There are plenty of pricing strategies that you can use for your business, and sometimes, it’s best to experiment around and see which one’s works best. However, that can result in unexpected situations, and some people can’t take that unnecessary risk.
You don’t need to worry, though; in this article, we’ll be discussing the different types of pricing strategies that you can use for your business. So, without further ado, let’s get straight right into the meat of the content.
The List Pricing Strategies You Should Know
1. Cost-Based Pricing
This strategy is pretty much the most straightforward and common pricing strategy. It’s possibly the first strategy that people that are getting into a business think about. After all, it’s an easy concept to grasp. You add a fixed percentage and amount to the overall cost of your product to generate a profit.
It’s easy, simple, and very convenient to calculate. It doesn’t take up much of one’s time, and it has also proven to work plenty of times. It’s a tried and true strategy, and many businesses at one point have tried it, thought about it, or even taken some ideas off of it.
Now, try to think about measuring its overall cost. You need to consider its production costs first, such as materials, labor, and other fixed costs that you might incur. Let’s say the entire process costs around $60. You can start gaining a profit if you charge an extra $5, but that’s not going to cut it if you’re thinking of other external costs that you incur in running your business.
You also have shipping costs or maybe even advertising costs to worry about since you’re an e-commerce business. The best course of action is to try and get at least 50% of the profit margin for cost-based pricing to be a viable strategy.
2. Consumer-Based Pricing
Consumer-based pricing is another pricing strategy that works well for many industries, such as SaaS startups. The reason for this? Simply because consumer-based pricing does not consider expenses incurred through the production process. Instead, you try to price your product depending on the price that your consumers would be willing to pay.
This takes advantage of the simple fact that if your market is willing to pay more for your service, why not charge them for that specific amount until you’ve reached the limit? Consumer-based pricing doesn’t care much for competitors with their prices; instead, you want to worry about optimizing your product prices as best as possible and maintaining the excellent perception of your consumers on your product’s or service’s value.
However, there is one catch to this strategy, and it’s that you always need to continue developing and innovating. It doesn’t need to be exactly on your product or service. If you offer your audience convenience in the buying process or make communication lines much easier for them to handle, you’re going to get the sales you need.
It’s not much of a catch. However, in the long term, consumer-based pricing both provides you with the profits you need and the innovation that you will eventually have to strive for to be successful.
3. Bundle Pricing
Bundled pricing is a favorite pricing strategy for many e-commerce sites on the internet. You also often see it in real-life retail stores in malls or shops. It’s because it’s one of the most effective pricing strategies, and mixed with the proper marketing techniques; it can generate a lot of interest for your products.
Bundling products and services in a package and offering a discount on their overall price is a great way to attract a lot of attention because people might be interested in just getting everything they need at once rather than trying to find one single item.
In the context of e-commerce, this only gets a lot better as you can do a lot of marketing alongside the bundled packages. You can do things such as outbound calling to existing clients through predictive dialers and offer them these bundled discounts.
You can showcase infographics or photos of the bundled product and its associated accessories on your website or other e-commerce sites. You can even send abandoned cart emails if there are customers that have seemingly forgotten about bundled packages in their carts on your online shop.
Combine discounts, convenience, and quantity; you get a great combo that is hard to pass up by many wandering, interested customers.
4. Dynamic Pricing
As compared to cost-based pricing, dynamic pricing is the exact opposite. It’s a strategy about being flexible and adaptable to different situations. In dynamic pricing, your prices should never stay on one single price point for too long but instead should move depending on the constant changes in supply and demand.
You can often see dynamic pricing changes on food in particular due to the simple fact that there is a lot of demand there due to it being a necessary item for a lot of people, and the supply for food is constantly changing because of weather, natural disasters, bad crop season, pests, and many more.
In the world of e-commerce, the same can say. If you are getting a lot of customers in a short period, then the only way to go is up and up your prices. However, that’s not to say that there is also a wrong side to this. Due to price fluctuation, some consumers wouldn’t be willing to pay whenever the price is high and would prefer to wait things out.
That’s going to affect your sales conversions in the long run. In a sense, you’re trading high price value sales for the sacrifice of several mutations that you ought to receive with a fixed price.
5. Premium Pricing
Premium pricing is the exact opposite of market-based pricing. In this strategy, you don’t try to undercut your competition but instead push your prices over to the edge. You try to make your product look as expensive but at the same time at a premium quality as compared to others because of the price that you ask for.
Premium pricing often markets itself in things such as luxury, exclusiveness, and quality. Some companies stand by these three things and showcase to their market that it isn’t all talk but does instead of offer authentic premium quality goods.
Premium pricing is a great strategy, only if you have the necessary resources to back it up. If you are proven to be a lot superior in terms of quality or offer incredibly exclusive luxurious products, you would be able to gain a lot of profit from consumers who are willing to pay the extra mile.
However, if your brand name can’t catch up on the hype, you’d be in a risky position that nobody might even be interested in buying your products or, worse, consider your products a cash-grab or a scam.
Before Executing Your Pricing Strategy
Once you’ve decided on what pricing strategy to execute for your business, you need a few more things to check and get ready before entirely investing in the dive. It’ll be bad if your initial change and momentum gain is abruptly brought to a halt by some factors that could have been prevented.
Get Stocked!
First thing’s first, you need always to know your business’s strong points and weak points. If you lack the assets to back up your inventory stocks, consider getting an inventory management platform to prevent bottlenecking your sales line. After all, executing the right pricing strategy also needs the proper tools to back it up.
This prevents you from losing out on potential sales and grows trust with your customers due to the simple fact that you can deliver what they ordered. The only worse thing than having bad prices is not having enough products to sell in the first place.
Appeal To Your Target Niche
After stocking up:
- Make sure you have the necessary marketing capabilities to sell your products and their appealing price lists.
- Make your e-commerce store as appealing as possible to your target niche.
- On your website or social media pages, try to make as much buzz as possible and even appeal using aesthetic imagery and graphics.
The market as much as possible before implementing any new types of pricing strategies. If you can’t do any of these or start, you don’t have to worry about marketing new pricing strategies. Instead, focus on selling your brand and business first and establishing a foundation for your future business goals.
Ready Your Website
The last thing you need to do is make sure that your website and other e-commerce platforms are all set and ready to go. This is the final crucial step that will decide your new pricing strategies and e-commerce store to succeed.
Nobody would be able to buy your products and services, let alone see them, if you did not go through with your web designers on how ready and capable your website is to handle the traffic.
Use UI research & analytics tools to make the best out of your website before the grand finale. Make sure to maximize and optimize your website as soon as possible.
Not to say that traffic will start flowing in surges, but often, businesses make the mistake of not being ready for any uncommon contingencies such as introducing a product into the market and being an instant hit. Too many companies in the past have lost a lot of potential sales due to their initial momentum being stalled by overwhelming customers.
See What Works!
After executing and getting the initial sales of your pricing strategy, it’s essential to see what results in your company received. At this stage, the only thing left to do is to ensure that everything goes smoothly and to check if and when the pricing strategy worked. It’s best to constantly monitor sales and marketing for a period to fully understand if the pricing strategy you have chosen is working in your favor.
This information would be all the more valuable for you if you ever decide to switch pricing strategies again or even scale your current pricing strategy to the next level with your present business. After all, the information gives better guidance in the decision-making processes of growth, hacking your business to the next level with the pricing strategies you have at hand.
Conclusion
There are plenty of pricing strategies that you can choose for your business, and while some work best in certain conditions and while some do not, it goes without saying that pricing strategies are essential for the success of any e-commerce business that is looking to set its foot into the internet markets