eCommerce Price Model — How to Easily Price a Product

One thing we’ve learned working with our partner brands at Awesome Motive is how important it is to be strategic and intentional when pricing your products.

These businesses follow a clear process to choose price points that make sense for their customers and reflect the value of what they’re offering.

One thing that stood out is that they don’t rely on guesswork or simply copy competitors. Instead, they follow practical models that help them price with confidence. 🔍

That is why we’ve put together this guide to share eCommerce pricing models and strategies that work.

Whether you’re selling physical products, digital downloads, or services, you’ll discover how to set prices that boost your profits while keeping customers happy and coming back for more. 💰

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 simply the method you use to calculate how much to charge for a product in your online store.

Instead of guessing, a pricing model gives you a framework. It helps you set a price based on factors like production costs, competitor pricing, and how much customers believe your product is worth.

Using a clear model helps you stay consistent. This makes it easier to adjust prices as your business grows or the market changes.

Overall, a strategic eCommerce pricing model reduces the risks of overpricing or underpricing. It helps you find the pricing sweet spot to boost revenue and keep your business growing.

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 widely adopted pricing strategies, especially among new 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.

✅Pros of Cost-Plus Pricing

• Simple and easy for beginners to calculate
• Ensures your costs are covered on every sale
• Makes pricing consistent across your product catalog

❌Cons of Cost-Plus Pricing

• Ignores customer perception and market demand
• Can make your pricing less competitive

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.

To figure out what customers value, you’ll need to do some research. You can use customer surveys, read online reviews, and analyze common questions from your audience to understand what they care about most.

Additionally, strong customer loyalty is essential for this model to work effectively.

✅Pros of Value-Based Pricing

• Can lead to much higher profit margins
• Focuses on the customer’s perceived value
• Works well for premium or unique products

❌Cons of Value-Based Pricing

• Requires strong market and customer research
• Difficult to implement for new brands without trust

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.

✅Pros of Competitor-Based Pricing

• Helps you stay competitive in crowded markets
• Easy to research and implement
• Matches customer pricing expectations

❌Cons of Competitor-Based Pricing

• Can reduce profit margins during price wars
• Ignores your product’s unique value

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.

However, this model requires constant monitoring to ensure the right prices are set at the right time, which can be tiresome.

For larger stores, this process is often handled by automated software or WordPress plugins, so you don’t have to do it manually.

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.

✅Pros of Dynamic Pricing

• Maximizes revenue during high-demand periods
• Allows quick adjustments based on market trends
• Works well for seasonal or fast-moving products

❌Cons of Dynamic Pricing

• Requires constant monitoring or automation tools
• Frequent price changes may frustrate customers

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.

✅Pros of Freemium Pricing

• Attracts a large number of users quickly
• Builds trust before asking customers to pay
• Encourages upgrades to premium features over time

❌Cons of Freemium Pricing

• Free users can increase support and hosting costs
• Converting free users into paying customers can be difficult

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.

✅Pros of Bundle Pricing

• Encourages customers to spend more per order
• Helps move slower-selling products
• Makes customers feel they are getting better value

❌Cons of Bundle Pricing

• Customers may not want every item in the bundle
• Can reduce profits if discounts are too aggressive

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.

✅Pros of Tiered Pricing

• Appeals to different budgets and customer needs
• Encourages users to upgrade over time
• Creates recurring revenue opportunities

❌Cons of Tiered Pricing

• Too many tiers can confuse customers
• Requires careful planning to balance features and pricing

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.

Beyond this common strategy of charm pricing, other tactics include:

• Anchoring: Presenting a higher-priced item first to make subsequent items seem more reasonable.
• Decoy Effect: Introducing a third, less attractive option to steer customers towards a specific, more profitable choice.
• Scarcity and Urgency: Creating a sense of limited availability or time-sensitive offers to prompt immediate purchases.

These methods aim to make the price feel “just right” for the customer’s mindset, encouraging a purchase without feeling like they are overspending.

✅Pros of Psychological Pricing

• Makes products feel more affordable
• Can increase conversions with small pricing adjustments
• Works especially well for impulse purchases

❌Cons of Psychological Pricing

• May reduce perceived value for premium brands
• Not all customers respond to pricing psychology tactics

Price Skimming Pricing Model

Price skimming is a pricing strategy where you launch a product at a high price and gradually lower it over time.

This model works best for new, innovative, or highly anticipated products where early customers are willing to pay more to get access first.

For example, new smartphones, gaming consoles, and software products often launch at premium prices before becoming more affordable later.

Businesses often use this strategy to recover development and marketing costs quickly before competitors enter the market. Over time, lowering the price helps attract a broader audience and keeps sales moving as demand from early adopters slows down.

✅Pros of Price Skimming

• Helps maximize profits from early adopters who are willing to pay more.
• Creates a premium and high-value perception around your product.
• Allows you to lower prices later to attract more price-sensitive customers.

❌Cons of Price Skimming

• High prices may discourage budget-conscious buyers.
• Competitors can enter the market with cheaper alternatives.

Penetration Pricing Model

Penetration pricing is a strategy where businesses launch products at a very low price to quickly attract customers and gain market share.

Once the business builds a customer base and brand recognition, prices may gradually increase over time.

Streaming services, SaaS products, and new eCommerce stores often use penetration pricing to compete against larger brands.

This strategy is especially common in crowded industries where customers already have many alternatives.

✅Pros of Penetration Pricing

• Helps attract customers quickly in competitive markets.
• Encourages people to try a new product with lower risk.
• Can rapidly increase brand awareness and market share.

❌Cons of Penetration Pricing

• Lower prices can reduce profit margins in the beginning.
• Customers may resist future price increases.

Loss-Leader Pricing Model

This is the strategy where businesses sell one product at a very low price (or even at a loss) to encourage customers to buy additional products.

The goal is to increase overall cart value and customer lifetime value.

For example, a store might sell a printer at a discount but make profits from ink cartridges and accessories later.

Many online stores also use this strategy during seasonal sales and promotions to attract more traffic. Once customers enter the store, businesses can recommend related products, upgrades, or bundles to increase overall revenue.

✅Pros of Loss-Leader Pricing

• Encourages customers to make larger purchases.
• Helps attract new shoppers with highly appealing deals.
• Can increase repeat purchases for related products.

❌Cons of Loss-Leader Pricing

• Can reduce profits if customers only buy discounted products.
• Requires careful planning to avoid unsustainable losses.

How to Choose the Right Pricing Model (A Simple 3-Step Start)

With so many options, picking the right model can feel tricky. Here’s a simple 3-step process to get you started.

Step 1: Understand Your Costs Thoroughly

First, you need a crystal-clear picture of all expenses involved. This isn’t just about manufacturing; it includes every cost from production to delivery like:

• Direct Costs: Raw materials, manufacturing, packaging, shipping, labor directly involved in production.
• Indirect Costs: Marketing, platform fees, payment processing fees, overhead (rent, utilities, salaries), customer support.

Calculating your total cost gives you your break-even point — the absolute minimum you can charge without losing money.

This foundational step is the core of the cost-plus model and essential for any other strategy.

Step 2: Research Your Market and Competitors

Once you know your costs, turn your attention outward. What are similar products selling for?

This market research helps you understand customer expectations and how your product can be positioned competitively. We recommend:

• Identifing Direct Competitors: Who sells products very similar to yours?
• Analyzing Pricing Tiers: Do they offer different versions or bundles?
• Evaluating Value Proposition: What unique features or benefits do your competitors offer at their price points?

Step 3: Assess and Adjust for Perceived Value

Finally, consider what makes your product unique and how customers perceive its worth. This is where you can adjust your price based on the special value you provide.

• Understand Your Target Audience: Who are they, what problems do they solve with your product, and what are they willing to pay?
• Highlight Unique Selling Propositions (USPs): Do you offer better features, superior quality, exceptional support, or a unique brand story?
• Gather Customer Feedback: Use surveys, reviews, and direct conversations to understand what customers value most.

Based on this perceived value, you can strategically price higher (value-based) or lower (to attract a broader market if value is similar but costs are lower).

Remember, pricing is an ongoing process—test, analyze, and adapt as your business and market evolve.

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.

Common eCommerce Pricing Mistakes to Avoid

While choosing the right pricing model is crucial, it’s equally important to be aware of common pitfalls that can undermine your strategy and negatively impact your profits.

Avoiding these mistakes can save you time, money, and customer trust.

By addressing these common mistakes, you can build a more profitable eCommerce pricing strategy.

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 clear and descriptive title, write a compelling description, and upload high-quality product images for your item.

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.

Keep in mind that these settings apply to a ‘Simple Product’. If your product comes in different options, like sizes or colors, you’ll need to select ‘Variable Product’ from the dropdown menu instead.

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 Download’ 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 lets you set different pricing tiers based on features, versions, or even different downloadable files.

If your tiers offer different files (like a basic vs. complete eBook), you’ll then upload those additional files in the ‘Download Files’ section.

Then, assign each one to its matching price tier using the dropdown menu.

For example, you could offer a ‘Basic Tier’ that includes the first few chapters of your eBook for a lower price, and a ‘Complete Tier’ that includes the full eBook for a higher price.

You would then assign each downloadable file to its matching 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.

In the ‘Membership Terms’ section, add a price and then choose the billing type.

To accept one-time payments, select ‘Lifetime’ or ‘Fixed’ from the dropdown. To accept recurring payments, choose the ‘Recurring’ option instead.

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.

With over 6 million active installations and a 4.8/5 star rating on WordPress.org, it’s the best calculator plugin on the market.

The tool has 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 helped us improve lead generation and conversion rates. 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:

Feel free to copy the prompt below and customize the examples to fit your own products.

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?

The best way to test your pricing strategy is by using A/B testing, tracking sales with analytics tools like MonsterInsights, and gathering direct customer feedback.

Experiment with different price points to see how they affect sales and conversion rates. Based on this data and feedback, you can adjust your prices to find what works best

How can I choose the best pricing model for my products?

To choose the best pricing model, you should analyze your product costs, research competitor prices, and understand what your customers value.

If you’re just starting, cost-plus pricing is simple and ensures you make a profit.

For competitive markets, competitor-based pricing is a good choice, while value-based pricing works well for unique or premium products.

Can I change my pricing model later?

Yes, you can and should change your pricing model as your business grows and the market evolves. You might start with a simple cost-plus model and later switch to a value-based model as your brand becomes more established.

Just be sure to communicate any significant changes clearly to your customers to maintain trust

Is psychological pricing always effective?

No, psychological pricing is not always effective, as its success depends heavily on your target audience and product type.

While tactics like pricing items at $9.99 can work well for budget-conscious shoppers, they can sometimes make high-end or luxury products seem less premium. It’s important to consider your brand’s image before using this strategy.

How important are seasonal trends in pricing?

Seasonal trends are very important, as adjusting your prices for holidays or high-demand periods can significantly boost sales.

Offering special promotions during peak seasons can attract more buyers, while offering discounts during slower periods can help maintain a steady flow of customers.

How should I communicate price changes to customers?

You should communicate price changes by informing customers in advance and clearly explaining the reasons for the change.

Being transparent about why the price is changing—whether due to increased costs or added features—helps maintain customer trust and reduces frustration.

Related Guides to eCommerce Pricing

• How to Choose the Best Products to Sell Online (Beginner’s Guide)
• The Ultimate eCommerce Launch Checklist for WordPress
• Profitable Ecommerce Business Ideas for WordPress (Expert Pick)
• How to Setup B2B eCommerce in WordPress – Beginner’s Guide
• Ecommerce Security Tips: How to Secure Your WordPress Store
• Best Homemade Things to Make and Sell Online (Expert Pick)
• WooCommerce SEO Made Easy – A Step-by-Step Guide to Ranking #1 in Google

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