Pricing Tool: Necessary Ally Of Every eCommerce Business
As strange as it might sound, pricing isn’t only about the numbers. It’s about the knowledge behind it.
Surrounded by fast and dynamic changes in the market, businesses need both knowledge and flexibility when trying to set the right pricing strategy. What every business strives to achieve is the price that will create a balance between making a profit, and being affordable for customers. Since this balance is not so easy to achieve, choosing the best pricing tool is essential. A well-thought-out pricing tool will be your key to sustainable and constant growth.
What is a pricing tool?
A pricing tool is a vital tool for every company, especially eCommerce ones. It helps them determine what pricing options they have, and which ones would be the best ones. Additionally, that means that the pricing tool needs to provide the right metrics to make those decisions.
That brings up the logical question – what features should you look for in a pricing tool?
With so many pricing tools emerging almost on a daily basis, the answer to this question starts to be a little complicated.
However, some of the features remain as must-have ones:
- Provide historical data of your pricing decisions
- Provide an overview of the market (that’s why pricing tools usually have a price monitoring option which allows you to keep an eye on your competitors’ pricing actions)
- Comparing products and their prices in order to give you a better understanding of your position and future actions
Let’s explain these points a bit better and see why all companies should use a pricing tool.
4 Reasons Why Companies Need A Pricing Tool
Nowadays, making long-term, but also short-time decisions is impossible without the right pricing tool. Being a serious brand or retailer (or striving to become one) requires the help of one of these kinds of tools.
1. Staying Competitive On The Market
A goal that everyone wants to achieve. But, in a dynamic market, it’s not so easy to get your prices right.
There is a whole set of data that you want to take into consideration when setting the prices for your products or services. Data can easily become overwhelming, therefore, it’s vital that you make some investigation before choosing the right pricing tool.
More is not always better. Some pricing tools can be too overwhelming for your needs, or they’re simply not providing the information that you need. Listening to other experiences can be useful, but at the end of the day, no one knows your needs better than you.
Staying competitive in the market can’t be done without knowing your competitors. Therefore, a pricing tool needs to provide you with the price comparison data in order for you to know where do you stand compared to your competition.
A good pricing tool should offer you comprehensive, yet understandable data that will help you reach your goals. If it’s displayed in some sort of a pricing dashboard, even better!
2. Determinating maximum profit margins
When you have a good overview of the market, it’s less likely that you’ll make mistakes regarding profit margins. The reality is that you’re not alone on the market, thus you need to objectively compare yourself to them.
Do you have more experience? Is your product/service easier to use? Is your product stocked with a variety of features? Can it be used across different industries? What kind of support system can you provide?
These are all relevant questions when deciding on your product price. Why short-sell yourself if you’re providing something that your competitors can’t? On the other hand, if you’re aware that your product still requires more development, then having a lower price is probably a smarter decision.
Again, a pricing tool is a powerful ally when it comes to setting the right pricing strategy.
It’s important to point out one more thing. Setting the right price is not a one-time job. The market is very fluid, therefore, adjustments are needed along the road.
However, if you have a pricing tool, you’ll be prepared for the dynamic price changes.
3. A Better understanding of your customers
Accurate pricing decisions can’t be made without knowing and understanding your customers.
You probably already have some basic ideas about your customers, but the information coming from the right pricing tool can be a game-changer.
What this new data will provide you is the following:
- Willingness to pay – you have the right to set a price for your product, but in the end, everything comes to the fact are the customers willing to pay or not;
- What’s the customers’ impression of the product – what features do they find the most important, and which ones haven’t received the attention that you were expecting;
- Customers’ information – what industries are they a part of, how big they are, where do they come from, etc.
- Customer lifetime value and customer acquisition costs – it’s important to have an overview of how much profit every customer brings to know how profitable is to acquire new ones
4. Creating a map for the next steps
Besides using this information for your current products and prices, you can also use it for future planning and decision-making.
For instance, with the help of a pricing tool, you’ll have a better understanding of your customers. You’ll see what’s the relationship between the features that your product can offer and your customers – maybe there is room for improvement. Some features can resonate better with certain customer groups, so you can think of different ways of promotion.
Likewise, if you see that some features are not available by your competitors, that means that you’ll have more room to experiment with the prices. Certain products may come out as popular ones, so you can think of ways of promoting them, or bundle them with other less popular ones.
As you can see, the pricing tool can be a very powerful tool in every business, especially eCommerce ones. However, you should not presume that what works for some other business will certainly work for you as well. There is a reason why there are so many pricing tools on the market – different companies have different requirements.
Having that in mind, maybe one of the most important things that you should look for in a pricing tool is their experience. There are a few tools that are present on the market for quite some time, and Price2Spy being one of them. Working with more than 700 clients from 25+ industries over these 11 years means that Price2Spy saw it all. From small to large enterprise clients, from brands and distributors to retailers – all of this has shaped the way in which Price2Spy works.
If you want to test it for yourself, we invite you to check out our 30-days free trial period.
What is your experience with pricing tools? Have you tried some of them? Share your thought with us in the comment section. We would love to hear more about it!