Agenda:
The most common pricing mistakes that are made by both e-commerce and brands when making price strategies are easy pitfalls.
However, with an insight into these 6 pricing strategy mistakes, you can quickly learn how to steer around and avoid losing earnings.
As a reseller, you typically need to invest a lot of time and energy in setting up pricing strategies for your products.
The right price strategy is essential to obtain a competitive edge. Many companies use several years to benefit from cutting down costs, outsourcing, reorganizing, or implementing new technologies. Nevertheless, these improvements barely give the benefits or revenue as expected. Companies are, therefore, obliged to look for other solutions to improve their results.
Today many eCommerce and Brands operate within a well-defined market industry, where the selling of specific products available in various versions, marketing communication, and services are the core of the company’s operations.
However, many companies still operate with simple price strategies and don’t take full advantage of the most profitable groups of customers or business segments.
Below we have listed the six most common price strategy mistakes companies make when pricing their products and services.
And these mistakes are taken straight from real life.
In fact:
Despite all kinds of recommendations on pricing, making mistakes still take place in many e-commerce and brands.
These mistakes have helped many e-commerce and brands steer around the common pitfalls in pricing and unlock revenue benefits.
Having only one price for a product and thinking this might be your way to success is the direct route towards losing potential profits.
Pricing is not just about setting a price; pricing is a continuous process that needs time investment.
Many variables affect the amount of profit; costs, sales volume, and average price are all critical factors before price strategies, which indicates the importance of working with more than one price strategy.
A quick hack tip from us:
Consider setting two prices for the same product to split test which price converts the best at a given time. It’s possible within just a few minutes with our tool, PriceShape.
Forget about the assumption “the lowest prices always make most sales.”
You will not necessarily get more customers by lowering your prices. However, if you are selling the same products as your competitors, as often happens in retail, there might be something about the fact that lowering your prices might increase your sales.
It's also worth mentioning that buyers tend to be more skeptical about prices that seem too low compared to the prices of competitors’ products. People want low prices but also high quality that they are willing to pay extra for. It’s up to you to convince them that they can get both by buying your products.
In general terms: Avoid static retailer pricing that is a common practice in many eCommerce.
Don’t exclusively make your prices high or low but be flexible with them and switch between high and low prices if you want to test how elastic a price on a given product can be. By doing this based on data, a tool like PriceShape can deliver to you in a user-friendly dashboard, and you can better rely on your decisions.
It's a balancing act to price a product in a way that will drive you to get more sales as profits. Dynamic pricing is highly about tailoring the prices concerning customer preferences.
This leads us to our next mistake made by many retailers.
Having no customer segmentation is another mistake that many make before pricing but is easy to avoid if you just take some time to dig into your customers’ behavior.
Customer segmentation should be based on your customers’ expectations for the product. Each customer segment values your product differently, and therefore your price strategy should take this into account.
A valuation of your product should contain all the elements that make up the end product: the product itself, packaging or labels, delivery, marketing communications, additional services or equipment, and product specification for the different customer segments.
As already mentioned before, prices should not only be based on costs alone, which is, of course, a convenient approach to price your products. A price based solely on costs usually leads to two situations:
A value-based pricing strategy is a perfect fit to not fall into this mistake. It’s about setting customer-based pricing, which means that you base your pricing on what your customers might believe your product is worth paying for.
The iron rule for pricing is that a given product may have a different value for different customers. So, you should evaluate the value for each product line. For each product, profit is optimal when the price reflects the customer’s willingness to pay.
Many companies just price their products based on one standard margin.
Instead, you should look at the realities of the market and anticipate potential competition. When introducing price changes, it’s essential to evaluate the prices of the competing products but also asses the sellers’ value and quality.
This is what a competitive price monitoring software can give you. Benchmarking against your competitors or simply doing some proper measurements of your competitors, of course, relies on some valuable information from which to decide your price positions. In product benchmarking, you should be aware of your reference points, price delivery speed, features, and various components.
Now that you know the most common price strategy mistakes to avoid losing revenue, you will guarantee to steer your price strategy around these pitfalls.
We understand if it can be too cumbersome for you to start with pricing strategies. In that case, you can quickly start with our PriceShape tool that will help you with setting pricing strategies for various products at the same time and make sure you set the most profitable prices for your business.
Contact us today to get a free demo of our product or a talk about how we can help you with your prices.