If you’re just starting on your online business journey, pricing can be one of the trickiest things to get right. As well as having to think about what customers want and how much you’ll need to sell them, you need to make sure that you are not over or undercharging. Pricing correctly will lead to better customer satisfaction, which in turn leads to increased sales and hopefully profit! In this post, we have explained various eCommerce pricing strategies to help online stores in standing ahead of their competitors.
What Is An eCommerce Pricing Strategy?
Pricing strategies are the answers to how you set your prices to attract new customers, keep current customers and make more profit from existing revenue streams. Pricing strategies can be used for many different types of products and services, with some being more successful at getting people interested in them than others.
The goal of pricing is to set your price so that it will turn a profit at an amount that your customers value. The most important thing to remember when determining your eCommerce prices is that costs will change as you grow and scale, which affects your pricing strategy. Depending on your business model, your cost per sale may increase or decrease. It’s also important to consider how changing variables can affect your pricing strategy.
eCommerce Pricing Importance
With the slow recovery of the economy and the rising demand for various products, the price remains to be one of the most important deciding factors for consumers. In fact, according to Shopify’s Future of Commerce Report 2022, 74% of shoppers consider price as one of the two most important factors that influence their purchase decision.
Top 4 eCommerce Pricing Strategies
1. Profit-Oriented Pricing Strategy
Profit-oriented pricing seeks out the best price points to maximize profit. This can be done by calculating the allotted profit or profit relative to the cost of goods sold and other operating costs, or by searching for a competitive product that can win customers away from other products. Profit-oriented pricing methods generally result in lower revenue than revenue-oriented pricing because they emphasize revenue generation over margin maximization.
2. Competitor-Based Pricing
When a company has several competitors, it is possible to take a look at the pricing of their products to determine which one suits them best. This pricing strategy is called competitor-based pricing because it takes into consideration the prices being set by the competition.
Competitor-based pricing makes a product seem like an excellent value by using pricing to define the competitive landscape and profits at your store. Using competitive analysis, you should identify what your competitors are charging for their products, evaluate how much more profit you can make on that item, and then determine how much you’ll be able to charge – either higher or lower than other products in the same niche.
3. Market Penetration Pricing
An effective market penetration pricing strategy focuses on entering the market with a competitive based price. The good news is that there are several methods to accomplish this, which include pricing your product or service as low as possible, even if you have to roll it back once demand increases. Whenever implementing this strategy make sure you communicate the benefit of your product or service and that you get the customer’s attention. Word of mouth will help spread awareness about the quality of your products and services. This is also where discount codes and strategies can play a critical role in winning over new customers to help develop brand awareness.
4. Skimming Pricing Strategy
When competing with a similar product on the market, sometimes setting a price that is high initially works well. However, lowering the price when more competitors enter the market can increase sales volume and drive revenue. A high-margin business will have the most success when selling to the price skimming strategy.
Price skimming is most commonly used by tech giants when they launch a new product. The goal of this method is to convince early adopters to buy in quickly before more mainstream customers come on board, which increases the perception of quality, exclusivity, and worth.
How to Decide on the Right Price
Product pricing can be one of the most exciting yet nerve-wracking aspects of eCommerce. It’s both an art and a science that requires an experimental approach backed by an intuitive feel for how customers value your product – consider how you want to be perceived when choosing the price for your products, then test out different prices and see which works best.
Experimentation is the Key
Choosing an appropriate pricing strategy can mean the difference between making it to the Showcase Showdown or going home empty-handed. But that doesn’t mean you need to rely on one tactic alone.
Predicting demand is one of the quintessential skills of any business. But what if you could make better predictions based on data and not just gut feeling? A new approach is taking a flight that uses algorithms to predict when people will turn up at a venue or buy something online — something Amazon uses to its advantage.
Pricing is a complex subject, and there is no silver bullet for an ideal pricing strategy. But to achieve your goals, you need to have a solid understanding of how it works. Like any other eCommerce operation that you need to run, there will always be room for improvement and it’s not going to be an easy task.
At NimbusPost, we have helped over 60000+ clients sync all of their channels and create winning eCommerce pricing strategies. Get in touch with our team of experts to learn how we can help you take your eCommerce business to the next level.