For a business, the best to succeed is to product pricing the right way and better than your competitors. This way, you can enhance the amount you sell. By creating the foundation for a business that will prosper.
There are a number of different types of ecommerce pricing strategies for a business. But, there is no specific formula-based approach that suits all types of products, businesses, or markets. When pricing your products, there are certain factors involved. This includes pinpointing your target customer, tracking how much competitors are changing. And understanding the relationship between quality and price.
Here are some ways in which you can achieve your business goals with the right kind of product pricing.
Firstly, you must be clear about what you want to achieve with your ecommerce pricing strategy. You want to make money. When you say you want to make money. It simply means generating enough revenue from selling your products. So that you can not only cover your costs but take a profit and perhaps expand your business.
Many businesses fail to understand that price alone does not drive sales. It is your ability to sell is what drives sales. And that means hiring the right sales people. And adopting the right sales and ecommerce pricing strategies. One must be aware of the risks that accompany making poor product pricing decisions. There are two main pitfalls you can encounter – under pricing and over product pricing.
– Underpricing: When a certain product is priced at too low a cost, it can have a disastrous impact on your bottom line. Even though business owners often believe this is what they ought to do in a down economy. Reducing prices to the point where you are giving away the product will not be in the firm’s best interest long term.
– Overpricing: On the other hand, over product pricing can be just as detrimental. Since the buyer is always going to be looking at your competitor’s pricing. Pricing beyond the customer’s desire to pay can also decrease sales.
Conducting a market research is essential to get to know your customer. This type of research can range from informal surveys of your existing customer base that your send out in an e-mail along with promotions to the more extensive and potentially expensive research projects undertaken by the third party consulting firms. You can also look at consumers in terms of distinct groups – the budget sensitive, the convenience centered, and those for whom status makes a difference.
Know your costs:
Many businesses either don’t factor in all their costs and under price or literally factor in all their costs and expect to make a profit with one product and therefore overcharge. A good rule of thumb is to make a spreadsheet of all the costs you need to cover every month, which might include the following:
- Your actual product costs, including labor and the costs of marketing and selling those products.
- All of the operating expenses necessary to own and operate the business.
- The costs associated with borrowing money (debt service costs).
- Your salary as the owner and/or manager of the business.
- A return on the capital you and any other owners or shareholders have invested.
- Capital for future expansion and replacement of fixed assets as they age.
It is always wise to look at your competition – after all, your customer most likely will, too. You can also prepare a head-to-head comparison of the product pricing to your competitor’s product(S). The key here is to compare net prices. This Information can come from phone calls, secret shopping, publishing data, etc. Taking notes during this process about how your company and products – and the competition – are perceived by the market.
Keeping a track of your outside factors will impact the demand for your product in the future. These factors can range from something as simple as long-term weather patterns to laws that may impact future sales of your sales products. Keeping a track of your competitor and their actions will also help your business.