In this post we are going to help you define your pricing strategy so that your online adventure is as successful as possible.
Has it ever happened to you that you cannot close the sales that you propose even when the product is of good quality, the promotion strategy is well designed and you have a solid commercial strategy? One of the reasons could be that you have not defined your pricing strategy well.
Defining it will help you better enter the market and will also help you structure your production and operational costs. Do you want to know what other advantages it has? Keep reading!
What is a pricing strategy?
A pricing strategy is the plan to be followed by a company to define the prices of its products in a way that is profitable for the business and attractive for the customer. It is also known as pricing and it is a practice that will keep the financial health of your company in good condition.
What are the main pricing strategies?
We present some of the most common pricing strategies for businesses in general and that you can use in your online business.
penetration strategy
This strategy is usually used when it is necessary to enter a market where your product is not yet known and you need to compete against strong players that already dominate the market. It is about capturing the attention of consumers with an attractive offer that includes a quality product at an affordable price.
It is generally a strategy that is used during the first stages of launch to measure the response of the market, later this strategy can be modified by defining your production cost or the speed with which your stock moves.
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differentiation strategy
The differentiation can be vertical or horizontal. This strategy is worthy of a brand looking for customers with high purchasing power. In the vertical model, high prices are set to convey a feeling of high quality, and with this the brands manage to retain the customers of that target. In the horizontal model, the variable that is adjusted are the characteristics of the product, that is, a niche product is sought in order to be able to sell it at a higher price, but without necessarily being of better quality.
Skimming Strategy
It is often called a skimming strategy because it refers to removing the cream from the surface, and is characterized by setting a fairly high price to capture the customer segment that is really interested and would pay for the product, and then lowering the price to capture a larger market segment.
Typically, this strategy is used for new or improved products that consumers are already aware of or want to purchase and expect a high cost, but also know that this cost may come down over time. It works well for consumers who want to be the first to get such a product.
Free shipping strategy
This strategy applies very well to your online business, since it is about absorbing the cost of shipping after a certain amount is spent in your store. In order to define this type of strategy, you must carefully consider your shipping costs to know if it applies to all the geographical areas where your store appears or if you will do it in specific areas.
To give you an idea of shipping costs, we invite you to read this note where you will know what the
This strategy works well to round purchases, for example, if you have products that cost 200 MXN and others that cost 50 MXN, you can create a shipping strategy starting at 400 MXN. People prefer to pay more and get more products than pay for shipping.
Package Pricing Strategy
This is also a good technique if your online business is dedicated to selling to retailers and wholesalers alike, or if you have a lot of stock that you can sell as a bundle. Here the idea is that you set a lower price by assembling product packages, it does not matter if they are the same or different, the idea is that people perceive real savings when buying by package.
They will probably end up spending more but will have the feeling of making a better purchase.
How to define pricing strategies for your online store?
Analyze your business goals
We know that the main objective for you is to sell, however, analyze your products and your business plan further. Think about what is the most difficult to move of all your products, what is the easiest and what is the first thing you should finish according to the characteristics of your products.
Make production calculations and use your financial plan to determine what is most important and define your
Define the price according to your target
Analyzing the profile of your clients and the segment of your market, you will be able to use the price strategy or strategies that best suit you. Review the behavior of your online store customers before launching a new strategy with your new products; You will be able to obtain very relevant information to define your strategy according to the profile of your consumers.
look at the market
Depending on the number of competitors in your segment, you will have to define a higher or lower price to penetrate the market and break the barriers to entry. So make sure you look at the big picture and not just focus on the biggest players in the industry.
Check if there are small players that survive with low prices or if, on the contrary, the barriers to entry are very high due to the type of behavior of the consumer of that product (who prefers established and well-known brands).
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Look at your competitors
Observe the prices that the competition is putting and define yours not far from those values. If you define prices that are too different from those of the other players in the segment, you will probably not get many clients.
Also, looking at your competition allows you to detect your strengths and weaknesses. From this observation you can improve your offer and value proposition.
Use the power of number 9
It is proven that products whose values end in 9 are more likely to be sold. This is a psychological factor to take into account when determining the prices of your online store and making them more attractive.
Do A/B tests:
The best thing you can do to find your ideal price (the one that maximizes your sales) is to test. For this, define different prices and see how customers react to each one. Then, compare the results and choose the one that performed the best.
Cycles of a product
Take into account that the value of the product will not always be able to remain the same since it experiences different phases. For example, in the introduction and growth stages, the price of the product could be lower to start with the penetration, but could be increased when measuring your production or promotion expenses.
To determine your strategies, take into account the cycles of a product:
Introduction: This is the product launch stage, where you have to make yourself known and find the first consumers. As already mentioned, at the same time you will have to invest money for its development, production and promotion, so the price you define must allow you to sustain all those expenses until its adoption begins to grow.
Growth: here the public has already begun to accept and acquire your product, and you begin to see its profitability. You can choose to keep the initial price or lower it a bit since your expenses are already being covered by the amount of sales.
Maturity: in this period the growth of sales stabilizes. The product is already widely known by your target segment and you don’t have to put in much promotional effort to sell it. Your price must be as competitive as possible to maintain this situation as long as you can. In other words, keep an eye on the demand and, if necessary, launch promotions to keep it alive.
Decline: This happens with any product, no matter how successful it is. There always comes a time when it stops being used and sales drop. Here your prices will have to be rearranged to squeeze the last of its potential. If you have a lot of stock left that you cannot sell, launch discounts and promotions to make the product more attractive. here some
Other tips for your pricing strategy
If you are looking to make more money than you currently do selling your products online, you can take two paths: expand your sales channels to sell more, or sell your existing products at a higher price (being careful not to go over the maximum price you your customers are willing to pay).
A good strategy to sell your items is to place two products of different prices next to each other (for example in the featured products section). In this way, the lower price will be perceived as even cheaper for being positioned next to a more expensive product and you have more opportunity to convince the consumer to buy.
Justify the value of your products! If you have a value proposition that has to do with design or the way of producing, it is important to communicate it. For example, if your competitor sells a product similar to yours cheaper, look at the features that make yours better; maybe it’s your artisan production or the elaboration time.
Your clients will perceive these differences as something they are willing to pay for and if there is someone who does not think so, it is simply not your client.
Monitor your prices constantly to identify if each product is performing to its full potential. Remember to identify which stage of the life cycle each product is in and adapt your pricing strategy accordingly.
Summary
In this article we show you:
What is a pricing strategy?
It is the plan to be followed by a company to define the prices of its products in a way that is profitable for the business and attractive for the customer.
What are the main pricing strategies?
- penetration strategy
- differentiation strategy
- Skimming Strategy
- Free shipping strategy
- Package pricing strategy
How to define pricing strategies for your online store?
- Analyze your business goals
- Define the price according to your target
- look at the market
- Look at your competitors
- Use the power of the number 9
- Do A/B tests:
Cycles of a product
- Introduction
- Increase
- Maturity
- Decay
Other tips for your pricing strategy
- Expand your sales channels
- Sell your existing products at a higher price
- Place two products of different price next to each other (for example in the featured products section)
- Justify the value of your products and your effort
- Monitor the market constantly
If you still do not have your own online store or you are thinking of giving your business a boost, we have one for you and see all the benefits it offers you. More than 90,000 stores trust us. Don’t miss your chance.
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