If you hire an ecommerce development company, then they will be responsible for the development of the site but not for the business strategies. After setting up the store, you have to focus on the business strategies to keep up your sales. One such major thing is setting up the prices of the products on your e-commerce store. You can find many different pricing strategies to follow on your e-commerce store. This article will tell you about the 7 major pricing strategies that every online retailer should follow. Selling your products at reasonable rates is essential for the success of your ecommerce store.
Deciding the price of a product is not as simple as you think – there are many different pricing models available which you can take into account. Whether you are just going to launch your e-commerce store or looking for some tactics to increase sales, read on for info on pricing strategies.
Pricing Strategy: An Introduction
A pricing strategy is a tactic or method by which you can determine the best price for selling your goods or services. In simple words, you decide what your products or services should cost.
Importance Of Pricing Strategies
If you are asking a customer too much for a product you are selling, it will decrease the chances of a sale, thus it will kill the conversion rate. On the other hand, if you are asking too little, then you will end up making a loss in the e-commerce business. Thus, you need to find a sweet point if you want to achieve success in the e-commerce industry.
Why Do You Need A Pricing Strategy?
It is a good business decision to not randomly picking out prices of products but instead follow a proper pricing strategy. It will give your customers value for money while maximizing your sales.
How To Choose A Pricing Strategy?
There are several things you need to consider while deciding on a proper pricing strategy for your e-commerce products. These are:
- Your own costs: Obviously, while making a sale you want to make a profit. Then the selling must be more than the complete of all costs which include manufacturing, labour, shipping, and marketing.
- Value for money: Every customer wants value for the price they are spending. You need to make sure that your price is competitive in this niche.
- Your Target Audience: You must know your target audience while picking up a pricing strategy. If you are dealing in luxury products then you have to identify whether your target audience will be ready to splash the money on those items.
7 eCommerce Pricing Strategies That You Must Know
Finally, we will know about the different types of pricing strategies.
1. Cost-Based Pricing
This is probably the most obvious pricing strategy in the e-commerce business, but it is worth considering. This pricing strategy focuses on making a profit you can make from the sales. In this strategy, you have to consider all your costs as mentioned in the previous section and then set the price as per the profit you want to make.
It is an old-age, basic model, but it is just good as any other model.
2. Penetration Pricing
If you are a newbie in the ecommerce industry or you have launched a new product then it is among the ideal models that you should focus on. In this model, you will be initially selling the product at a lowered discounted price but for a temporary period. As soon as it gets a good market share, you can boost up the price.
The idea here is that you have to initially attract the customers with a discounted price and realize to them that it is a product worth even at a higher (actual) cost.
3. Loss Leader
The loss leader is a hugely popular ecommerce pricing strategy. Suppose you went to your favorite online store and find a pricy item which you want to purchase but at a big discount. You add it to your cart. You checked the price; get overjoyed at such a bargain. And you think “as I am getting such a great discount on this item, I should buy more items from this site”. Before you know, your cart is full to the brim.
If you have ever encountered this situation, then you must have become part of the loss leader pricing strategy. In this strategy, the businesses attract the customers with a discounted price and lure them to buy more products in the store.
4. Competitive Pricing
One more result-oriented pricing strategy for selling products on an e-commerce store. In this strategy, you have to analyze your competitors’ who are in the same industry, check out what prices they are selling, and accordingly set the prices a bit lower. The focus of this method is the same as its name indicates i.e. keeping the prices competitive. It may be trickier for the brands who have just initiated their e-commerce journey but it is an important pricing strategy that every online retailer must know.
You must have encountered this pricing in the brick-and-mortar stores where if you buy multiple products the shop owner will give you more discount.
This pricing is a great way if you want to increase sales by volume on your e-commerce store. It works because on buying more items the customers are getting a better deal. But make sure while selling products in the bundles don’t give too much discount that you may end up making a loss.
6. Economy Pricing
With economic pricing, you set the prices low but gain revenue through increased sales volume. Typically, this pricing is efficient in B2B business when you are selling low-priced products at a huge volume. When the production costs are low, you can recoup the loss through the volume of sales.
7. Anchor Pricing
Last but not the least, this technique is mostly used by B2C retailers. There are two different ways in this pricing strategy. At the time of sale, you can list the sale price just next to the original price. This caught the customers’ attention and they realize what a good deal they are getting.
At the time of no sale, you can list down the expensive products next to the cheaper ones. It will draw customers’ attention to both products and encourage more sales.
In this article, we have gone through the important pricing strategies that you can deploy on your ecommerce store. Having a pricing strategy is important, but it is not something you should fret over. These are dynamic and evolves as per time. At Emizentech, the best ecommerce website development company we will give you the best level functionalities to use any pricing strategy. You just have to focus on the business strategies of your online business and we will manage the technicalities. Let us know your requirements.