- By: Ricky Hayes August 22, 2020
Effective Product Pricing Strategies You Should Use For Your Ecommerce Store
If you’re in the online shopping game, you’ll find yourself in the same field as more prominent players like Amazon and eBay. And chances are, you won’t be able to tackle them.
However, there are other smaller players with whom you’re jostling. Winning depends on several fundamentals that you should have at your fingertips.
One of these fundamentals is pricing your eCommerce products. Getting your numbers right just might be the thing that keeps your brand in business. Depending on your niche, the right price could be what makes customers choose you over your competition.
That said, it doesn’t mean that you should slash prices across the board. This isn’t a guarantee that buyers will flock to your online store. It could be the opposite.
In fact, many buyers automatically assume that products with low prices must be bad quality. Therefore, you need to be familiar with setting eCommerce product prices so that your product’s cost is just right.
In this article, we’ll take you through various strategies for eCommerce product pricing to set your brand apart.
Read on to find out how to price your products just right.
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Essential Things To Consider To Set The Right Product Price
Before you can price your products, there are some factors to consider.
These ensure that you come up with an effective pricing strategy, keeping your balance sheet looking healthy.
- Cover Your Costs
Before you slap a number on a product, make sure that that figure covers the costs of getting the item.
This is the point about which your business turns.
If you’re selling your products at a price lower than what it costs you to get them, you’ll drive your business into the ground pretty soon.
So, when setting the price of your product, check to see what you bought it for. Then, sell it for a figure higher than that. That way, you make money off it. Simple.
- Know What Your Target Market Is Like
Knowing your target marketing is essential to pricing your eCommerce products just right. If your audience finds your price too wild, they’ll move on to the next online retailer.
Your prospective customers usually know what price to expect for a particular product. Therefore, you should conduct some market research to find out.
Look through your buyer personas. They’ll usually hint at what the best price is for the different items in your product range.
Also, checking out your competition is part of your market research. How have they priced their products? Are they making any meaningful sales?
These questions will let you know the ballpark of your niche prices. Set yours accordingly.
- Learn How To Crunch The Numbers
Like we’ve already mentioned, eCommerce product pricing requires you to cover your costs before making a profit.
Therefore, you need to know what it costs you to add a product to your range.
The costs include but are not limited to:
- Cost of the product
- Custom packaging
- Different taxes
- Credit card fees
With all these costs in hand, crunch the numbers to determine the profit you want to clear.
This should help.
Profit margin = (Your intended retail price – Product cost) / Intended retail price
This margin is usually expressed as a percentage. So, multiply the result above by 100.
Experiment with different retail prices to get your chosen profit margin. Keep in mind that this retail price fits in with your buyer personas and industry standards.
You can determine the retail price like this:
Retail price = (Product cost / [100 – markup percentage]) x 100
For instance, you spent $50 to acquire a pair of women’s sneakers. You want a markup of 65%.
Your retail price = (50 / [ 100 – 65 ]) x 100
Your retail price = (50 / 35) x 100
Your retail price = 1.43 x 100
Therefore, your retail price for the sneakers is $143.
However, this is just a possible price. To remain competitive, you might have to apply other eCommerce product pricing strategies to arrive at a suitable figure.
How To Price Products In Your Online Store
Successful eCommerce brands stay in business because of two main reasons. First of all, they have quality products that are in high demand. Secondly, these brands price their products just right. This means that the customer rarely chooses another store to buy from.
Therefore, you have to build a pricing strategy that complements your other brand-building efforts.
Below, we take a closer look at some of the pricing tips you can choose to make your retail price more appealing to potential buyers.
Market Entry Discount Pricing
If you’re a new player in the given market, you might find it hard to make a name for yourself in the beginning.
You can make your brand noticeable by pricing your eCommerce products lower than your competition for the early stages of your business.
This eCommerce product pricing strategy allows you to get a foot in the door. You might barely break even or operate a loss.
However, as you build your online store brand, you can raise your prices to meet your desired market.
This involves starting off at a relatively high retail price and then gradually reducing it as time goes on.
With this kind of pricing structure, you can net several buyers who conform to your different buyer personas.
Here’s what we mean. One of your buyer personas describes big spenders who want to get your product as soon as you launch it. Another persona describes people who are interested in your product but want it at a lower price.
With skim pricing, you cater to both kinds of buyers. The first group is more likely to buy when you launch the product. The second group does so when the price drops later on.
Let’s take a look at our sneakers online store. At launch, the women’s sneakers cost $143. After 6 months or slightly before, the price drops down to $105. We can then further lower it to $90 after another 4 months.
Charm pricing is also known as odd-even pricing. It involves rounding down the price of an item from a whole number to a decimal.
Let’s say the pair of sneakers costs $100. Odd pricing it would mean the price tag shows $99.99. Setting eCommerce product prices with this method relies on the psychology of the customer.
When they see this $99.99, they focus on the whole 99. It seems significantly smaller than 100. And because of this, they’re more likely to buy.
The science also says that we’re hardwired to buy when a price is an odd number. And the best odd number to achieve this is 9. So, a $59 item is more likely to sell than one that costs $56.
If you have a top-end product and are confident in its quality, don’t be ashamed to give it the price tag it deserves.
This is exceptionally viable when you’re targeting an upscale market. They know what you have to offer and appreciate the superior quality of the product. They won’t bat an eyelid at the prime price tag you’ve slapped onto the product.
If the pair of sneakers cost $143, the women you’re targeting will buy it. No questions asked.
This strategy involves pricing your eCommerce products highly and displaying them prominently.
But that’s not all.
Display the lower-priced but similar items as well. However, do so more discreetly.
The point of this eCommerce product pricing strategy is that potential customers will be surprised at the premium product’s high price. However, the nearby products are cheaper.
The buyer sees these products as more cost-effective. They consider it a steal compared to the premium product.
So, even if they’ve ignored the top item, they’ve bought other items. That’s more money to your business account.
The Debutify theme allows you to set up your product pages displaying the items as you see fit for anchor pricing.
Loss leading involves offering a specific product at a substantial discount to draw in more customers.
When buyers visit your online store to buy the discounted items, you show them related products. They buy these as well because they complement the discounted product well.
So, while you’re making a lower profit or a loss on one item, sales of the complementary product more than make up for it.
Ecommerce product pricing is a vital piece when you’re assembling the different parts of your online store. The various ways of pricing your products work in different settings.
Sift through them before applying them to your online retail store. Different strategies will work for different products in your range. You, therefore, need to choose the strategies that work for your brand.
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