Choosing the right pricing strategy is one of the most crucial decisions that you have to make. Get it wrong, and it could cost big for your business. Online and offline retailers alike recognize pricing strategy as one of the key value levers, and, accordingly, companies have worked to refine their pricing strategy, tactics, and tools over the past several decades in hopes of optimizing their approach. Today, with the rising use of the internet and smartphones, customers can compare prices with just a click of a button. So, the pricing strategy that companies in the e commerce industry choose must be one that not only gives them a good ROI but also gives a sense of ‘value for money’ to the customers. There are endless ways for companies in the ecommerce industry to configure and set their pricing strategy. Here is our pick of the top five ways to get online pricing strategy right:
Loss leader pricing
This is a crucial pricing strategy for companies in the ecommerce industry to convert their customers into loyal customers and ensure repeat sales. This strategy is generally practiced by retail giants such as Amazon and Walmart. The main idea behind this pricing strategy is to price certain products at a price that is significantly lower than that of the competitors in the e commerce industry. This is similar to the predatory pricing strategy that is mostly followed by offline retailers. This technique not only drives traffic into the store but also help in converting window shoppers into paying customers.
Basket-based pricing is a common pricing strategy that is used by players in the e commerce industry to entice customers to make a purchase. In this technique, certain price points or products are used to incentivize customers to purchase products. For instance, it is often seen that online retailers offer free delivery if your total basket value exceeds a particular limit. This sometimes makes customers purchase more than they would have initially intended so that they can avail of the benefits.
Amazon is a prominent example of an e commerce industry player who has been leveraging this pricing strategy effectively. The company leverages its state of the art logistics network to not only serve its customers at the shortest possible time but also to use it as a profit-making pricing strategy. They give customers options such as same day delivery, next day or 2-day shipping, in return for an additional premium from the customers. This is a great way for the company to keep its prices lower than the competitors but at the same time drive profitability for the business.
Real-time price optimization
With the advent of advanced technology, it is now possible for companies in the e commerce space to gain real-time insights on determining whether the rate at which the products are priced is the ideal way of ensuring profitability or not. It is not advisable to always price the products lower than that of the competitors. Instead, players in the e commerce industry can use retail analytics to identify and adjust the prices based on factors such as demand and out-of-stock situations. Out-of-stock situations are opportune moments for setting prices at a higher rate as customers looking for these products on competing sites will surely navigate to you.