When you build an online store, pricing your products turns out to be one of the most challenging things in ecommerce. Not only does it affect your margins and how much you sell but even your brand. And to a consumer, it can tell a lot about your business. Yes, your pricing strategy controls the entire perception of your brand. Never thought of it this way, did you?
For instance, if a customer sees an item listed at your online store for Rs.500/- and Rs.1500/- at your competitors, which ecommerce website would he think has higher quality. The more expensive one at your competitor’s.
But you, an owner, do understand well that even though your competitor is selling products at a higher price, it doesn’t necessarily mean his/her product quality is in any way superior to yours, just because you sell at bargain prices. As I said, it’s all a matter of perception.
So, what’s the alternative? Should we search for different pricing strategies online? Very convenient. But also very confusing.
So, when you come across different pricing strategies while building an online store, it’s important to treat them as a testing process. This way, you can work on these strategies and figure out how receptive your customers are to them, and make a better choice.
It’s crucial for your business that you get your pricing strategy straight since it is the only thing people think of while making a purchase.
At StoreHippo, we have seen a lot of pricing strategies over the years. And for this article, we have compiled a list of such factors to think over while planning the pricing strategy of your ecommerce website.
Factors to consider while planning your pricing strategy
Understand your position in the market
Before you do anything else, start by looking within and about you. Is your website a gorgeous-looking and incredibly well done? Are you selling your products below market price? If so, you can think of raising the price a bit.
But if you are still rocking that old website theme for the past decade and are pricing your products at the top of the market, you might need to shrink a little
Since the time you build an online store, how professional and trusted your business has been? Think over it. And while at that start looking at the prices of products on other websites too, which brings us to our next step.
Research your competitors
Now that you know where you stand, let’s talk about where your competitors stand. So, who are your biggest competitors? How do their prices compare to yours? Find out and we will move on to how best to position your price compared to theirs.
As per the research, if you think of selling products on your ecommerce website below market price, the value of your brand will be perceived differently (as we discussed earlier). And if you set your prices high, you might risk losing your customers to your competitors.
When it comes to the pricing strategy, there are a lot of factors at play. Don’t worry, we will discuss them in the upcoming steps.
Use the psychology of anchoring
Let us understand how humans make decisions. We generally depend on one piece of information, also known as the metaphorical anchor, while making decisions such as to purchase an item or to even build an online store.
For example, how to sell an item priced for 3000 INR? Simple, put it next to another item costing 8000 INR. The consumer will use the higher price as an anchor and now the 3000 INR item seems like a great deal. Budget-conscious customers will go for the lowest price available and still think they are getting a great value for money.
Offer incentives to make them spend more
Your prices play a key factor in determining how much your customers spend during each transaction. Which is why you need to set the prices on your ecommerce website so as to make your customers spend as much money as possible.
So, what can you offer your consumers? That’s right, incentives!
Suppose you are offering a 2-pack item for 250 INR and a 3 pack of the same item for 400 INR. Customers are getting a better deal with 2-pack but with this, they have to pay extra for delivery as it doesn’t meet the 300 INR threshold.
The solution? They will consider buying two of the 2-pack items from your ecommerce website. Not only will this give them a better value per piece but will also help them meet the free delivery requirement. This strategy will give them a reason to continue adding items to their cart.
Everybody is familiar with discounts. The strategy is pretty simple as well. Set your prices high, offer promotions, sales, and discounts.
Why buy a pair of shoes at 2000 INR when you can get the same pair at 500 INR with 75% off on discounts. Include this strategy when you build an online store. This is too good a deal to pass up on, right? Your customers could get four products for the price of one.
However, you might need to tread carefully on these grounds here. Because if your customers get used to buying only the discounted items (a side effect of running sales too often), they might never buy products on full price again.
Know your margins
You need to know your margins if you are planning to offer discounts, put items on sale, or running other promotions on your ecommerce website. This is highly important because you need to make sure you are still earning a profit after all these offers.
After all, you too got to put money in your pocket after you pay your electricity and other bills, pay your employees, and keep something to invest back into the business.
As we have discussed earlier, you cannot just blindly set the price on your products. You don’t want to generate sales and lose money at the same time. This is not what you build an online store for.
Another great pricing strategy you can implement is the bundling concept. Here, you set up the prices so that buying items separately is more expensive than buying them in bulk.
Let’s say a person is interested in buying an item for 1200 INR and its accessory for 300 INR separately. But if he sees buying them together will only cost him 1300 INR, there is no reason he wouldn’t go for it.
Bundling is a great pricing strategy that also helps improves your up-sell and cross-sell strategy of your ecommerce website.
Focus on quality
Even having higher prices for products on your online store is justifiable if you have enough reason to support them. Now, I am not referring to luxury brands here. But if you are selling a shirt for 2000 INR, you need to tell them why.
Otherwise, why would they consider buying from you when they can get it for 400 INR from your competitors?
You can use a lightweight material that is made to stretch and use a fabric that fights odour causing bacteria. You can also try removing seams from the sides to help reduce irritation. You get the idea, right?
Put emphasis on value
The strategies that we discussed earlier such as offering discounts or bundling products are great at making your customers feel like they are getting a deal.
Owning and managing an ecommerce website is no child’s play. Apart from offering all these great deals, you need to make sure you are offering them value too. An easy way of doing it is by making your prices as affordable as possible. After all, it's their hard-earned money too.
Price is an essential factor that affects a consumer’s buying decisions. But today’s shoppers have become savvy, if you can’t offer them a quality product at affordable rates, they will simply look elsewhere. So, don’t give them the chance to walk away.
Build an online store and use these strategies to increase your sales. Start experimenting and whatever business you have, we are sure you will find something useful here.
Or you can do the opposite, that is, get an ecommerce platform that allows you the freedom to implement all these strategies as per your need. Check out StoreHippo, a reliable ecommerce platform with advanced features and a variety of in-built tools such as the discount engine, pricing overrides, etc. to assist you in building the store of your dreams without much ado.
So, what are you waiting for? Start building yours today with StoreHippo 14 day free trial period and explore the possibilities ahead.