Choosing the right pricing strategy for your ecommerce site can be a challenge. The value you place on your products may not be echoed amongst your customer base. And then there are your competitors to take into account too.
If you’re struggling to come up with an effective pricing strategy for your store, take a look at these top tips:
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1. Know Your Margins
First things first, you need to calculate the absolute lowest price at which you can sell your product whilst still generating profit. This bargain basement figure will help you to avoid pricing your products too cheaply. And if the only way to sell your product is to dip below this figure on a regular basis, you need to reassess your product, your marketing or your selling platform.
2. Know your USP
When you put together your e-commerce business plan, you’ll have worked to determine your USP – your unique selling point – in comparison to your competitors. The stronger your USP, the more flexibility you have with pricing. In contrast, when customers can make a direct comparison between your product or service and that of a competitor, your pricing strategy is constrained by that of your competitor.
3. Consider a Loss Leader
Supermarkets stock loss leaders all the time. These are items that they sell really cheaply, either below market value or at a loss to themselves. The reasoning behind this madness? Loss leaders attract customers to the store. Customers will buy a cheaply priced item, such as milk, but then they’ll probably end up picking up at least a few extra items too. If you have a diverse range of stock, consider using a few loss leaders to attract more customers who will then be introduced to the rest of your profitable items.
4. Come Up With Incentives
Always keeping your margins in mind, it’s possible to come up with price incentives that persuade your customers to make a purchase. You could offer discounts for customers who purchase within the next hour. Other options include two for one offers or buy one and get one 50% off. Always consider the wording of your offer to make it seem as appealing as possible. Limited period incentives such as these will attract new customers who may return to buy full priced products at a later date.
5. Use Pricing Optimisation Software
If competitive pricing is a foundation of your business strategy, you need to have a solid grasp of what is happening in the market at any given time. Pricing optimisation software allows you to do just that. Software tools can identify pricing trends, competitor pricing policies and how competitors differentiate their products from yours – all in an instant. Using this type of software is much easier (although more costly) than try to process all of that important data yourself.
6. Test Your Pricing Strategies
Evaluating market demand for your product or service is incredibly important. But so is evaluating your pricing strategy. People may love your product but that doesn’t mean they’re prepared to pay what you imagine it’s worth. Test your pricing strategies by setting two different prices for the same item. Using analytics you can see which price gets the most conversions within a given time period. You then work out the total profit for those items and learn a little about which pricing option generates the greatest return.
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Try to see your pricing strategy as a work in progress. The market changes. And your prices need to change with it. Learn about the pricing strategies open to you, then keep testing them and evaluating them to make sure you’re generating as much profit as possible.
Cassie Wilson is an experienced Project Manager and Content Coordinator, working as a part of the team behind Bountye – an online treasure trove of second-hand goods. Cassie has been working on numerous projects and often shares her marketing and selling tips with other experts online.