Have you made your eCommerce pricing strategy? This would be the most complicated step in creating an online store from scratch. You must be able to strike a balance between the purchasing power and your product value. Your pricing strategy should be one that will be accepted by your customers. Here are a few pricing strategies that can help you when you are new to this.
What are the pricing strategies?
A pricing strategy is a means to determine a product’s or service’s fair market value. This tactic is integrated with the 4P strategy (products, price, place, and promotion), economic trends, rivalry, market demand, and ultimately, product features. This strategy is one of the most important components of the marketing mix because it is concentrated on generating and expanding an organization’s revenue, which leads to the firm becoming profitable.
What is an eCommerce pricing strategy?
There are a few rules you need to abide by when you decide on your product models. These are the eCommerce pricing strategies. You need to know these things before you decide how to price your eCommerce products.
- Your expense on the product
- Your profit when the product is sold
- Customer acceptance to buy the product at that rate
This becomes a way of marketing too. That is when you give discounts on your products and boost up your sales or choosing not to give discounts making your product look like a luxury and standard product. Either way, you need to have a pricing strategy.
Choose the right and best eCommerce pricing strategy
Price is a factor that differentiates you from your competitors. An effective pricing strategy will always reduce the cost for you.
Your pricing can do various things for you like:
- Product value: Your price gives value to your product
- Competitive: Pricing makes you competitive in the market.If your price is overly priced you tend to lose customers and are too low too customers tend to doubt the quality. It should be balanced
- Profit: It determines your margin of profit. Make sure you know your cost and your customer’s willingness to accept the pricing you have put
Right or wrong pricing strategy
The pricing strategy of a business may not suit the other one. Right or wrong eCommerce pricing strategy depends on a few factors:
- The product you sell, and the manufacturing cost of your product
- Your targeted customers and their readiness to accept and pay
- The profit margin is set by you.
By checking these, you will be able to select the right pricing model for your business.
ECommerce pricing strategies used by businesses
There are a number of options to choose from when it comes to pricing strategy. Every strategy will have its own pros and cons.
How to determine product pricing? Here are a few things you need to look into.
This is a simple and basic way where you decide your profit margin and add it up with your cost for the product. Here the term cost includes your expense to get the product including the shipping cost and the amount you may have to pay in the market if you choose advertisement.
This kind of cost-based pricing is flexible and doesn’t depend on market or trend changes. The cons of this method are that it doesn’t target your customer and their acceptance to pay. The margin set by you could also be unrealistic.
In this eCommerce pricing strategy, the pricing is arrived at by comparing your average competitor’s price and your cost. This helps customers to do a comparison too.
The good part of this method is that you will be selling your product which will be appropriate in the market. This method will be fair to the customers too.
The issue with this method is that your competitor can anytime set pricing lower than yours. You may also have to sell out a large quantity to reach up to your competitor’s margin. There won’t be a unique position for your brand value.
Here your pricing is done by comparing your cost with your competitor’s average pricing.In the end, you also need to add a value which will be your USP. It is basically adding value to your customer, by keeping them happy through fast shipping or through a strong customer support system. Hence, here the pricing will include your cost, margin, and value.
The striking advantage here is the value given to the customer and it will be a fair game for your customer. The problem is when you try to put a figure for the value. It can be tough to derive a number value.
In this method, you bundle up different types of products together and add them up. Then you can arrive at a figure lower than what it takes to buy each product separately. It will look like are giving a discount on the bundled products. It takes a lot of trial and error in this method.
In this method, your shipping cost will be lesser as it goes as individual single packages. It increases your AOV and helps in deriving different product combinations.
The cons here is that it will be difficult to set the balance between value and the discount you would be arriving at. The margin per product also crashes down.
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