Planning A Killer Pricing Strategy? Keep These 6 Factors In Mind!
So, you are all set to enter the world of ecommerce and sell your products online. You have decided which eCommerce platform to use to build your website, products to sell, product source, shipping solution, everything. However, you, like many others, may get confused about the pricing strategy.
In every business management and marketing, especially for startups, even a small decision plays a pivotal role in determining the success of your online business. One of these determining factors is how you price your products that attract maximum buyers. If you have wrongly evaluated your pricing strategy, it might create problems for your startup, which will also lead to business downfall.
For any business owner and marketing manager, product pricing is the toughest job. Why? Because they need to evaluate the cost of the products, analyze their competitors, and get thorough with the customer’s psychology before setting up the prices of your products, prices that work towards achieving success in your business.
Things to Keep in Mind When Making a Product Pricing Strategy
There is no hard & fast rule by which you can determine the pricing strategy for your business. However, there are certain factors to be considered before you do that. What are these? Find it out here.
Know Your Target Audience
For any business to succeed, make sure that you know who exactly is your target audience. Get answers to questions like Who are they? What do they want? Are they price-sensitive? Will they be loyal to your brand? The diversification of your target audience may not lead to the same result. However, the customer’s psychology will be a major contributor to your pricing strategy.
Determine Your Product Cost
Since you are running a business to get maximum profits, you need to determine the product cost before pricing it for retail. Remember that the product cost does not include the basic cost of purchasing from the source or raw material and labor costs. It also covers overhead costs like transportation cost, marketing cost, rent, debts, shipping, taxes, shipping (if you are offering low cost of free shipping), etc.
Is The Price Covering Your Revenue Target?
Every business has a certain revenue target that will cover profit margins and the overall cost of the product. To set up a pricing strategy, make sure you keep the revenue target in mind. Now, evaluate the price per product with the help of the revenue target and the complete cost of the product. Now, divide this number by the number of product units, and you will get the retail price of your single unit product. If you have a variety of products, you can segment your entire revenue target by-product and follow the same procedure.
Keep A Close Watch On Your Competitors
As it is said, keep your friends close, but enemies closer; make sure that you keep a good close watch on your competitors. Check out at what price they are offering the same product. Make sure that the product price is low, or at least comparable to yours. However, don’t forget your cost. On the other hand, you can sell products at a higher price than your competitors, but some conditions apply. It would be best if you gave your customer a reason to go for high-priced products from your company, rather than the bare-bones, low-cost product provider.
Check Out Your Product Demand
Your product demand also serves as a deciding factor of its pricing strategy. If you are the sole seller of the product and the demand is good, you can set prices slightly higher. However, if the demand is low, then you need to adjust the prices. For example, AC/Cooler costs are lowest during the winter season; however, their prices increase tremendously as soon as the summer season arrives.
Your Experiments With Prices
You don’t need to keep your product prices stagnant. On the contrary, it is the most fluctuating factor in the marketing mix. That is why you can experiment with the prices. You can slightly cut down the profit margin to check if the conversion rate increases. Or, you can offer add-on products/discounts and sell products on MRP. This way, you can come up with different ideas in pricing strategy to increase sales.
The above factors more or less cover the major factors that sum up the pricing strategy of your product. It is not compulsory that all these factors will result in the same prices. But, you can rotate these prices and check which price leads to maximum sales. Have any other factors in mind? Let the world know by leaving a comment below. 🙂