What is the Best Pricing Strategy for Selling Online
We’re going to be blunt for a second. If the price isn’t right, your product won’t sell. Don’t get us wrong, a great product listed on all the right marketplaces is headed in the right direction. Especially if your marketing game is on point. But without the best pricing strategy you may be missing out on sales.
You want to offer a low price, but if a product is priced too low, you won’t be able to cover costs. Choosing the best pricing strategy in e-commerce is critical to business success.
We’ve made a list of pricing strategies to consider for your e-commerce business and some of the pros and cons to each.
1. Premium Pricing Strategy
Let’s start with setting products at a higher price point.
With a premium pricing strategy, the purpose is to emphasize the value of your product with a higher price point. It only works with products that are unique and still in the early stages of the product life cycle.
2. Market Penetration
If you’re entering a market with quite a few competitors, market penetration may be a good strategy for you.
To gain market share, sellers list products at a much lower price than competitors. Unfortunately, sellers tend to lose money until a solid brand awareness is established. Then the seller can begin increasing the price over time and increasing revenue.
3. Economy Pricing
If you’re a small business, this isn’t the pricing strategy for you.
Large retailers, like Walmart for example, use this strategy to keep products cheap for consumers by limiting the amount of marketing behind each product.
4. Price Skimming
This strategy literally skims off customers that are willing to pay a high price for your product.
Once more competitors start popping up, then the price is lowered to skim off more people at that price point.
5. Psychology Pricing
This one’s about getting in your customer’s mind without them knowing.
Typically, buyers look at the first number in a price when deciding whether to buy an item. Let’s look at it this way. You price an item at $19 versus $20. Often, more people are willing to buy the item just because it begins with a lower number.
While you may lose a dollar of profit, there’s potential to convert more buyers over time and increase sales.
6. Bundle Pricing Strategy
In the eyes of consumers, bundles are king when shopping around a marketplace like Walmart or Amazon.
Bundles group items together at lower price points than if the items were purchased separately. This is a common method for clearing excess inventory in a warehouse.
It can be hard to find an e-commerce pricing strategy that works for you and there’s not always an explanation for why one price works versus another. But promise us one thing?
Don’t set a price and then hope for the best. Constantly go back and evaluate which prices are working and which ones need adjusted.
Sell More. Work Less.
Erin is the Co-Founder of Listing Mirror.