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E-Commerce Pricing Glossary

In an industry that is hot and constantly evolving – E-Commerce, it is not surprising to see a completely new word invented by a professional and adapted by e-commerce audience. E-commerce involvers start to reshape the existing words and give new meanings to them. So, it is not that easy to quickly get familiar with these tech-based wordings for a newcomer.

This continuous re-invention is happening in almost every aspect of e-commerce and in Prisync, as we are highly focusing on the “pricing” area of e-commerce, we thought it is the time to craft a e-commerce pricing glossary that makes e-commerce involvers’ life a little easier when setting up a new pricing strategy. This glossary might help you gain better insight which/how pricing strategies are implemented to e-commerce companies or at least you can use this guide as a quick reference.

How we can eliminate the risk of MAP violation and strengthen our brand position? Should we deploy dynamic pricing to our e-commerce store? Is it possible to increase our margins by using competitive intelligence?

Don’t let these tech-based words make your pricing processes complicated!

Here, 39 most important pricing-related terms that every e-commerce store owner/manager should know;

Automated Pricing Strategy

Automated pricing approach is a practice to monitor competitors’ prices automatically with competitor price tracking tools. By implementing this strategy, e-commerce companies can decrease the daily time-consuming works, set a fine-tuned dynamic pricing strategy and have a clear visibility on market.

Best Price Guarantee

Best Price Guarantee is a commitment made by online retailers which offers the best price to online shoppers in a specific product category.

Bundle Pricing

With bundle pricing, online stores sell multiple products from one transaction for a lower rate than online shopper would face if they purchase them separately. It is a great practice to sell unsold products and decrease inventory costs. It can also improve consumer loyalty as stores are giving some free or discounted products.

Competitive Price Intelligence

Competitive price intelligence refers to identify, compare and analyze pricing and other revenue-impacting data for an e-commerce company. E-commerce companies can benefit from competitive price intelligence by acquiring competitor price tracking tools. With comparisons on products and services, it is possible to have clear visibility to volumes of pricing data.

Competitive Price Tracking Tools

Competitor price tracking tools enable e-commerce companies to track and display price changes and stock availabilities of competitors’ products automatically.

Cost-Oriented Pricing

This e-commerce pricing approach requires the company to be able write down its unit product costs for each of its products in its portfolio, and then set a target profit margin for each of those products and price the products as the sum of the unit costs and the target margin.

Customer-Oriented Pricing

Customer-Oriented pricing is a strategy in which the online retailer should always consider the customer reference points during the purchase. It is mostly about the value of the product or service from the consumer’s perspective. In order to enhance the customer-oriented pricing efforts, it is a must to know perfectly these two questions; What is my shop’s unique selling proposition? Who are my customers?

Discount

Special offerings on special products from e-commerce stores to visitors in order to convert them to real customers. Online shoppers face with discounts on special days or on special products (generally they are hard to sell). They can also get discounts by subscribing to e-mail list or signing ups.

Discount Code(Coupon Code)

A series of numbers or letters that online shoppers can enter at checkout to give them access to special offers or discounts.

Dynamic Pricing

Dynamic pricing also called real-time pricing, is a way for setting the cost for a product and service that is highly flexible. By using dynamic pricing strategy e-commerce companies adjust their prices in response to market demands and competitors prices. This strategy can be set and sustained easily by implementing competitive intelligence tools.

Economy Pricing

The e-commerce companies which target to attract the most price-conscious customers can deploy economy pricing as a pricing strategy. This type of pricing takes a very low-cost approach. Examples of online retailers appyling this type of strategy include Walmart, Target, online groceries.

Incentives

The reward made from e-commerce companies to motivate online shoppers to make more sales by offering coupons, free shipping,…

Landed Cost

A landed cost is the total price of a product once it has arrived at consumer. The landed cost covers the original price of the product, all transportation costs, duties, taxes, insurance, currency conversion, creating, handling and payment fees.

Loss Leader

Loss leader pricing is an aggressive pricing strategy in which an online store sells its certain products below cost in order to attract customers. The other major purpose lying under the idea of this strategy is the chance of selling other products at list price while gathering online shoppers to store by offering products below costs. E-commerce companies expect to compensate the loss from losses by boosting the retail-priced products.  Think about deals in Black Friday or special days.

Market-Oriented Pricing

In market-oriented pricing, the e-commerce company set its pricing strategy based on the similar products on the market. Also known competitive pricing strategy, evaluating competitors’ prices and market demand is prioritized. In a world where consumers care heavily about the online prices and compare the prices versus competitors, market-oriented pricing strategy becomes a crucial issue that e-commerce companies should consider.

Manufacturer’s Suggested Retail Price (MSRP)

MSRP is the selling price of a product suggested by the manufacturers to e-commerce companies.

Minimum Advertised Price (MAP)

MAP is the lowest price a retailer can advertise the product for sale. It is imposed by manufacturers to re-sellers in order to maintain their brand positioning in terms of price. For example, if a sunglass manufacturer sets a MAP price of $200 for one of its sunglass, it means that online retailers must advertise this product at $200 or more, if not it means retailer violates MAP policy.

Penetration Pricing

Penetration Pricing is most appropriate when an e-commerce company enters a new market or introduce a new product to attract new customers, increase market share and build customer loyalty. It is mostly applied by setting an initial price much lower than the standard price. Setting low prices discourages competitors from entering the market. But, before making a penetration pricing decision, a proper market and competitor research must be conducted. Without a complete preparation, it may cause to lose money and may increase competition rather than decrease it.

Perceived Value

Perceived value is mainly related with customer-oriented pricing strategy. It refers what product image comes in customer mind and what the customer is ready to pay for it.

 

 

We hope this e-commerce pricing glossary will be beneficial for you when you are trying to set a new pricing strategy. If you are eager to read the full list, please download our e-book. You just need to follow simple steps to get it. Please feel free to reach us to get more details about pricing. Excited to hear your feedback.

 

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