What factors do you consider when developing pricing rules that can cater to different needs and help drive profitability?
It’s no secret that market prices fluctuate a lot and keeping track of every product can be overwhelming. The purpose of this blog is to provide you with ideas on how to be smarter and more efficient when it comes to pricing your products in the market. The topics we will cover include:
🔹General tips on how to group your products in a profitable way
🔹Ways to increase your profit margins through bundling
🔹Strategies for maintaining and improving your pricing over time
Some of the concepts we will discuss may seem complicated if you’re not already familiar with dynamic pricing strategies. However, don’t worry because this is a great opportunity to identify and implement some easy wins in your pricing strategy.
You may have a vast number of brands, and each brand may have numerous products with unique pricing. However, it’s possible to price many products effectively and profitably with a broad strategy that takes into account relevant competitors and ensures a sustainable minimum product profit.
It is likely that there are certain items in your product range that should remain at a fixed price for specific reasons. This could include newly launched products that are currently in high demand or limited edition products that are rare. These are examples of products that may not benefit from dynamic price changes, and it may be advantageous to temporarily exclude them from any pricing adjustments.
The advice being conveyed here is to strategically choose which battles to fight when it comes to pricing different product segments. Instead of using the same pricing strategy across all segments, it’s recommended to identify key competitors within each segment based on how consumers perceive comparison alternatives.
For instance, if a consumer has been considering buying a lamp for a while and finally decides to purchase it from you because your price is the best on the market, it may not be the most effective pricing strategy to use the same pricing for the add-on purchase of light bulbs.
Instead, you could potentially earn a higher profit margin for these additional items by setting the price level higher than the regular profit margin for the lamp. This is because these items function as “cart-closers,” meaning that they help to finalize the sale rather than attracting customers to make a purchase in the first place.
It’s important to review your strategy setup because the market conditions may change in the near future. To ensure that your pricing is set up correctly, you can ask yourself a few questions:
✔️ Are there any products that have been discounted so much that they are barely profitable?
✔️ Which products should you lower the margin on to increase sales?
✔️ What is the average margin for your products?
By answering these questions, you can determine which products to restock and at what cost, price, and margin threshold to focus on certain brands.
Establishing a pricing framework enables you to cater to the needs of the majority of your product range and set the foundation for expansion. Following this, it is crucial to set high aspirations and develop sophisticated pricing tactics for items that you anticipate will have greater success.
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