6 pricing mistakes you should avoid in eCommerce

25 November 2021 - 14:01, by , in Best practices in price monitoring, Comments off
Reading Time: 6 minutes

Business owners will tell you that all the phases of running a business can be challenging, but what especially keeps them sleepless is pricing. Or to be more precise – possible pricing mistakes. Pricing analysts are constantly second-guessing themselves. But is it even possible to be fully sure that you’ve chosen the right pricing strategy? 

pricing mistakes

Pricing mistakes: What to avoid and why

An extremely competitive eCommerce environment makes this situation even trickier. Although every industry can have its own pricing rules, there are some common pricing mistakes that should be avoided at all costs. 

Surprise fees and non-transparent pricing

People don’t always like complete honesty.

For example, if you honestly tell a friend that you don’t like how he has arranged his new apartment, it is very possible that he’ll get upset. The only thing that could annoy him more is to find out that the price of the furniture is actually higher than the one he saw on the site because it did not include various hidden costs. Now, that’s the kind of honesty that everyone is looking for.

Whether the price is higher or lower, people like to know what they are dealing with. If you lure a customer by showing the price lower than it really is, you’ll make money, but it will also be the last time that customer has made a purchase with you. No one likes to feel deceived. Therefore, it is better to disclose all costs and make the final price really final. For some customers, that price may not be suitable, but at least you don’t risk creating a bad reputation.

Not using customer segmentation

There is no one-size-fits-all. Different kinds of customers have varying interests and therefore different price sensitivity. Having a pricing strategy that reflects this can be pretty helpful. Unfortunately, not many businesses understand how big pricing mistakes can come out of poor customer segmentation. 

pricing mistakes - customer segmentation

Less effective pricing strategies happen when you don’t know your customers very well. Who are they? What products are they usually buying from you? How often and in what amount/price range? Are they usually waiting for sales or do they buy regardless of the season? 

These are just a few of the important questions that you need to ask yourself before deciding on the price. It’s impossible that all your customers have the same buying pattern – something must be different. Thus, having different buyer personas can make a difference in your profitability. 

Buyer personas will allow you to segment your customers into different groups and decide what price would suit them best. A great way to avoid pricing mistakes!

Overcomplicating your offer

This pricing mistake is something that can be defined as “The road to hell is paved with good intentions”.

Creating a wide offer is considered a plus, but you need to be careful not to overdo it. What do we mean by that? Well, even though you want to offer many bundles, discounts, and other benefits, it’s important to do it without overcomplicating your offer. If the customer needs to be a mathematician to calculate what your offer actually means, then you’re doing something wrong. You want the offer to be plain and simple where people can tell exactly what your sales script had to offer and what they are getting for a particular price. 

pricing mistakes - customer segmentation

On the other hand, make sure to offer different price points that would be in alignment with the customer segmentation. 

Another thing you want to pay attention to is how you present your prices. According to research on behavioral economics, prices that contain more decimals are usually perceived as higher. 

For example:

  • $1,299.00
  • $1,299
  • $1299

These prices are completely the same, but customers tend to perceive the first two as the higher ones. The study shows that due to decimals, these prices felt higher. What is also interesting is that this phenomenon happens even if the prices are not said out loud. Or in other words, only reading the prices was enough to feel that they are more expensive. 

Sticky prices

Pricing mistakes can also occur when using sticky prices. Prices can be defined as sticky when they are resilient to change even though the market circumstances would suggest so. The main problem with price stickiness is the slower reaction time. While businesses that are using dynamic prices can easily change them almost whenever they need to, sticky prices don’t allow such a fast reaction. That basically means that they are costly to your business. 

Truth be told, not all industry branches have the option of leaving this pricing model. But, the ones that have this option should definitely adjust the prices to an extremely competitive eCommerce market. 

Price stickiness is applicable to both lowering and raising prices, but that’s also the root of another pricing mistake which we’re gonna explain next.

Lower prices are not necessarily good

Among all pricing mistakes, one seems to be very compelling to businesses and that’s setting lower prices than the competition. That’s because there is a popular belief that lower prices increase sales. A well-made point, but only if it’s done correctly. 

pricing mistakes - customer segmentation

Of course that customers will find you more appealing than the competition if you’re offering lower prices. But, the price shouldn’t be your only focus point. Why?

  • Constant price lowering can make your prices below your costs, which creates an unhealthy business environment. It’s a completely unsustainable model.
  • Pricing also plays a psychological role – customers tend to relate too low prices with low quality. 

What we would like to advise you is to try to make use of the opportunities for lowering (or increasing) your prices but without jeopardizing your market position. Contrary to popular belief, higher prices can also bring you a better market position. It might sound unrealistic, but with the right help, this one as well as many other pricing mistakes are avoidable. 

Changing your prices manually 

One of the reasons why businesses are so reluctant to change prices is because they tried to do it manually and it didn’t turn out great. Either they didn’t do it properly or they saw how time-consuming it can be. The reasons are numerous, but in the end, they decided that it’s better to leave things as they are. And when it comes to manual price changes, we would totally agree.

Manual price change is a thing from the past. The eCommerce market is evolving so fast that it’s impossible to keep up with changes by manually changing prices. That is why price monitoring tools are available on the market – or in other words – the tools that will perform this process automatically. This saves you both time and resources, and most importantly, you get timely and reliable results. If price changes for some reason cannot be done automatically, the teams behind these tools can do it manually for you.

An additional benefit that comes with the usage of price monitoring tools is that you can be aware of your competitors’ actions. You’ll know when they perform price changes, and most importantly, you’ll be able to detect the patterns behind those changes. 

Conclusion

Pricing mistakes are an inevitable part of the process. There are only a few companies that can say that they’ve got it right from the very beginning. It requires time and effort, but once the right pricing strategy is set, your business will only see success. 

We tried to show you the most common pricing mistakes, but every business is different, so this can not be the full list. However, this can be a great starting point that will lead you in the right direction. 

Have you made some other pricing mistakes and what have you learned from them? We would love to hear more about your experience!

 

About Price2Spy

 

Price2Spy is an online service that provides comprehensive and suitable solutions for eCommerce professionals including; retailers, brands/manufacturers and distributors in order to stay profitable in the current competitive market conditions. If you want to learn more about what Price2Spy can do for your business, please get a personalized free demo or start your 30-day free trial.

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About Price2Spy Blog

This blog is a place for eCommerce professionals to discuss ideas, methodologies and strategies to compete more effectively in the ever more tightening world of online retail. We explore things like competitive price monitoring, competitor business intelligence, competitive pricing, and counter-intelligence in general.

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