Ecommerce Best Practices – Pricing Strategies that Work
Video Transcript
What is a “winning pricing strategy”? In almost all cases a winning pricing strategy is the pricing strategy that does not have you as the lowest priced seller on the market. Is that always true? No, but in most cases it will be true. In most cases you do not want to get into price cutting wars where you’re trying to be the lowest price. The only way that will be to your advantage is if you have clear market advantages along those lines.
If you’re able to get the product wholesale significantly cheaper than your competitors, and you can still maintain a significant profit margin while undercutting their retail price and gathering a percentage of the market, then by all means, do that. It can be an acceptable strategy. But in general, for most of you watching this video, I know that’s not going to be an option. You may have the same amount of leverage or even significantly less leverage than some of your competitors. Getting into price cutting is really not a good option because your margins will get smaller and smaller; and what you’ll end up with is a lot of customers to serve and not much profit per sale.
One thing to be aware of as an ecommerce business owner, if you’re not already aware of it — there are different types of customers out there. The lowest rock bottom price is not the most important thing to everyone. There’s a certain segment of your customer population that is looking for that; and that’s really important to them. But there are also people who don’t mind paying a few dollars more if you can add some value to their sale or add some convenience to your sale.
The key that I want to get across is the way you want to position yourself with your pricing strategy. Generally, you don’t want to be the most expensive nor the cheapest. Generally you want to be somewhere around mid-pack – somewhere that gives you a good profit margin. And then really make the sale through value added services, whether it’s by having a better website that’s better optimized that pulls in traffic more efficiently; or whether it’s through a better display of your products, better product images, better messaging around the products to give more assurance to the customer; give more confidence; and then making the sale.
Bottom line is — don’t try to succeed as the “price cutter” because in the end you’re probably going to lose unless you have a clear market advantage. And really push yourself to find other ways to build confidence with the customer and to increase your sales percentage.
If you’re in a business where you’re selling something that many other people sell, as much as possible you want to offer the commodity that your customers are looking for and help them find it very easily and efficiently. Have a really good looking image and have all the proper languaging around it. You want to offer it at a very fair price; a very competitive price in the market. But then you want to find a way to add value to their sale so that you don’t have to be the lowest priced guy in the market. There’s a feeling of, “Well I think I may prefer to buy it from John because I really have a good feeling that John is going to stand behind his product. There won’t be any hassles with John. If I have to return the product there won’t be hassles. The pricing is very straight forward.” Those are a few examples of things that you can do to tilt the sale in your favor.
The bottom line is that people who are out commodity shopping – looking for a product that many other people are selling – these shoppers don’t want to look at 10 or 20 other websites – even the hardcore price shoppers. So if you can give them a competitive price and then an ironclad reason to buy from you – which is really based on the unique positioning of your business in real market conditions – your chances of making the sale are very, very good; and with a profit margin that will work for you and your business.
Related posts:
Filed under Ecommerce Solutions, Videos by 
