What comes associated with the purchase of a product? It’s the ‘price tag.’ ‘Earn enough that you do not have to look at the price tag’ seems good in movies and stories but not in real life. In the real world, more than 90% of customers look at the price tag while making a purchase. When everything seems to be perfect for buying a product, the price tag is the next big thing that can make or break the purchase. It plays a crucial role in the final purchase decision.
Hence, businesses need to adopt proper ecommerce pricing strategies so that customers purchase from them rather than jumping into some competitor website portal to buy similar products. Thus, businesses must practice E-commerce price optimization strategies to make their potential customers turn into loyal customers. But how can you swoon your customers to buy from you? Here we list down the top 10 effective tips that can help you with the pricing structure of your products:
1.Say no to the same pricing for similar products
To understand this, let’s take, for example, an instance when you visit a website and find two similar products listed for, say, 10 dollars. Which one would you choose? You will land in a dicey situation, and there is a high chance that you will leave the website without purchasing anything due to a lack of opinion and differentiation and jump to other websites where you can make a more informed choice.
As per a study, it is believed that about 64% of the customers will leave such a website that puts down the same pricing for similar products. On the contrary, even if you maintain a slight pricing difference between the two, such as 10 dollars and 12 dollars, the chances of the products being sold rise to 77%.
It is because the potential buyer here gets into a situation where he/she can apply their own logic and math to find out which product better caters to their needs while comparing the prices. Thus, it is always a better idea to give up on the same pricing for similar products, as it can adversely impact your sales funnel. To understand the significance of product differentiation and its impact on pricing, you can delve into our blog on ‘Web Design Trends to Watch for in 2023,’ which highlights the ever-evolving e-commerce landscape.
2.Loss Leader Strategy
Have you ever heard of clickbaits in the Youtube space? Click baits are deceiving and attractive thumbnails created by video creators that attract viewers to come and watch their videos. The loss leader strategy is also somewhat similar to clickbait, which triggers the customers to shop more. It is another strategy that can entice customers easily.
To understand this better, let us take an example: a company that sells a printer for 100 dollars. Anyone would find this quite surprising and find themselves running down into exploring the website, verifying the product, and doing research as to how this product is priced so low. Most of the customers who find products low-priced wonder how people can make profits by such a deal. Well, the story is completely different. No one can make profits by quoting a product at a price that doesn’t even cater to the overall expenses.
However, the idea behind such a pricing strategy is that such deals and discounts lure customers to explore the website and shop for more products.
Such a strategy works all the time and works in close relation to human psychology, which tempts them to end up purchasing more than usual from that particular website.
As a result, you gain an upper hand to cross-sell and upsell other products on your website that can hike the overall price of the shopping cart of your customers. On the contrary, even if you do not make huge profits, you will always end up gaining a good customer base, which is the most essential asset for your business.
3.Harness the magical powers of the number 9
This is something that is quite common these days, and almost every one of us has been lured and trapped by number 9. Let’s answer a question first. What is the most common number that you see at the end of the price tag? It is mostly 9. You are prone to see $9, $19, $99, $49, and similar price tags on different products while you browse the internet or even while you visit a physical store.
Going by research conducted by Quantitative Marketing and Economics, it was found that when a product is priced at a price that ends with 9, it is prone to outsell the products that end with 0 or any other number. Have you ever thought about the logic behind the number 9 pricing?
Let’s explain this because this logic really works and affects the psychological purchase decisions of the buyers. It is because when you see a product tagged for $99, there are more chances that you will buy the same in comparison to a scenario when the same product is tagged for $100, wherein there is a difference of just one dollar. This is because of human psychology, or you can say the left digit effect that causes the buyer to think that the product is costing you somewhere around 90 dollars and not 100 dollars.
You are likely to see the left digit number as the primary differentiator for pricing, whereas you will actually pay almost 100 dollars instead of 90. But as it is said, ‘it’s all in mind,’ you will eventually evolve into purchasing a product that ends with 9, thinking it to be affordable and reasonable. So, always price your products in such a way that ends with number 9 because customers are more vulnerable to trust nine factors.
4.Use competitor data to gain a competitive edge
Being a business owner, you would never want your competitors to be anywhere close to you, especially when it comes to climbing the ladder of success. But a savvy entrepreneur will understand that, in reality, you should keep your competitors close to attain a competitive edge for your pricing strategy for ecommerce.
If you wish to craft an innovative pricing strategy that can be effective for your sales and yield substantial results, you always need to have an eye on your competitor’s pricing. A thorough competitor pricing analysis needs to be done to create a pricing strategy that can meticulously help you stay empowered and surpass the rival pricing standards.
To get started in the pricing landscape, collect comprehensive pricing data of your rivals and all information about the discounts and deals they offer, etc. After the collection of the same, review all the data for authenticity and precision and accordingly work out the maths to set your own pricing structure. This will further enhance your chances of being successful in sales of your products, paving your way to be a market leader. Competitor analysis is a key element in pricing strategy. Explore ‘Shopify SEO Guide – A Complete Checklist for Website Owners’ to learn more about how competitive insights extend beyond pricing to affect SEO and overall website optimization. Competitor analysis is a key element in pricing strategy. Explore ‘Shopify SEO Guide – A Complete Checklist for Website Owners‘ to learn more about how competitive insights extend beyond pricing to affect SEO and overall website optimization.
5.Avoid biasing
A fundamental step in pricing your products is to treat your customers equally, irrespective of the customer segment they belong to. Discrimination or unfair treatment based on the background of the customers can lead the customers to develop a negative notion about your business. In worst cases, you can also land yourself down into legal issues, which can hamper your brand reputation.
Now, how does this discrimination occur? Have you ever witnessed a scenario wherein you tend to find a product highly priced when you browse from an Apple iPhone or a laptop, and miraculously, the product pricing drops when you browse the same from a regular phone or laptop? This is what happens when business owners differentiate customers based on their spending ability and pay no heed to equitable pricing. But such a tactic can prove to be unhealthy for your business and is an illegal approach.
On the other hand, it is not that you can chalk such a game plan and remain unaffected by its disadvantages. It is because customers have also become smart in today’s modern times- all thanks to the internet, which gives them an upper hand to compare the costs of a product on various price comparison sites before making the purchase. All in all, such a price discrimination strategy won’t lead you anywhere, and, in fact, it can do more harm than good.
Thus, when you have to formulate a pricing strategy for your products, it is imperative that you maintain dynamic and impartial pricing standards for your e-commerce store, irrespective of the demographics and customer traits. Do a lot of research and come up with an equitable and fair pricing of your products that is consistent and stands the same everywhere. This will promote trust, further fostering a good brand image and perception in the minds of your potential customers.
6.Capitalizing during Peak periods
If you are into a business that hikes up during festivities or holiday season such as ecommerce stores, etc., then this strategy is exclusively for you. It is easy to predict that the sales of clothes, furniture and other items gain a hike during festival seasons. The peak pricing strategy aims at creating a pricing structure that maximizes during the high-demand seasons. It also helps strike a balance between demand and supply during rush periods that acknowledges a person paying a premium amount during such times for the products and services available. Following such an approach, the business owners can vary the prices based on the demand and needs of the customer.
Such a pricing strategy can earn you huge revenue and profits when you have the upper hand or the leading edge in your industrial landscape. During the time of the year, when the demand for your products and services is on a surge, and your competitors do not have enough stock or ability to suffice the demand of customers, it’s a golden chance for you to take advantage and capitalize such opportunities into gains.
It is a flexible pricing approach that lets the business owners take advantage of zenith seasons to cater to the heightened demands of the customers. But, business owners need to continuously monitor the price trends and the willingness of the customers to pay to reach their maximum potential.
7.Cost-based pricing
This is the most common pricing strategy of ecommerce wherein you calculate the overall expenditures incurred on manufacturing the product. Further, the cost of distribution, packing, and manufacturing is added up to come up with the overall expenditure. Accordingly, the selling price of the product is finalized after adding a profit margin to it.
This pricing strategy is quite simple and adopted mainly by newcomers, wherein the focus is primarily on the cost of the product and not on the spending capacity of the customers for that particular product. Here, a stipulated gain percentage is made over the total production cost, and that is the end of the story that reaps a certain sum as profit for every product you sell.
8.Price Skimming
Have you ever come across terms like “Limited Period offer, “Limited stock,” “Limited Edition,” or “offer available only for the next 24 hours”? Well, all such trigger words come under the price-skimming strategy. Such trigger words stimulate a sense of urgency in the customers to buy something that is scarce. It spreads a pressing need in the minds of the customers that they should urgently buy the stuff soon or they will miss some awesome deals or products. As a result of the fear of missing out, customers tend to make instant purchase decisions and even end up paying more.
This sense of emergency buying, as perceived by the customers, can work wonders when the purchasers hurriedly plan to purchase products that can run out of stock anytime soon. Using this strategy, you can initially quote higher prices for your products and eventually lower the price when you find a decline in the demand for the products as the competition increases in the market.
9.Consumer Based pricing
Also known as value-based pricing, it is a strategy that focuses on the perception of the customers about the value of a product. Hence, instead of calculating the overall expenditures incurred, you can directly quote a price depending on the worth of the product as deemed by your customers. The best part about this strategy is that you can set a price without downscaling your profits owing to the value perceived by your potential customers.
The primary USP in such pricing strategies of ecommerce is the value your products can provide for building a satisfactory customer experience. Find out how your product is different from its competitors in the market. May it be its quantity, quality, package, or any other aspect, find out how your products can capture the essence of customer satisfaction and accordingly price the products.
10.Bundle pricing
As the name suggests, bundle pricing is a strategy that lets businesses sell different products or the same line of products in unity with some deals and discounts for a single price. Even though such a strategy may force you to sell your products at comparatively lower prices than usual, the logic here is that your customers will buy two or three instead of just one.
This means the quantity of products sold will increase and so will your profits. The average order value will also rise while the customers enjoy their own share of joy and happiness in buying products at a lesser value while purchasing in bundles.
Bundling the products together can increase your sales and tempt your customers to buy more than their regular requirement in one go. This strategy can boost your sales and reduce the expenditures that you spend on marketing your products. The best part is that you can also sell less popular items with the bundle you create to clear out the overstocked items. Discover more about bundle pricing and its role in sales strategies in our post ‘E-commerce Sales: 15 Proven Marketing Strategies for 2023.’ This will give you insights into how bundling can be part of a comprehensive marketing approach to boost your sales.
Conclusion
We hope the ecommerce pricing strategies mentioned above help you attain a competitive edge amongst your rivals in your business landscape. With the implementation of the tips mentioned above, you can surely come up with pricing standards that can play into your strengths and prove advantageous. But remember that adequate pricing depends a lot on the nature of your business and requires continuous monitoring of user demands and price trends and should be accordingly modified from time to time to ensure long-term success.
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