Online trading is a huge market and is expected to continue to grow in the upcoming years. You can sell nearly anything in online retail, including an endless array of different products or services. Selling online is often much easier and more affordable as you don’t need a storefront and can employ fewer people.
But one concern many online stores or retailers have is pricing. Companies want to price low enough to attract potential buyers away from their competition, but also high enough to make a decent profit. So how do you go about choosing the right pricing strategy for you?
There are many different strategies companies can use and some might even use data to help them predict the effectiveness of a certain strategy (If you’re interested in learning more, read this blog article from Daniweb).
With all of that in mind, this blog post is going to look at some of the best pricing strategies and tips for online retail.
Utilize Charm Pricing
When you’re shopping, you likely see many items whose prices end in 99, and this is no accident. Using charm pricing (a type of psychological pricing) is all about getting people to think they’re getting a deal even if they’re not. Because many people constantly look for deals to save money, this pricing strategy can help more people make impulse purchases because of the perceived savings.
Using this strategy is often a good idea as many people will look at the left digit to perceive the price of a product or service. So, if you have something for $49.99, many will associate that with $40 instead of $50, despite only being a penny less. This is only one example of using psychological pricing to benefit your company, but is one of the best.
As mentioned in the last section, many people are constantly looking for discounts. Spending money hurts, so people would like to spend as little as possible. Customers love discounts, so if they see discounted items they’re looking for in your store, there is a good chance they will make a purchase. Discounts get a lot of eyes on your store, and can help you get rid of old or “out of date” items with ease.
There is a reason why nearly every retailer (online and otherwise) uses discounts or promotions at one time or another, because it works. However, if you are a premium or mid-tier retailer, you want to be careful with discounts. If you use them too frequently on too many items, many shoppers may see you as a bargain retailer, which might not be the reputation you want.
Consider Value-Based Pricing
This is a relatively complex pricing strategy, but can be incredibly effective. Value-based pricing is when you price items based on the perceived value it has to your customers. This requires a lot of research and analysis, but can provide high profits. You will need to make small and subtle changes to prices frequently, based on both customer behavior and what’s happening in the market.
For example, in the summer, items like bathing suits, sunscreen and pool toys can be priced higher as more people are looking for them. Thus, they have a higher perceived value to customers at this moment. However, in the dead of winter, when these items have a lower value to the customer, the price needs to reflect that lower value. It can be hard to get this pricing strategy right, but if you can, it can be incredibly beneficial.
In conclusion, hopefully this article has helped you learn about some of the best pricing strategies for online retail. Of course, no matter which pricing strategy you want to employ, be sure to test it out first. Be sure to try out others not listed here, as the right pricing strategy for one company may not work for another.