Wondering what price to sell your products at? How much your products are worth?
“Will potential customers be likely to pay the price tags on your B2B ecommerce site?”
Well, determining pricing to sell your products at is exciting yet a tricky task. Ecommerce product pricing is the most efficient and effective marketing tool to enhance conversion rate optimization. By applying different pricing strategies, your business will be sustainable, effective and profitable in the long run.
Price matters a lot….It is no surprise. We all have gone through this. You find perfectly suitable clothing on a popular site. You like its design, but when you turn your eyes, you see the price next to product image and name. Oops! You do quick calculations to check if it really fits your wallet. You just leave the thought of buying it and surf other sites or get back to your work. The price is the immediate qualifier that affects the online purchase decision. However, the spending habits of each customer are different. Though some people are very sensitive about price, some care about product quality and features. Therefore, you need an appropriate pricing strategy that will help turn most of the users into customers.
What is your USP?
When it comes to determining product pricing, several factors need to be considered depending on the industry your e-commerce store operates in. Figuring out your USPs unique selling point (USP) is the most important step. Invest time in exploring specific components that will pinpoint your target audience, finding out how much competitors are charging, and figuring out the relationship between price and qualities. Once you figure out the USP, you can step ahead to decide the pricing models. Remember, every business needs to carry out this exercise and it takes time and includes multiple experiments. As an ecommerce marketer, surely your focus will be on driving traffic to get more sales and hence, it is essential to find out both your customer preferences as well as USP. Ecommerce companies can use pricing as a marketing tool as well as conversion rate optimizer with the help of different pricing approaches. So, let us explore different product pricing strategies.
The most popular and simplistic approach to sell products online. Simplicity is the greatest advantage. It ensures a minimum return on every product sold. Here, you define a specific cost associated with the service or product being sold and add some markup to produce a profit margin.
Cost + Margin = Price
If you want to follow this approach, it is essential to refine their skills at measuring, estimating and defining cost and margin.
This strategy mainly makes use of a customer’s perceived value to sell products. In today’s digital world, it is easy to compare products with just a few clicks. Not only prices but features, quality and value, are also evaluated here. Therefore, customers will trust you, if you are able to justify that your Ecommerce store provides additional value than other stores. Many popular brands price their products on luxury and value instead of competitive prices and people prefer purchasing these brand products, as they are aware that they will get a good deal worth the money spent.
If you have established yourself as a brand, you can go for value-based pricing approach.
- Competitive pricing– This strategy involves the research on market competition. Here, to determine the price, what your direct competitors are charging for a particular product is directly monitored. This type of pricing strategy works only if you are selling identical products as your competitors without any differentiators. Simply put, here it is assumed that your competitor has carried out research and then you simply match the price.
- Flat prices: In this strategy, all of the products in a store are priced the same. Many of the sellers have started adopting this new trend.
- Psychological pricing: This approach is the latest trend in the e-commerce world. In simple words, it involves “tricking” customers as if they are paying less. Charm pricing (the concept of product price ending with 9 instead of 0), emotional pricing are a few examples here.
- Market-oriented pricing: With numerous Ecommerce companies all across the world, you cannot simply run your ecommerce store in isolation from its market. Market conditions form integral aspect that drives your store success. Grasping a thorough understanding about the difference between the pricing offered by your company and the competitors is essential.
- Dynamic pricing- This is a more sophisticated approach and involves utilizing frequently updated competitor pricing information as a triggering factor to update prices.
- Consumer-oriented pricing: This pricing strategy involves a different approach. Determining who are your customers, why would they visit your store, what will motivate them to buy your products, etc. will help you segment your audience into behavioral groups.
- Besides the above-mentioned overall pricing strategies, you can also implement a price strategy on permanent or an ad hoc manner-
- Price dumping: In this approach, the price is kept low to make more volume. A lower price can help enter or gain new market share or raise barriers towards competitors.
- Price boosting: If you expected a strong demand for your products or if you have a unique product with very low/no competition, then this type of strategy can work wonders in the short term. Here, the price is increased to gain extra margin.
- High – low pricing: This approach involves promoting popular products at lower prices and overall assortment at higher prices than that of the competitor. Here the point is to grab the attention of customers and make them visit your store with discounted/ low price tags. This also makes them see and buy other, higher-priced products as well
What works for your Ecommerce store?
Ultimately, pricing strategy for your ecommerce store certainly depends on the type of business you run. Therefore, you need to invest time in research, consider all of the above methods, compare them and find the best one that suits your business model the most.
Still confused about pricing your products? Don’t worry, A/B testing can prove to be helpful here. Finding statistics about customer conversion rates by running A/B testing on your product can help you form a rock solid ecommerce product pricing strategy that works well for your business! Get started now.