How to Price a Product: Guide for Online Sellers
Price management is an essential aspect of e-Commerce businesses. About 80% of consumers say that competitive pricing is an important component of shopping at a retail store. Implementing a solid pricing strategy will entice your online customers and lead to increased sales and higher returns on investments (ROIs).
There are various ways to increase your online sales and earn higher profits. In today’s article, we will discuss some key pricing strategies that you can use to price your products and stay on top of the market. Read on!
Strategies to Price a Product
Online sellers should make substantial efforts to learn about their target audience and requirements and price the products accordingly. However, this does not mean eliminating the profit margins and providing your customers with the most affordable price.
The key is to balance your pricing strategy through a sophisticated price management technique and change your plan from time to time, depending on the market conditions. That way, you can streamline your business operations.
Use Analytics to Understand Customers’ Behavior
Unlike brick-and-mortar shops, online sellers or companies have the advantage of using analytics solutions to analyze a large volume of data and generate crucial insights. You can use these insights to understand your customers’ behaviour and focus on different verticals to reach prospective customers.
Whether you run a social media campaign or production promotions, you can test your product and use data to gain insights on consumers. That way, you can make an informed decision and price your products adequately.
For example, suppose you notice that Monday is the most profitable day for a specific product. In that case, you can run a social media campaign on that particular day to maximize your earnings. Remember, consumers’ shopping behaviour is a vital factor you can use to optimize your pricing strategy.
For instance, if you sell women’s clothes and you find out that a specific jeans product has an enormous response on social media platforms, it means consumers demand this particular product. So, you can adjust your price for the product to earn higher profits. The formula is simple: increased demand for a product means you can elevate its price.
On the other hand, if you notice that consumers put a particular product in their carts but do not purchase it, it means the price is too high. In that case, you have to optimize the price tag on your online store for that specific product to generate more sales and achieve higher ROIs.
So, using analytics software to monitor customers’ behaviour in your online shop is a massive advantage that most brick-and-mortar stores don’t have, meaning you can reduce the risk of errors and make informed decisions to streamline your business processes.
Improve Your Website’s Layout
Online sellers without an attractive and easy-to-use eCommerce website will lose customers and generate fewer sales than those who invest in a high-quality website design. Remember, your eCommerce website’s layout plays a crucial role in streamlining your pricing strategies.
For example, your product description content must have a call-to-action to entice consumers and encourage them to purchase the product. Make sure you showcase the product in a “Buy Now” display or “Customer Favorite.” When you learn these tactics, you can optimize your sales and make informed decisions regarding your pricing strategies.
Experts recommend using a ticking clock for prices with a temporary discount to attract customers. Many online sellers use this strategy to urge users to take action and take advantage of the offer.
In addition, you can mention the number of remaining products in your inventory on your website to encourage visitors to purchase your products before they go out of stock. That way, you can position your products as “high demand.”
Moreover, group similar products, such as makeup items, to make a mini-price comparison and highlight the most popular product. That way, you can attract more customers, retain the existing ones, and achieve your goal of higher conversion rates.
Focus on the Right Pricing Model
Choosing a suitable pricing model is an essential aspect of your price management strategy. Some online sellers use a conventional method of adding a markup to their wholesale costs. The purpose is to develop a product’s price.
Some pricing models focus on profits from selling products in large quantities, leading to higher returns on investments. Reputable online brands use value-based pricing strategies, allowing them to set higher prices due to the trust and relationship of consumers with the company. Shoppers pay more and buy an established company’s products than an online shop that sells similar products for lower prices.
Therefore, it is wise to analyze the market, determine what eCommerce websites like yours are selling, and focus on their prices to make an informed decision. There are various pricing strategies, and each one comes with its pros and cons. Let us discuss 3 of the most commonly used pricing strategies. Continue reading!
A competitive pricing strategy is an integral component of your price management strategy. It is a standard method, and online sellers can use it differently depending on the products they promote or sell.
Using competitive pricing requires you to position your brand or product different from your competitor. Make sure your product or brand position is superior to your competitor’s brand or product. Focus on the unique selling points that separate your product from your competitor’s products.
In addition, invest in a premium design, online storefront, and packaging to make an excellent impression on your existing and prospective customers. If you have a luxury eCommerce brand, it is wise to focus on your website’s design. Make sure you also have excellent onsite customer service to reduce eCommerce return rates.
Below Competition Pricing
Below competition pricing is a sophisticated method to undercut your competitor’s price and position your product for the best deal. If you want to get the most out of this strategy, we recommend negotiating with your supplier for a lower wholesale price.
Likewise, reduce your operating costs, focus on an effective marketing campaign, and highlight the market value. Remember, this type of pricing strategy can become a sticky situation if your competitor companies try to lower their price, leading to price wars.
So, the most effective way to take advantage of “below competition pricing” is to price a product temporarily, allowing your online visitors to feel more enticed. That way, your customers will buy your product without getting accustomed to the bargain rates.
Above Competition Pricing
Above-competition pricing is another effective price management strategy for eCommerce owners. It is an excellent way to increase your sales and earn higher profits. However, this type of pricing strategy works if you have fast-moving inventory.
So, as a seller, you must justify higher prices with different factors, including exclusivity, improved customer service, scarcity, and boosted brand experience. For example, jewellery is an industry that uses above competition pricing.
However, if you have an online jewellery shop without a luxury image or brand reputation, this type of pricing is not suitable. Reputable brands command higher prices due to their excellent brand equity.
For instance, if you sell diamonds, you may not beat your competitors in quality, but your customers will still pay more due to your brand reputation, trust, relationship, and loyalty. Brand value is an essential aspect of an online company. So, focus on developing your brand image if you want to price a product higher and increase your profit margins.
How to price a product? It is a common question asked by many online businesses and eCommerce site owners. You can follow the tips and tricks given above to effectively optimize your price management strategy and price a product.
However, choose the one that best fits your needs and can attract high-paying customers. You can switch from one price strategy to another based on the market situation and your business conditions.
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