If you are an e-commerce retailer and your products aren’t selling well, you would be forgiven for solving this problem intuitively by reducing your prices. However, sometimes the correct answer is that you need to do something counter-intuitive, like actually raising your prices, or changing your whole approach to selling online, to solve common ecommerce pricing issues.
Read on for some tips and tricks to help you raise prices without sacrificing demand or revenue.
Think Novel When It Comes To Price Increases
The way to increase product prices has changed remarkably over the last 10 years. In years gone by, raising product prices typically meant varying the single baseline cost of a product, which was set in the first instance through a calculation of costs involved in bringing the product to the market.
More recently, lots of new ways to sell have evolved and as a result there are lots of really novel, innovative ways to sell products more effectively. For example, a product can be sold on its own for a baseline price, but with an interesting additional twist - the customer can also choose to “add on” extras that are relevant to the product or service and these are aimed at enhancing the product or service. This allows the customer a wider choice, where they can buy the generic product if they wish, but they also have the option of enhancing their experience of the product or the sale. Common ways to “upgrade” a product or service include:
- Get the product or service more quickly – 24 hour turnarounds on things like delivery of chocolates for special occasions, can attract a significant increment for the retailer
- Add personalisation to products like calendars or phones
- Add related or complementary products at a discounted rate
- Add an enhanced version of the basic product or service.
Price increases can be factored into this process of offering upgrades and extras, so the baseline price can remain the same, however the customer has a whole range of other options where they can choose to enhance the product or service ordered, at an additional cost.
Think Of Alternative Ways To Vary Price
There are lots of ways to be competitive about pricing without lowering your baseline price. Offering free postage and packing for a period of time is one example.
Varying postage and packing costs is highly effective as a way to attract customers because it is sometimes “invisible” to competitors, for example a competitor might be selling a product for slightly less, however when the overall cost (including postage and packing) is considered, the competitor product might be more expensive.
Sell Product Bundles
If you sell more products by selling them at a reduced price if purchased as a bundle of products together, you can afford to reduce the overall price of the product bundle, but still make a profit.
These kinds of promotions where you incentivise purchases of several similar products together are great ways to boost profits.
Do Your Homework
If you approach the problem of price strategy instinctively, or manually, you might miss critical information about competitor pricing. This is why a lot of online retailers are turning to specialist price monitoring software to help them understand how competitors are approaching their pricing strategy, for the same and similar products.
Particularly if you are thinking of raising baseline prices for products you sell, you need to consider what prices are being set by your competitors. Are your competitors selling the same product for more or less?
If you discover your main competitors are selling the same product for more than you are, your pricing can be raised overnight with little anxiety for you as a retailer. You are still selling your products for cheaper, so a price increase isn’t likely to have significant impact in terms of repelling customers.
However, raising baseline prices on products is a much more challenging decision for retailers if price varies from day to day and the price being set by competitors is the same or similar compared to their own. You may need to raise your prices for just a few days before reducing them again, in order to implement a price increase that doesn’t send all of your potential customers into the arms of your competitors.
You must also consider factors like promotions and additional costs like postage and packing, when considering your pricing strategy. A good pricing strategy goes deeper than just an assessment of the baseline cost of a product, compared to others available. Two products can be priced exactly the same way, however if one of these products is selling with free postage and packing, then this product is selling for cheaper.
Similarly, if two products are ostensibly selling at the same price, but one of these can be bought at a discounted price if the buyer enters a code they got on Facebook, then these two products are actually selling at very different prices, although at first blush they appear the same.
A shrewd pricing strategy will also encompass the sale of similar products. Have prices for similar products recently been reduced? If so, you should prepare for a possible diminution in overall sales revenue.
Evaluate, Evaluate, Evaluate
A comprehensive evaluation strategy is a must for any ecommerce retailer. Are you selling lots of products but spending too much on advertising? If this is the case, you may need to revise your advertising budget as opposed to increasing prices.
A comprehensive evaluation strategy allows you deep insight into patterns surrounding your overall retail activity. This allows you to take smart decisions, for example a decision to discontinue an unprofitable product line and invest in products that are selling particularly well. Equally, expensive ads and marketing campaigns can be discontinued sooner rather than later, so resources can be diverted to where they will produce more return for the overall spend.
If you are not sure of how customers will react to a planned price increase, a great idea is to create a price experiment or a trial. This is a period of time where you will actually set a price in a certain way, but you will compare the purchasing behaviour of your buyers comprehensively across various segmentations, for example, you can ask yourself the following questions:
- How is one product selling compared to others in the same business portfolio?
- Are sales going as expected?
- How are similar products being sold by competitors priced?
- How are identical products being sold by competitors priced?
Price experimentation allows sellers to avoid something that can be incredibly damaging to ecommerce sales – setting pricing according to human instinct. Some sellers can worry that if they set their prices “too high” their buyers will abandon them overnight, or immediately switch to competitors. However, these fears are often erroneous or ill-founded, with the result that profit margins are curtailed for irrational reasons.
The price experimentation window allows retailers a short window of time to get their pricing just right. During this period of time they can evaluate and make any adjustments required based on actual information and real time buyer behaviour, as opposed to making emotional or instinctive decisions, which can backfire.
Invest In Optimisation
Due to the proliferation of mobile and tablet sales compared to sales from websites designed for desktop, a harsh reality for many retailers is if a retailer website isn’t optimised for mobile and tablet purchases
, the price isn’t likely to matter much as lots of people will just buy the same products from other retailers.
For customers convenience is key
, and consumers may even pay more money for products if the checkout process is secure, easy and convenient.
For a serious online retailer, a lot of planning and consideration must go into the creation of a convenient, secure and fuss free check out process that works on multiple platforms, taking account of how most purchases are now from tablets and mobile phones, not desktop computers.
To Get Pricing Right – Think Counter Intuitively
Pricing is one of the key factors, which drives sales and success for ecommerce retailers, and the pressure to get pricing just right is ever-increasing. Despite the importance of price, it is surprising how little thought and planning many retailers still devote to it, with many relying on “gut instinct” to make final decisions on price. As such, retailers can unwittingly set their prices far too high without understanding how this is likely to impact their customer base. Equally, pricing that is too low is a problem. However, there are lots of things that retailers can do to ensure that pricing strategy is optimal. These include allowing for a large degree of flexibility in how customers can shop by making it possible for them to purchase faster delivery and “extras” like product bundles. Also essential to the problem of getting pricing correct is pricing intelligence and insights gained through running price experiments, and investing in price comparison technology and software to ensure that price monitoring is effective.