There are a lot of available eCommerce sites, and a plethora of new ones are coming up every day, and competition in the market has grown fierce. As a result, businesses must develop their marketing strategies to draw the attention of those who visit their websites and convince them to become their customers.
A successful pricing plan is crucial for helping your business establish an affordable price that keeps your business ahead of the pack, increases revenue, and increases your profit.
A company can decide to award a prize to increase its profits, remain competitive in the marketplace, grow the market value, and offer fierce competition to rival companies.
Pricing is among the main factors in determining an effective marketing plan. The cost of the product is the primary factor buyers look at when they decide whether to buy a product or not.
In this article, we’ll glimpse the 10 most important ecommerce pricing strategy that will allow you to establish the most profitable price for your products without sacrificing your profit.
Table of Contents
- 1 What is an ecommerce pricing strategy?
- 2 The importance of having an appropriate pricing strategy for an ecommerce store
- 3 10 Different types of pricing strategies for eCommerce businesses
- 3.1 1. Competitive pricing strategy
- 3.2 2. Value-based pricing
- 3.3 3. Cost plus pricing strategy
- 3.4 4. Price skimming
- 3.5 5. Dynamic pricing strategy
- 3.6 6. Penetration pricing strategy
- 3.7 7. Loss Leader Pricing
- 3.8 8. Bundle pricing strategy
- 3.9 9. Premium Pricing Strategy
- 3.10 10. Odd Pricing
- 3.11 Related
What is an ecommerce pricing strategy?
The term “pricing strategy” refers to a strategy or framework that can be used to accurately determine your product’s price. Different pricing strategies for eCommerce can be utilized based on the sort of goods and services you’re offering, what demand the products and services you’re selling, and how your competitors are operating.
Remember that the cost will likely change as your business expands and grows and will impact the pricing strategy you choose to implement. Based on your business model, the price per sale might change or even decrease, and you may require an online pricing plan to accommodate this.
The importance of having an appropriate pricing strategy for an ecommerce store
The best pricing strategy for e-commerce will differ for every business. Even as a company grows, it could be necessary to modify its strategy. For example, a straightforward cost-plus pricing method is focused on making a profit from every sale. Cost-plus pricing is suitable for the beginning stages of an e-commerce business, but it may not be sustainable in the long run.
As your company grows, your costs can increase exponentially. The actual price per order or acquisition costs can increase too. Therefore, you require an eCommerce pricing strategy to aid in the growth of your business. A variety of pricing strategies employed by online retailers won’t affect profit in the long run.
Even if your online company is already successful, there are opportunities to boost profits even more by re-evaluating your pricing strategy and working on it.
10 Different types of pricing strategies for eCommerce businesses
1. Competitive pricing strategy
Based on the research carried out in 2016 by Forrester, most people utilize search engines to look up products and compare products from various companies and merchants. As early as 2012–when online shopping was an atom of the amount that it is today–consumers would visit numerous websites before handing in their credit card information. The higher the cost of a product and the longer it would spend comparing prices. These statistics might be 10 years old; however, they’re not outdated. Nowadays, consumers have more tools to compare shops, such as websites and apps that allow comparison shopping.
Pricing competitively is a technique that considers the behavior of consumers. It involves deciding what your competition costs.
It’s straightforward and low-risk; however, it fails to consider your client’s perceived value in your product. In simple terms? You may be losing profits if you price your products at a low price in a “race to the bottom.”
2. Value-based pricing
The most popular method employed by numerous eCommerce price analysts, value-based pricing lets you determine a price based on the value your customers feel your product is worth.
Compared to competitive pricing or price-plus, cost-plus generally will result in higher mark-ups and is also more profitable and is the ideal choice for businesses with a long-term plan.
Value-based pricing is a good option for businesses that have distinct qualities like sustainability in their DNA. Over one-third (34 %) of the population is willing to spend more money on sustainable products or services. Those willing to pay more will prefer a premium of 25 percent on an average basis, according to the 2021 Global Sustainability Study.
This pricing strategy works well for brands with an extensive fan base, like those selling art, collectibles, and luxury goods or status items.
3. Cost plus pricing strategy
This is the simplest pricing method; however, it’s business-oriented rather than focused on the customer. That is, pricing is determined by the profits you’d like to earn, not what a buyer is prepared to shell out. Therefore, it is likely that you will need to alter the price until you get the most profitable price using this approach.
Add the total cost of your goods, including marketing and shipping, and the profit margin you’d like to earn, which is the price you will charge for selling your product!
- Product: $5
- Shipping: $3
- Marketing: $5
- Total cost: $13
- Required Profit Margin: $5
- Your Selling Price: $18
Ideal for beginners to e-commerce.
4. Price skimming
If you’re selling a truly unique or original service, price-skimming could be the best method. It’s all about setting a higher price and then decreasing it when more competitors come along and start selling similar products. Merchants can drive sales when competition is not as high and then reduce prices to stay competitive in the future.
Price skimming is a technique commonly utilized by tech giants when they introduce new products and are confident that early adopters will be willing to buy in. This is crucial since price skimming won’t be successful unless you’re certain that your customers will view the product as premium, unique, and worth spending money on.
5. Dynamic pricing strategy
Ideal for businesses that sell e-commerce and have the time and the resources to keep pace with research or have the budget for the repricer program.
Dynamic simply refers to flexibility. This means that pricing flexibility will permit you to determine the most appropriate prices to meet fluctuating demand and competitive fluctuations.
If competition grows the competition, you may lower the price so that you’re the most affordable seller. On the other hand, if your competition is out of stock and there is a high demand, you may increase the price due to the market for sellers. This is a usual supply and demand approach.
You’ll need to keep an eye on your competitors when you select Dynamic Pricing. Using the repricing program can be beneficial.
6. Penetration pricing strategy
Contrary to skimming prices, the penetration price is best for brands in a highly competitive market. Therefore, setting your prices as low as possible in the beginning and increasing the price later is recommended. This is the point where discount codes and other strategies can play a crucial role in attracting new customers and helping to build awareness of your brand.
The downside with penetration pricing lies in the fact that it could harm your brand’s image or cause consumers to underestimate your products or see they are of poor quality.
7. Loss Leader Pricing
Ideal for businesses that sell items that come with simple ‘add-ons’ like refills or anything that is needed as a regular purchase.
You’ve probably seen the really low-cost products on the internet. The ones that leave you staring in awe, wondering how an organization could earn a profit from the product.
The chances are that they’re not. They are because they are loss-leaders. These are products that are sold at a discounted price as a way to draw customers to your website or product pages. This pricing method is effective because once you’ve convinced the customer to buy in the first place, they will likely look through your other offerings and then purchase more items.
8. Bundle pricing strategy
A multi-price strategy Product bundle pricing is the process of selling multiple items for one price. There are various methods to accomplish this, including cross-sells, upsells, and BOGO discounts being among the most popular kinds of bundles.
While bundle pricing may increase the volume of sales, it could also be risky and risk making profits less if it is not handled in a way that is correct.
9. Premium Pricing Strategy
A premium pricing strategy entails making the price of a product more expensive than comparable items on the market. The strategy is often referred to as skim pricing since it’s an approach to “skim the cream” off the market’s top.
It’s used to increase profits in areas where consumers prefer to pay more for the product when there aren’t any alternatives, where there are obstacles to entry into the market, or where the seller cannot cut costs by making large quantities.
10. Odd Pricing
This pricing method is an effective method to determine a fair price for your online products. Customers always note the left-hand side of the digit when looking at the price. For example, an item that is priced at $4.99 appears to be less expensive than a product priced at $5.00. Even though the difference between costs is only 1 cent, customers will prefer the first one since the price is lower than 5.
Offer odd prices for your products to get your customers to buy more. For example, if your product retails at $10.00, change your price to $9.95. This will fool your customers into thinking that the products are priced fairly and not priced at a high cost.