Let’s face it, prices matter for eCommerce. Your pricing strategy is an important part of your overall business that requires careful planning and diligence. Many factors affect how you should price your products, and you may need to adjust your prices to increase sales.
However, competitive pricing is a balancing act.
Prices too low? You may get a lot of sales, but fail to turn a profit.
Prices too high? You lose out on sales and scare off budget-conscious shoppers.
So how do you get your prices just right? You must consider factors like costs, revenue goals, and competitor pricing while remembering that human consumers are complex and require more than just number-crunching. Here are the best strategies to nail down competitive pricing for your eCommerce store.
Determine Your Profit Margins
Since the goal of your business is to earn a profit, you must consider your profit margins when setting your prices. Calculate your profit margin based on the cost of your product and revenue. Roughly doubling the cost of your product will often yield a healthy profit margin, but you will often need to mark products slightly up or down to actually see profitable sales.
Manufacturer Suggested Retail Price
The manufacturer suggested retail price is the price your manufacturer recommends selling your product at. MSPRs are a great starting point, especially for highly standardized products. With the MSRP, you can save a lot of time, but you won’t be as competitive with pricing as many other retailers will be selling the same product for the same price. Instead, use it as a starting point.
Mark Up In-Demand Products
Doubling your wholesale cost works well as a general concept, but there are instances in which you should mark up more. Products that are unique, scarce, or in high-demand should be marked up a bit. For these products, you can often use a higher markup formula to increase the retail price while still getting sales and earning a higher profit.
Mark Down Commoditized Products
While products high in demand may deserve a mark up, products that are very commoditized may need to be marked down from the keystone pricing in order to sell effectively. Products that are easily available elsewhere will need to be priced a bit more competitively in order to sell.
Offering product bundles is an excellent way to increase the average order value and make more money. You can offer bundles which include multiple of the same item, or kits which are a mix of complementary products. In both cases, you provide a small discount on the bundle while still making more overall. The customer will feel rewarded with a great deal, and you will make a bigger profit. Use kits and bundles to allure consumers to new products, and to encourage customers to purchase complementary products which will increase their average order value. With bundling and kitting, you create a higher perceived value for a lower cost, ultimately driving larger volume purchases.
It is no secret that shoppers love a good sale. Discounting is one of the most widely used pricing methods, with over 97% of all retailers across all sectors using it. Discount pricing is a great way to increase traffic to your store, offload inventory, and attract more budget-conscious customers. However, be careful not to use discounting too frequently or you run the risk of becoming a “bargain retailer”. To make discounts more effective, create a favorable comparison by listing the discounted price next to the original price. Consumers will “anchor” the new price to the reference price and believe they are getting a more valuable deal.
Introduce New Products with Penetration Pricing
Customers will hesitate to pay the big bucks for a new product, even if it is worth it. Penetration pricing is when you temporarily use lower pricing for a new product to gain market share. While it impacts your additional profit, you boost customer awareness and get your foot in the door for new products.
Price for the Human Mind
Pricing isn’t all about just the numbers. Psychological pricing will also help you sell more. Prices ending in odd numbers are more enticing, and marking something at $19.99 vs $20 is more compelling. Even though there is only a penny’s difference, people will think of the price in the teens vs in the twenties. According to Priceless by William Poundstone, using charm prices (ending in odd numbers) boosts sales by 24% on average!
When it comes down to it, you will still struggle to sell products if they are not on par with your competition. This is especially true for commodity items available in many places. Use competitor pricing data as a benchmark to price your products. Influence price-conscious customers to purchase from you over competitors by outpricing them. However, you must be careful not to sacrifice profit and to avoid the “race to the bottom”.
Sell More with Better Pricing
Adjustinlook g your pricing strategy is a simple way to increase sales and profit margins. Take a close at your current prices and determine when you can use the strategies above to improve your pricing.
Adjusting your pricing for multichannel eCommerce can be tedious, but not with Listing Mirror. Our #1 multichannel product listing software makes it easier for you to create and update your listings for all channels. We also help simplify order fulfillment, inventory syncing, and warehouse management so you can spend more time planning your pricing strategy. To learn more about eCommerce pricing or to get started with Listing Mirror today, contact us HERE.