May 3th, 2021
7 min read
We emphasized the importance of a focus on pricing in a digital environment where potential customers shopping online are constantly exposed to different prices in an earlier blog post. By that, they are almost encouraged to always go for what is the best price for them (which is often occasionally the lowest price.) This turns out to be exactly why you should as a seller put some great effort into making some thoughts about what you do when you choose the prices of your products or services.
Just selecting a price point out of the blue is a no-go. Some base their charging solely on the competition while others relate it to the value you might likely place on a given product. Maybe you have a strategy that is related to your ambition about telling a brand story that fits your future wishes of an overall ambition of making some brand awareness.
Tips to better manage your pricing
Sadly the fact is, some pricing mistakes are of a more serious manner than others. A competitive price monitoring tool can give you the option to implement dynamic pricing, but you still have to set up your pricing strategies yourself. This implies that your strategies are well-defined so they can make some profits for your business.
A good pricing strategy is in any case an individual strategy that matches your ambitions and business conditions. However, we can give you some advice about which mistakes you should always try to avoid doing.
What is most important is that your pricing strategy should not make you lose money. We want to clearly inform you about some of the classic pitfalls that are likely to undermine your business. Below are the 5 most common mistakes you can do within the pricing universe:
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. In some industries, it is common practice for prices to change daily or even hourly or within minutes. Your prices should be aligned to supply and demand, and since the law of supply and demand is always changing, your prices should naturally change, too. Also, consider making two prices for one product to explore which price converts the best at a given time.
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. What is also worth mentioning is 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. It is up to you to convince them that they can get both by buying your products.
In general terms: Just avoid static pricing. Don’t exclusively make your prices either 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 that out from the data that a tool like PriceShape can deliver to you on a user-friendly dashboard, you can better rely on that your decisions might be the right ones.
It is, of course, 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. So please also note that customer segmentation is pivotal when setting the right price.
You should continuously adjust your prices in response to real-time demand and supply. With a tool like for instance a price optimization software program helping you to implement dynamic pricing on your products you’ll have access to price trends, and by that, you’ll automatically know how to set your prices at a given moment.
Always take into account the value of your products and spend time communicating the benefits of your product right to your potential customers. Prices should not be based on costs alone. Value-based pricing is setting customer-based pricing, this means that you base your pricing on what your customers might believe your product is worth paying for. Thus you have to highlight the benefits of your products and also take that into account when setting the price. This is an alternative to just setting the price in proportion to the standard price or calculated from the costs.
This is exactly what a competitive price monitoring software can give you valuable insights about. Benchmarking against your competitors or simply doing some useful 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 that can be as well as price be delivery speed, features, and other various components. Get it all in our PriceShape solution.
May 3th, 2021
7 min read
April 22th, 2021
5 min read