free shipping. Set your threshold at a level that increases average order value while still protecting margin.
Wholesale or bulk sales: If you sell B2B or offer volume discounts, ensure your margins hold when prices drop for bulk buyers.
Pro tip: Treat margins like guardrails. Never go below your break-even margin, even during aggressive promotions. Experienced merchants often calculate both a floor price (the lowest possible) and an ideal price (where profitability thrives).
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This ensures every sale supports growth instead of eroding profitability.
Testing and Validating Your Price
Setting a price is not the end of the process. It is a hypothesis. The only way to know if your pricing strategy is effective is to validate it with real customer behavior. Testing ensures that your prices align with both profitability and market demand.
Tools and Methods for Price Testing
Shogun A/B Testing [Coming Soon]
Test different price points for your product to see impacts on conversion rates
Example: A lifestyle brand ran an A/B test with a $39 vs. $42 price point. Conversions dipped slightly at $42, but the increase in margin raised total revenue by 12 percent.
Discount experiments
Run limited-time promotions at different discount levels (10 percent vs. 15 percent) to see how customers respond.
Track redemption rates and whether promotions increase repeat purchases or only attract discount-driven shoppers.
Price sensitivity surveys
Ask customers directly what they would expect to pay. Tools like Van Westendorp’s Price Sensitivity Meter can help identify the price range customers consider “too cheap,” “too expensive,” and “just right.”
Market simulations
Use small cohorts of paid ads that promote the same product at different prices. Measure click-through and conversion rates to see which price creates the best ROI.
Metrics to Track During Validation
Conversion rate: Percentage of visitors completing purchases.
Revenue per visitor (RPV): Balances conversion rate with average order value to identify the true winner.
Customer acquisition cost (CAC): If a lower price does not significantly reduce CAC, the extra sales may not justify the margin cut.
Repeat purchase rate: Customers acquired through heavy discounts often have weaker retention.
Actionable Steps for Merchants
Test one variable at a time. Do not change the price and the product description simultaneously or you will not know what caused the outcome.
Run tests long enough to account for natural fluctuations in traffic and seasonality. A minimum of two weeks or 1,000 sessions per variant is a good benchmark.
Segment your data. High-value customers may react differently than one-time buyers. Do not make sweeping pricing changes based on aggregate averages alone.
Pro tip: Treat testing as ongoing, not one-and-done. Consumer expectations shift with the economy, competitor moves, and seasonality. A price that works in Q1 may need revisiting in Q4.
Communicating Value to Support Your Price
Price is only part of the equation. Customers will justify or reject it based on the story you tell and the value cues you present. Even a perfectly calculated price will fail if your product page does not communicate why it is worth paying.
Crafting Product Messaging That Justifies Price
Benefit-first descriptions: Move beyond listing features. Instead, show how those features solve pain points or elevate lifestyle. For example, “waterproof coating” becomes “stay dry in any weather without sacrificing style.”
Visual hierarchy: Place your strongest value proposition above the fold. Reinforce it with secondary benefits throughout the page.
In a simple yet effective messaging tweak, Edible Arrangements added a large banner just below the navigation bar to highlight their same-day delivery option, including a countdown timer. This single change led to an 8%increase in same-day sales.
Storytelling: Highlight origin stories, sustainability, or craftsmanship. Shoppers are willing to pay 10 to 20% more if they see authenticity and mission-driven branding.
Leveraging Social Proof and Trust Signals
Reviews and UGC: Display verified customer reviews, photos, or videos. Shoppers trust peer voices more than brand claims. For instance, VISP deploys an effective carousel of vertical videos from real users to help build trust.
Guarantees and policies: A 30-day money-back guarantee reduces perceived risk. Transparent returns policies increase buyer confidence.
Using Design to Reinforce Price Positioning
High-quality visuals: Crisp photography and lifestyle videos justify premium pricing. Poor imagery makes even low-priced products feel overpriced.
Scarcity and exclusivity cues: Limited edition tags or low stock notifications can strengthen perceived value.
Comparisons: Side-by-side comparisons show why your product is worth more. For example, if your product lasts twice as long as competitors, display that visually on the page.
Actionable Steps for Merchants
Audit your product pages: Ask yourself if the page makes the price feel like a bargain compared to the value offered.
Layer in multiple trust elements: Aim to have at least three forms of social proof (reviews, UGC, expert mentions) above or near the add-to-cart button.
Test messaging along with pricing: Use Shogun A/B Testing to measure not just price points but also the impact of different headlines, guarantees, or image styles on conversion rates.
Pro tip: If you are struggling with price resistance, the issue is often not the price itself but the way the value is communicated. Strengthening product storytelling can sometimes unlock higher margins without altering the actual price.
Monitoring and Adjusting Post-Launch
Launching a product with a strong pricing strategy is only the beginning. Market conditions, customer behavior, and competitive landscapes change quickly. To maintain profitability and relevance, you need an ongoing system for monitoring and adjusting your prices.
When to Adjust Pricing
Market response: If conversion rates or sales volume are significantly below projections, your price may be too high. Conversely, if sales are strong but margins are thin, you may have room to raise prices.
Competitor changes: A competitor dropping their price does not mean you should automatically follow. Instead, assess whether your positioning justifies holding steady or whether you should adjust.
Seasonal demand: Many categories such as apparel, electronics, and home goods experience strong seasonal shifts. Limited-time adjustments during peak seasons can capture additional revenue.
Avoiding Price Confusion
Frequent changes can make customers suspicious or reduce trust in your brand. Shoppers notice inconsistencies and may hold off on purchasing if they believe another discount is around the corner.
Use structured calendars: Plan price changes quarterly or biannually, not weekly.
Frame adjustments as events: Instead of quietly raising prices, communicate them as part of a product update, improved feature set, or enhanced quality.
Consistency across channels: Make sure your website, marketplaces, and ad creative reflect the same pricing to avoid mixed signals.
Metrics to Track Over Time
Conversion rate: Keep monitoring how many visitors complete purchases at the current price point.
Customer lifetime value (CLV): A slightly lower margin may still pay off if it leads to repeat purchases and higher retention.
Refund and return rates: Price dissatisfaction often shows up as higher returns, especially if expectations do not match perceived value.
Revenue per visitor (RPV): Balances volume and margin to give you the clearest picture of overall performance.
Actionable Steps for Merchants
Set up price performance dashboards. Track conversion, AOV, CLV, and RPV in one place to identify trends quickly.
Schedule regular reviews. Revisit your pricing quarterly to account for market shifts and internal cost changes.
Pair adjustments with communication. Whenever possible, explain price increases as tied to product improvements, sustainability initiatives, or enhanced customer service.
Pro tip: Treat pricing as a living system. The best ecommerce merchants do not only optimize pre-launch. They build processes to keep improving pricing long after launch day.
Ready to maximize your revenue with an optimized storefront?
Start testing, tracking, and optimizing your Shopify storefront with Shogun A/B Testing
