Selling online is something that can really make a difference to your business. Whether you are using the ecommerce world to supplement an already established business, or you are solely selling through the internet, getting it right can make you extremely successful.
Pricing is the key to all of this. If your pricing is wrong – too high or too low – the customers who might otherwise have bought from you will distrust what you are selling. Either they will think you are being greedy when they can get the same (or similar products) from elsewhere for less money, or they will worry about the quality of the products if the price is much lower than everywhere else.
So how can you get the pricing strategy for your e-commerce site just right? Read on for some ideas.
Cost-Plus Pricing
Also known as ‘keystone pricing’, cost-plus pricing is the strategy of looking at the wholesale cost of what you are selling and then adding a percentage on top. Depending on what you are selling, you can use either a higher or lower mark up. If you are selling something relatively rare, something that costs a lot to begin with, or something that takes a while to sell due to being niche, you might want to give it a higher price. Something that is easy to get hold of or that always sells quickly you might want to have a lower price, thinking of quantity to get the same profits as one higher priced item might give you.
Cost-plus pricing means that you can ensure you are making the right amount of profit – depending on what that might be for you and your business plan – factoring in delivery costs, operations, and even maintenance and repair in some cases.
Target Return Pricing
Target return pricing is about looking at a return on your investment, meaning that you work on a percentage strategy rather than fixed pricing. This means you can be fairly flexible on what you charge depending on the percentage that you are looking to make.
Of course, there are some issues with this way of working. It means that rather than looking at what your competitors are charging, or what the public might be willing to pay, you work only on your own profit percentages. However, despite its downsides, the positives include the fact that you will always know what your bottom line is going to be, and how your business will grow.
Value Based Pricing
This particular pricing strategy is about pricing products and services in such a way as to ensure customers buy from you rather than the competition. It works by pricing products and services on their perceived value, using emotions – just like in advertising. Although you will still need to take cost, shipping, taxes, and other considerations into account when pricing, you also need to look at supply and demand, and how much the overall package (including your own customer service and unique way of working) is worth.
What are you offering over and above your competitors to ensure you can charge more, for example? If customers feel that what you are doing is worth the money you are charging, they will pay, so this is your chance to ensure you are giving them exceptional value. That way, you can make more money.
Competitive Pricing
Competitive pricing is one of the best ways you can work when it comes to determining the price of your products and services. There are a number of different benefits, all of which will bring you more sales and additional profits, boosting your business and growing it as you want it to grow.
Examples of just how useful this tactic can be for you as a business owner include the fact that you can look at the cost of your products yourself, comparing them online and then negotiating with your supplier for a better price. You can also easily and quickly compare yourself to your competitors and see exactly what they are doing not just in terms of pricing but how they are listing and selling their products; this will allow you to be much more competitive, even down to looking into their shipping fees and promotions.
It can be an add on to other marketing ideas such as PPC. The last thing you want is to pay for a PPC campaign and then find you aren’t the cheapest (or aren’t offering as much for the price). You can make more of your budget if you are comparing prices.
There are downsides, of course, as with any pricing model. Be careful, for example, not to be so competitive that you aren’t making any money - breaking even or making a loss won’t help your business to grow, even if you make a lot of sales. Plus, some monitoring sites might be out of date, so it’s always worth checking a few sources to be sure of the prices you are working with.
Lead Generation Model
The lead generation model is about intriguing potential customers enough to ensure that they get in touch to find out more about what you are selling. This might mean that someone has to fill in an online form in order to request a call-back from a sales representative, or perhaps they need to give over some information in order to download a brochure, for example.
There are some positive reasons for taking this approach, the main one being that you can actively engage with your customers, building up a rapport to not only make this sale but to hopefully create future business too. Plus you will have all the details and information you need to create targeted sales in the future. The negative aspect is that some customers might be put off by not being able to get pricing without offering up their own details.
Conclusion
Pricing your online goods and services correctly is one of the most important elements of running an e-commerce business. Therefore, choosing the right pricing strategy is crucial. You will need to determine which strategy is going to work best for your business, your customers, and for you.
Market research will help you to get started. Knowing just who is most likely to buy from you - and what they are most likely to buy - will help you to work out which pricing strategy is best since you will know more about the buying habits (is it price that is most important? Is it quality? Is it extras?) of your customers.
