When pricing your products, one thing is clear: not every product should follow the same pricing rules. Yet, many e-commerce businesses stick to static prices without considering where each product is in its lifecycle. This often leads to unsold stock, missed opportunities, and untapped profit.
By taking a closer look at your product lifecycle - from launching new items to phasing them out - you can fine-tune your pricing, increase profitability, and stay ahead of the competition.
In this blog post, we’ll explore how to refine your pricing strategy to drive sales, cut down excess stock, and keep your product offerings updated.
The typical product lifecycle can be broken down into five stages:
Each stage has different pricing considerations that affect your bottom line and influence customer buying behavior. Let’s explore each stage to uncover best practices for maximizing profits and staying competitive.
Goal: Build awareness and capture early adopters
Pricing strategy: Premium or penetration pricing
When introducing a new product to the market, the goal is clear: build awareness and attract early adopters. However, how you position your product through pricing can make all the difference.
If you aim to signal quality and exclusivity, a premium pricing strategy might be the way to go. Setting a higher price point creates an image of sophistication and uniqueness—perfect for products that stand out or cater to a niche audience. Premium pricing works exceptionally well if you’ve invested in strong branding and your product offers clear value that justifies the price.
On the other hand, penetration pricing focuses on quickly reaching a broader customer base. By introducing your product at an attractive, competitive rate, you can generate buzz and gain market share right from the start. This approach works particularly well in crowded markets or when your product solves a common problem cost-effectively.
Choosing the right pricing strategy requires more than just picking a number—it’s about understanding your audience, your competition, and the perception you want to create. Think about the long-term impact: premium pricing can help establish a strong brand image, while penetration pricing can quickly build a loyal customer base.
Before finalizing your approach, consider factors like your target market, production costs, and competitors' pricing. A well-thought-out pricing strategy isn’t just about profits- it’s about setting your product up for success in a competitive market.
Tip: Monitor early sales data and customer feedback closely to determine if adjustments are needed early on.
Goal: Drive sales volume while maximizing profit
Pricing strategy: Value-based or competitive pricing
As your product gains traction, your focus shifts to balancing profitability with increasing demand. Pricing becomes a key factor in maintaining momentum while ensuring long-term success.
If you want to capture more value from your growing customer base, a value-based pricing strategy could be the right choice. This approach sets the price according to how much your product is worth to your customers. If your product solves a significant problem or offers something unique, you can price it higher, reflecting the value it brings. Value-based pricing works best when your product is differentiated from competitors.
On the other hand, competitive pricing might be a better fit if you want to stay in line with market trends and keep your price in check with similar products. This strategy involves setting your price based on competitors' prices, ensuring you remain a viable option without pricing yourself out of the market. Competitive pricing is especially effective in markets with several similar products or when you want to attract a broader customer base quickly.
Choosing the right strategy at this stage requires evaluating your product’s market position and the perceived value. Whether you focus on competitive pricing to drive volume or value-based pricing to maximize profits, aligning your price with customer expectations will keep your product in demand.
Tip: Monitor competitors in PriceShape and customer feedback to ensure your pricing aligns with evolving market conditions. Then, start considering whether an offered discount is necessary.
Goal: Maintain high sales volume despite increased competition
Pricing strategy: Competitive and discount pricing
When your product reaches the maturity stage, competition is at its highest, and customers often have plenty of options to choose from. This is where your pricing strategy plays a crucial role in maintaining sales volume and profitability. Balancing competitive pricing with value-added tactics can help you stand out in a crowded market.
If you want to attract attention without ruining margins, bundling or cross-selling can be effective strategies. Offering complementary products together or promoting related items not only adds value for customers but also helps boost overall sales. Similarly, targeted sales promotions like flash sales, seasonal discounts, or loyalty rewards can keep customers engaged and encourage repeat purchases.
At this stage, keeping a close eye on your inventory is essential. Understanding your stock status and the performance of individual products in terms of sales allows you to adjust pricing accordingly. For example, overstocked items may benefit from discounts to clear space, while popular products might sustain their value.
Tip: This is the time to get strategic and flexible. Monitor competitor moves and experiment with pricing to find the right balance. Incorporate factors like stock status and sales performance into your decisions. Using tools like PriceShape’s product management software, you can stay agile and make data-driven adjustments to keep your product relevant without compromising profits.
With PriceShape, you can easily track market trends, adjust prices dynamically, and optimize your profits at every stage of your product's journey.
Book a personal meetingGoal: Reduce stock without severe profit loss
Pricing strategy: Aggressive discounting
As demand for a product begins to decline, your strategy should shift toward clearing inventory while minimizing profit losses. Aggressive discounting can help move stock quickly, but it’s important to find a balance to avoid damaging your brand's perception or straining relationships with suppliers or collaborators.
Strategic price reductions should reflect the age of your stock and current inventory levels. Older or slower-moving items may warrant deeper discounts to free up space, but cutting prices indiscriminately can undercut your overall profitability. A smarter approach might include bundling declining products with more popular ones, providing customers with a perceived deal while helping you move inventory effectively.
Tip: This is the stage to adjust your margin strategies and reconsider minimum discount ranges. Setting up dynamic tags for underperforming products can help you quickly identify and target items that need action. With the right balance, you can clear inventory efficiently without eroding your brand value.
Goal: Liquidate remaining stock
Pricing strategy: Clearance pricing / Outlet Strategy
When a product reaches the phase-out stage, the focus shifts entirely to get rid of remaining stock and making way for new offerings. This is where clearance pricing becomes your best ally. The goal is simple: sell out these items quickly while avoiding unnecessary storage costs or clutter.
Deep discounts are often the most effective tool here, as they attract deal-hunters and ensure you recover some value from otherwise stagnant inventory. For maximum impact, consider dedicated clearance events or promotions that highlight these items and create a sense of urgency among customers.
Tip: Automate your pricing strategy to allow for significant discounts without needing constant oversight. Dynamic adjustments ensure that clearance prices remain competitive while saving you time and effort.
Adopting an overall and more lifecycle-based pricing strategy means aligning each stage of a product's journey with optimal pricing tactics. Not only does this approach help reduce excess inventory and increase sales, but it also strengthens your brand’s positioning and improves customer experience.
PriceShape has made it easy for you to track, adjust, and optimize prices at every stage, ensuring your business stays agile in a fast-changing market. With our marketing optimization, you can seamlessly adjust your prices to match each phase, keep your assortment fresh, and avoid the costly trap of unsold stock.
If you want to learn more about how Priceshape can help your business, get started here.