Regardless of the product, service, or industry type, pricing strategy is definitely one of the most important parts of any business. Pricing is never easy to get right, for both larger and smaller companies.
The market became very dynamic and everything that once was a profitable strategy now might not show the same successful results. If we add to that an extra competitive nature of the eCommerce market, it becomes clear why having a proactive approach is completely necessary in order to stay on top of the game.
So, if all of a sudden your pricing strategy started to show some unexpectedly poor results, here are some reasons that might be below the surface.
One of the most important questions that arise here is how often do you monitor your competitors?
Nowadays, all businesses are almost constantly in the process of repricing, and if you don’t keep up with that, you won’t be able to profit from those fast-paced changes. Therefore, you must always be informed about the changes in pricing strategies that your competitors apply.
For instance, if you try to perform this task of price monitoring manually it is most likely that some error will occur.
There are too many competitors and retailers whose websites you need to keep track of in order to be aware of the pricing strategy that they are using. This process would become much easier and efficient if done automatically instead of manually. Collecting the data manually means that you’ll be constantly in the backlog, whereas the automated approach allows you to tackle those issues.
Of course, all of this is much easier said than done. Where to start from? What should be your main focus? What to do with the information that you get? These are all legit questions that one could ask themselves at the very beginning. One of the companies that could help you with this task can be Price2Spy.
Different categories of products require different pricing strategies. The product value can vary depending on the region, season, customer segment and other factors.
Even though we said how important it is to be up to date with the price changes that your competitors are making, it is not always necessary to apply them as well. You need to know your own business strategy and act accordingly.
For example, if some of your competitors lower their prices it doesn’t necessarily mean that you need to follow up. If you have done the right investigation before defining a pricing strategy and you are sure that you targeted your customers accordingly, there is no need for changing the prices just for the sake of it. Basically, this means that it is crucial to understand the price elasticity of the products and the changes in the market demand in order to define the best pricing strategy.
Customers today are given a variety of choices when making their purchases. There are many options that include different colors, fabrics, quantity and other customization regarding the product itself. Consequently, this means that the customers expect some price modifications.
For instance, you should consider implementing a bundle pricing strategy which may consist of discounts if customers opt to buy a certain amount of products, or that the price varies depending on the shipping costs. Customers expect a more personalized experience during the whole shopping process, and by providing that you have more chance of turning them into loyal ones. Moreover, this kind of bundle pricing allows you to gain more profit if some of your customers decide for premium options, while the others that want to remain on a regular one won’t be affected.
The product price will always remain as one of the most important things to focus on conducting a pricing strategy. However, long gone are the days when the price was the only important factor influencing the customers’ purchase.
Retailers need to have a broader view when it comes to defining a pricing strategy. They need to keep in mind their product’s placement in the market as well as the brand value. These aspects are always closely related to customer experience. In the online world, the customer is mainly focused on two things: easiness when finding and buying the wanted product and how engaging the website is.
You need to provide the whole experience and therefore, having a simplified pricing strategy wouldn’t help much. Having these insights will help you to reach the final goal which is having more profitability.
One of the best ways to increase sales is by offering promotions. However, you’ll not get the wanted results if the timing of the activation isn’t right. Also, making changes in the pricing strategy must never become a tool for price discrimination.
Speaking of bad timing and price discrimination, there are some companies that we could use as a ‘learn-by-example’. For instance, Uber, as a low-cost ride service, decided to raise the prices during the rush hour, and that decision came to action during a winter storm in New York. The timing couldn’t be more wrong, and therefore the results as well – Uber was accused of exploiting its customers.
Besides keeping track of the results that your previous promotional activities have accomplished, it could be also useful to keep an eye on the activities that the competitors are conducting as well.
For example, you can find more about trends such as what type of promotions are they using, what is the main source/medium, or how frequently are they having some promotional activity. By doing all that you will be able to get better results in the future – offering more engrossing promotions at the right time.
Everything said above comes back to the necessity of having a pricing strategy that is data-driven and adequate. If yours is not, that brings us to the conclusion that modifications are required.
Therefore, the first step should always be to become aware of the problem. After that, the source of the problem should be identified.
Remember, finding the right pricing strategy isn’t an easy task and it will require time, patience and probably a lot of adjustments along the way. But if you devote enough time to finding the strategy that is the most suitable for your business, and putting all the important pieces in the right places, you will be most likely to stay ahead of your competition.
What are your thoughts on eCommerce pricing strategies? Let us know, we’d be happy to hear from you!