Top three retail pricing strategies to beat your competitors
Pricing items in online retail store can be a pain. It can take hours of tedious manual work, and it's always a trial and error experiment as you never know which price is just the right one for your products.
You know that you need to have some sort of pricing strategy in place for you online store and we know that you do, but is that strategy costing you?
Here is an outline of a few different points that often play a part in pricing strategies to illustrate the how they affect your business.
Some might say that Anchor Pricing is "the" key to developing your successful pricing strategy. We say, keep your eye on the big picture and be aware of how people shop. Anchor pricing refers to establishing a price point that your customers then use as a reference point for all future purchases.
As an example, when sales prices are listed, the original price is also always listed to give customers a reference point for how much they are saving. This establishes that reference point as an anchor price for that product, and customers see that point as the "normal" price. If you can set the anchor price "high," your sales benefit since customer see the high price as normal and your "sale" price as a great deal. Sounds like a good pricing strategy so far, right?
The problem is that anchor pricing does not necessarily factor in how people shop today. More and more customers are taking to the internet and utilizing a wide variety of tools to compare prices before purchasing - and not just on "big ticket" items. By the time a customer gets to your store, they already have a good idea of what the "real" anchor price is for the product they are looking to buy. If your anchor price does not match their expectation - they leave.
That is not to say that there is no place for anchor pricing. You still need to set an anchor price, but you need accurate pricing data for the market to allow you to establish an anchor price that customers will "agree" with. Your data source is the actual "key" to enable the development of an effective pricing strategy.
Beat them all!
With the ever-growing trend of price comparison website and applications, it may seem that the only way to entice customers is to beat everyone's prices. After all, if everyone is comparing prices and yours are the lowest that should equal more sales, right? We can comfortably answer that question with a very positive "maybe."
Having the lowest price may bring you some additional business, but it also drags you into a downward price spiral and puts your business in a position you may not want to be. Having said that, being the cheapest can be a useful strategy to help meet some short-term needs your business may have such as boosting a slow sales cycle, or emptying out inventory.
The lower prices drive more traffic that makes up for the decreased profit margins. However, you still need to ensure that you can afford to sell at the cheapest price without taking a loss, and more importantly, you need to be aware of what that cheapest point is in the market at any given moment.
This is where accurate market data is essential. Your data needs to be up to the minute, and allow you to respond dynamically to any changes, allowing you to maintain your pricing position.
No, we do not mean your online store should become like the airlines, where on any given flight most of the passengers have paid different amounts. We are referring to the ability of you to adapt to changes in pricing in the market.
As mentioned previously, by the time the customer has arrived at your product, they already have a good idea of what it should cost. Your pricing needs to reflect real time market conditions so that when these customers arrive, their expectations on cost are met. In the ever-changing world of online shopping, the "expected" price for a given product can be very dynamic and if your pricing cannot adapt, you will cut your profits on both ends.
By not adjusting your prices to reflect lower market pricing, customers will go elsewhere. By not adjusting your prices to reflect higher market pricing, you will be selling items at a lower price than necessary to maintain customer satisfaction. The key to maintain a dynamic pricing solution is good data.
You need to monitor market conditions in real time and be able to implement changes as needed, whenever and wherever you are.