Five-step pricing strategy

When it comes to important decisions about your ecommerce site, pricing is up there as one of the crucial choices. What should each product cost? How do your prices stack up against your competitors? Critically – will your customers buy?

It takes time to decide on the price you put out there and it might well be a decision that you have to sit down and make for each product you sell but one of the most important points to make about pricing strategy is that the decision is never final. The choices you make can and should be changed when needs be.

This will come down to testing your strategy. Have your decisions worked? You should always monitor the success of your products and as a result have dynamic pricing. This involves keeping an eye on the market and studying your analytics.

It is a never ending task but not a thankless one. A successful pricing strategy will keep you ahead of your competition and create those all needed sales.

Here are our five steps to get you started:

Research the market

If your product or similar is being sold elsewhere, you need to know how much it is going for. This will give you some idea of what your customers will be expecting and you can put your price within a radius of the average price. Whether you go up or down will depend on how you’d like to position your brand.

Researching what others are doing doesn’t mean you should copy them, understanding the market you trade in is essential. Take any ideas you might have and make them your own.

Understand all of your margins

Selling something at a loss is something retailers do once in a blue moon but its not something you want to happen regularly and without a plan behind it (see loss-leaders). You need to work out the lowest price you can possibly go to for each item without making a loss. This gives you some room to manoeuvre if you need to drop prices for some reason.

Utilise your unique selling proposition

What is it that sets you aside from the other sellers in your market? If you are going to win sales over your competitors you need to offer your customers something different. This doesn’t necessarily mean making your products cheaper as this can have negative long-term effects and cheapen your brand which you might not want to do.

Is your customer service the best? Is your shipping quicker than anyone else? Do you donate a fraction of your sales to charity? Thinking about your USP – having one means that you don’t always have to beat on price.

Introduce incentives

Offering good deals for a limited time can draw shoppers into your brand. As long as they have a good experience with you, they will remember you next time they want to purchase again regardless of the price.

Make sure you keep an eye on your stock levels and use these to offer great deals on things that aren’t selling as well. It helps to shift some stock and it puts you in front of potential new users.

Use loss-leaders

Like a sacrificial lamb, these products are offered at rock-bottom prices in order to gain more sales for the rest of your products. You might decide to make a loss on one particular product and make massive gains by selling lots of others.

Don’t lose the chance to make the most of these, make sure they are surrounded by related products that people might also want so you can get those extra sales at your normal price.

The opposite can also be true when it comes to loss-leaders. Placing an expensive offering next to something else can increase the feeling of getting a good deal so always make sure you give people plenty of choice.