Written By Başak Sarıçayır from Prisync
Price is one of the major factors of any commerce (both online and in-store).
And you might have heard some of the pricing strategies that brick and mortar stores use to maximize their profit, but eCommerce has taking pricing to a whole other level.
Let’s first talk about the basics.
There are 3 common pricing strategies that everyone knows about.
This is when a company calculates all the costs that go into making the product, and then sets a target margin.
This is when a company prices its’ product based on how a competitor prices theirs.
This type of pricing strategy takes into account all the value that a consumer would contribute to the product, and then price it according to that.
A classic example is Apple’s iPhone products that are sold at increasingly higher prices because of the perceived value of the brand and not the costs of the electronic parts in them.
Pricing intelligence (or competitive price monitoring) refers to the awareness of the changes in price and its impacts on your business.
This involves monitoring your competitor’s pricing, across the channels, platforms, and marketplaces that you are in.
You might be wondering, that sounds competitive, why can’t I just calculate my costs, and add a few bucks?
Let me explain.
If you’re still adding a markup on your cost to find the selling price (cost-based pricing), you’re missing tremendous sales opportunities.
Online consumers like to go price shopping.
With everything at our fingertips, why not find the best deal?
Studies show that 70% of shoppers say competitive pricing is the most important factor when choosing a product, above all else.
Pricing remains a top priority for the modern consumer, who's buying journey differs greatly from that of the previous generation, when brand loyalty was everything.
That’s why Amazon has worked so hard to grow its’ Amazon Prime membership.
And the fact that price comparison websites are among the highest traffic websites across the world tells us that price comparison is already a part of our buying journey.
So, if you’re still setting your prices based on your costs and target profit margins, you’re already losing sales.
Then what’s the right way of pricing a product in a highly competitive market?
Head over to our next topic to learn more.