An efficient ecommerce pricing strategy can grow or perish your business. Do you set prices low to stay viable but decrease profits? Or, do you set higher prices but risk losing out on lots of new customers? Using the appropriate pricing strategy for your ecommerce business can take your business to the next level and grow your profits and revenue. Although product pricing is a hard task, there are ways to determine the best pricing strategy that suits your business. In this article, we’ll go over the eight ecommerce pricing strategies every entrepreneur should know.
This is the most basic pricing strategy, but it is business-centered rather than customer-centered. In other words, the product price is based on how much you want to make, rather than how much a client may be willing to pay. You’ll likely need to adjust the pricing until you find the best price with this strategy.
Add together the price of your products, including marketing and shipping, and the profit margin you would like to accomplish and that is your selling price!
This pricing strategy is generally used for commodities and is based on offering better prices than your competitors. This means comparing your prices to the price of identical products offered by your competitors across all platforms and making pricing alterations accordingly.
For instance, if you run a hoodie brand that targets Gen Z college students, you may need to use a competition-based pricing strategy to contend with other hoodie brands targeting Gen Z. Allocating time and effort to research your customers can yield profit for your business.
Value-based pricing is centered on finding out the highest amount a client is willing to pay for your product. Value-based clients focus more on authenticity and ‘fairness’ than anything else. Clients like this need to know that the product you’re selling is of standard quality, eco-friendly, fairly sourced, and/or difficult to come by.
For example, if selling shoes online, costume shoes would be priced on the lower side because the client is aware it’s made with inexpensive materials. Higher-end shoes, like a shoe from Gucci., would sell at a higher price because customers are willing to pay more for superior materials.
This pricing strategy is what its name suggests, malleable. The prices set with this strategy are subject to change based on the supply and demand in the market. A company can increase or decrease the cost of its items according to the competition predominant in the market and the supply of the goods.
If the competition has multiplied in the market, or new businesses are coming into the market, the cost of the products can be decreased to make them affordable and attract more customers
Similarly, if there is a large demand for the goods in the market and a few distributors fulfill the demand, then a company can increase its prices. Besides, if the business has bought excess stock and fears that it will expire, go out of fashion, or get impaired. They can sell it at low rates to finish the stock.
If you are working under an extremely competitive niche, bundle pricing is appropriate for you. This pricing strategy is also effective for attracting visitors to your store and increasing your ecommerce sales. To discover the price under this strategy is pretty straightforward. All you have to do is create a bundle of corresponding goods and sell them together for a cheaper price.
Selling bundled goods help your business to boost its average order value. You will record a single transaction on the sale of numerous things. To create a bundle of items, check which goods are your frequent sellers. Pair those items with low-selling goods to create a bundle.
Loss Leader Pricing
You have most likely come across those cheap products online, right? The ones where you gaze open-mouthed wondering how on earth anyone can be making a profit on the product. Well, there is a possibility they are not. Because they are loss-leaders. These are items sold at a low price as a hook to simply lure clients to your website or product listings. The loss leader pricing strategy works because once you have lured the client in, they are likely to go through your other items and purchase additional products.
Anchor pricing is a strategy that gives clients a reference price point (the anchor) when searching for particular products. For instance, when running a discount offer for an item, your website can show the original price next to the discounted price. A good example is how an ecommerce store can list a product as ‘$200 $175′ to show the client how much money they’re saving, even if the product frequently sells for $175 on their store.
You have probably come across several ‘Exclusive offers’ or ‘Limited Edition’ on different websites. The tactic of offering something rare makes the clients crave it even more. It creates a necessity and acts as an efficient catalyst for a customer to decide about purchasing the item.
Most businesses display their expensive products under the banner of special edition or limited edition. The clients believe that the collection launched is rare and will run out soon. Because of the fear of missing out, clients are ready to pay a high price because they get a limited edition item.
The most effective ecommerce pricing strategy for you will always mostly depend on the niche of your ecommerce business and your goals. You must remember that pricing can consistently change so you will need to stay on top of your pricing strategy. It’s not strange for there to be a demand that you run several pricing strategies all at once.
Be fair and ensure you offer value to your clients. They are smart, so your ecommerce pricing strategy must also be smart. Contact us today at Fulfillman to know more about the Shopify dropshipping business. Our dedicated team will be available to speak with you and provide suitable answers to your questions and concerns. We guarantee you excellent services.