What is an Effective Pricing Strategy for your eCommerce Store
The Internet is full of eCommerce blog posts. Most of them help you strategize how to enhance an eCommerce website and marketing techniques that make it more engaging.
Have you ever thought what strategy do consumers have while making a purchase? Yes, an optimized and a user-friendly website does affect the buying decision. But many simply browse multiple websites and purchase from the one which offers the lowest price.
Many eCommerce owners have struggled badly to identify the pricing strategy that works best for them. They are ready for this struggle because a pricing strategy can either make or break their business.
Before figuring out a pricing strategy, you should know the two basic goals of an effective pricing strategy for your eCommerce store:
Attract Customers
Discourage Competitors
Let’s help you decide a pricing strategy that works best for your eCommerce store.
Market Intended Pricing
Market research can help you decide your product pricing.High competition in the eCommerce industry requires you to check the pricing of your competitors. It's not necessary that you must lower your prices to compete effectively. Sometimes the price for a product you are selling is comparatively lower, as compared to your competitors. In such a case, you don’t need to hike your prices.
In a world of automation, you can go for a company that offers automated market research.
Research Based On Products And Competitors
Conducting pricing research for your entire store and every competitor may seem difficult. You may have to deal with thousands of products each having a large number of competitors. Choose the products that drive you most profit and the competitors that the are the most important.
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Update Prices For The Selected Products And Competitors
After selecting the products and competitors, start listing the prices. Automated price tracking can work here. Also, track if the stock of those products are available or not. In some cases prices changes frequently and you need to keep monitoring it on a daily basis. Using automated price tracking can help you manage the process efficiently.
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Price Tracking To Actionable Reports
There is no point of collecting data if it can’t be used appropriately. Get your analytics team to create actionable insights from the prices you are collecting. Set up notifications and alerts for any change in the competitor's pricing. You can integrate APIs with your store to create customized functions that match your pricings to the competitors.
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Market Research Using Conjoint Analysis
Conjoint analysis is the best market research method to determine the pricing for a product. In conjoint analysis, researchers determine what customers compromise and what they gain when paying a price for a product. Both these metrics are compared against each other to get valuable insights.
In general, we analyse how customers make a buying decision. What matters here is the customer’s expectations from the product.
We combine market research and customer psychographics here. However, this combination can simplify many eCommerce business problems. After all, meeting user expectations is the most important factor that determines your success.
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You can have a look at some more market analysis methods to develop an effective pricing strategy for your eCommerce store.
Value Based Pricing
It focuses on pricing a product based on the price your customers are willing to pay.
The best thing about this strategy is that customers pay the amount that the product actually deserves. It doesn't consider your competitors, retail price or any other principle except the value that the customer is getting.
Value based pricing can either decrease or increase your profitability. It totally depends on the customers. You can hike the prices if the customers are willing to pay more or you may have to lower the prices if the customers don’t find your offerings worth.
Here are some tips to implement value-based pricing strategy effectively:
When applying value-based pricing, you can’t consider everything. Focus on a single segment of a single product or look at a single competitor.
When calculating the value based pricing for a product, look at the alternatives available in the market.
Then decide the features that make you unique from your competitors.
The next big thing is to calculate the value that your product is adding, in pricing terms.
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Manufacturer Suggested Retail Pricing
In this case, you have a fixed margin but no say in the final price that is being charged to the customers.
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Discounted Pricing
Who doesn’t love coupons, rebates, rewards and special offers? You can use this strategy if you want to sell a huge stock fast. Don’t run the same offer for too long. This may ruin your brand reputation.
Bundling Products
You must have seen multiple products selling in the same price category in a grocery store. You can bundle multiple related products and offer them at a discount. Bundling is a helpful technique to provide more value to customers while getting more sales at the same time.
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You must measure and analyse the results your eCommerce business is getting from your pricing strategy. You can modify your strategy to get better results over time.
