Setting the right pricing strategy has always been a struggling issue for e-commerce companies. As a result of applying inaccurate choices, the growth rate of e-commerce companies does not always reflect its real potential. Even figuring out the best pricing strategy that works shouldn’t be a really big deal, because of misunderstanding the core pricing concepts, it is not rare to see e-commerce companies fail to apply the most appropriate pricing strategy.
In this article, we will state the most apparent mistakes and cover how to avoid them.
Know extremely well your costs!
Because your actual product prices start to be formed from your unit costs, knowing them perfectly must be the first act you should do. Most basically, if you generate more money than your costs, we can probably say your business will survive.
Unfortunately, the execution does not flow for e-commerce companies like I’ve mentioned above. Many of them have some difficulties to identify the real costs and fail to make proper calculation. So, sustaining a cost-based approach becomes an impossible strategy for many of them.
One of its reason; unit cost of a product is mostly associated with the amount paid to suppliers. But it contains many variables. You should also identify and add the overhead costs such as salaries, marketing and all your general costs to your finalized costs.
In order to eliminate miscalculation, all these costs have to be monitored and taken into account very strictly. Then the rest is simple! Don’t set the prices under your costs to sustain your business’ profitability and have an healthy bottom line.
Update your prices constantly
We are talking about e-commerce and we know that the competition in e-commerce is extremely fierce as there are thousands of online stores trying to attract customers. It may be acceptable to set rarely changeable prices if you are selling very niche products but ignoring the price updates in a dynamic industry like electronics or mom & baby will cause you to face decreasing in sales and conversions.
It is not rare to see static prices set by e-commerce companies. Generally they make monthly or annual price plans and don’t touch them. In this case, e-commerce companies are doomed to be outcompeted by their competitors.
Online shoppers are brutally hunting products to find the best deal among vast of choices. They don’t think even one minute to leave your store to continue shopping from your competitor if you fail to fulfill their needs and understand their perceptions as prices are considered as the major decisive factor by more than 6 out of 10 of online shoppers. So, you need to test and optimize your prices continuously by benchmarking the market and competitors.
This seems a good strategy. Right? But, there are huge pricing related data points and metrics in the market. So, many of e-commerce companies fail to figure out where to start and what to monitor. Competitor price tracking software like Prisync provides actionable price insights from market to e-commerce companies. Moreover, you can track your competitors’ prices automatically and update your prices constantly to respond every move of your rivals and boost up the sales.
Don’t just focus on cutting prices
Just aiming to cutting prices and being the cheapest in market may lead you to increase the sales. But, what is the limit of cutting prices and how is your profitability affected by this act?
Before deciding to be the cheapest one in the market, analyze your costs. If you continuously keep on cutting the prices, your profitability will be harmed. Don’t forget! Your ultimate goal is to making profit not just creating crowd around your business. If you are not achieving the favorable profitability, the numbers of customers make no sense.
Moreover, you can still hold your best deal position while increasing your prices. For example, you may be far away being the best deal position in market. In these scenarios, increasing your prices will not harm your best deal position and you can still remain your competitiveness. In order to eliminate the risk of missing that opportunity, you can detect this gap by using competitor price tracking software.
Monitor the competitors’ prices and market
There are more than 12 millions online stores in e-commerce industry. In a such competitive market, you have to be aware of everything what’s happening. Especially by knowing the competitor prices, you’ll detect your real position in market. If you simply focus on internal issues and set random prices, it is extremely hard to stay on ground in this dynamic environment. Keep in mind that your competitors are also monitoring your strategic moves. From the side of customers, they are also tracking your products, comparing them with your competitors’.
So there are two things that you should really care about: time and information. Try to seek the ways of understanding the competition landscape and competitors’ price fluctuation (because they make these changes for a reason). This competitive price intelligence helps you to analyze and convert this data into actionable insights. The next step is; after you get this ready-to-activate insight, you can start responding every single move of your competitor rapidly. For example, you may detect one of your competitor decreases its prices every Thursday. The rest is simple; calculate your costs, set the profitable margin, analyze your competitor prices and place your finalized prices on your product page. Now you’ve gained the competitive advantage! After that, you won’t surprise how conversion rates are lifting.
Thanks to automated competitor price tracking software, you can gather all these competitor intelligence from the market and enhance your respond quality and speed.
E-commerce companies of any size can generate great benefit from competitive pricing intelligence when it is shaped in automated form and they can gather valuable insights without being distracted by too much information.
image source: https://techcrunch.com/2016/05/05/the-most-common-marketing-mistake-startups-make/