eCommerce Pricing Strategies: The Ultimate List
Key to success in eCommerce business is the right price. Prices are going up and down constantly, and how it’s set will determine your position on the market. The right price is the one that drives the most customers and ensures your profitability and protects your market position.
Depending on your desired position on the market, there are different e-commerce pricing strategies that you can apply. You can choose a different one for each product or use the same one for all of them, but what you need to keep in mind is that market is alive and you will need to stay alert of all the changes and make necessary adjustments to your strategy if something isn’t selling well.
Of course, there is always an option to use some price monitoring tool such as Price2Spy. But, let’s start from the beginning and go over the most popular eCommerce pricing strategies. No price monitoring tool can help you if you don’t know your final goal.
If you’re not sure if your business needs a pricing strategy update, no worries. Here are all the answers about advantages and disadvateges of bundle pricing.
eCommerce Pricing Strategies – Which one is the best choice?
Here, we are going to mention some of the most important eCommerce pricing strategies. Let’s see the list:
- Cost-based E-commerce pricing strategy
- Value-Based Pricing
- Penetration pricing
- Bundle pricing
- Dynamic pricing
Cost-Based Pricing
The simplest of all eCommerce pricing strategies is the cost-based one. It’s also the most popular one in the retail industry. The math is simple here, just look at the equation.
Cost of production+Desired profit margin= Price
Cost of production includes fixed and variable costs. Fixed costs are independent of the output, while variable costs aren’t. So if you produce more than planned, fixed costs are staying the same. However, the variable ones are going to be higher.
As for the desired profit margin, it’s how much the manufacturer wants to earn. It differs from manufacturer to manufacturer, from product to product, industry to industry, etc. This is up to you to choose how much you want to get from each sale.
Most of the time you’ll limited by customers’ purchasing power. For example, you’re producing and selling product A for $50 (and it costs you $15 to make it). Compared to someone else’s product of the same kind that costs 30$ (product cost is the same), people are going to buy the cheaper one.
So, when it comes to simillar products, the purchasing power is a big factor here.
In addition to other eCommerce pricing strategies, this one is pretty easy to plan and predict.
Value-Based Pricing Strategy
In this eCommerce pricing strategy, price is set based on what the manufacturer/seller perceives a consumer is willing to pay for a particular product at a certain time. The price they’re willing to pay can be different during the time.
Out of all the eCommerce pricing strategies, this one is the hardest to implement. Why is that the case? Well, it requires extensive market research and a deep understanding of how the customer feels.
Companies that offer unique or highly valuable products can take advantages of this strategy more than companies which sell everyday, regular products. For example, you can’t apply this strategy to bread, but you can to a phone.
It’s all about what consumer thinks of that product or service and how it makes him look.
Penetration Pricing
One of the eCommerce pricing strategies that is meant for new products is the penetration pricing. The main thing is that your online store wants to present product to customers and attract them.
And how are you going to do that?
Well, you can offer the product at a lower price in the beginning. The lower price will make customers aware of the product, and they’ll start buying it. After the initial time, the price of the product will go up.
The logic is that the people will stay because they like the product, and don’t want to change it for other type/brand.
Bundle Pricing
This is one of the eCommerce pricing stretegies that you must have seen. Bundle pricing strategy is about selling more and combining unpopular or new product with a popular one. The best example of this strategy are deals like “Buy one, get one free”.
This strategy isn’t only popular in selling goods, but in selling services as well.
If you want to know more about it and learn about its advantages and disadvantages, you can read about it at this blog post.
Dynamic Pricing
One of the most popular eCommerce pricing stretegies nowadays is dynamic pricing.
Dynamic pricing offers the same price for everybody and that price is always changing due to different market conditions. Three factors that you have to take into consideration when pricing the products are supply, demand and competitor’s behavior.
Since we’ve already covered this topic on the blog, we’re not going to repeat ourselves. You can read more about it here.
Summing it up
Choosing among eCommerce pricing strategies is hard. You need to consider many factors, such as costs, the purchasing power of customers, industry, etc. It’s a trial and error process. Some succeed the first time, some don’t. Important thing is to keep an eye on the market and change when necessary.
In order to make this task easier, you can start our free 30-days trail and test out all the services that Price2Spy has to offer.
Which of these eCommerce pricing strategies do you find the easiest and which the hardest? Let us know, we would like to hear your thoughts.
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.
