Shoppers will think carefully before placing an item in their basket. In fact, the average consumer tends to research and compare products online first before deciding where to shop, with the price tag often a primary motivation behind a sale.
Whether you're selling products from a supplier or your own unique creations, deciding how much to charge can be tricky at best. Here are some guidelines to help you establish a profitable pricing policy for your eCommerce inventory.
Calculate how much it costs to run your business
Keeping your prices in line with your operational costs is the most basic approach to finding a suitable price for a product. This means that all prices should account for your eCommerce store's expenses and profits. To figure out the total cost of ownership, you need to factor in things such as website hosting, updates, design, the cost of an SSL certificate, payment gateway fees, and content creation. Be sure to also add the expenses for marketing, wages, loan repayments, shipping costs, damaged merchandise, and discounts. Lastly, remember to also take your profit into consideration; include your profit margin in the product cost subtotal to calculate your product price.
Price items equally online and offline
If your brand has both an online and offline presence, you may be wondering whether to keep your prices consistent in both environments. And, while there is widespread belief that online merchandise is cheaper than their brick-and-mortar counterparts, studies have shown that most stores maintain similarity when it comes to the cost of their products.
Cheaper online products is a form of price discrimination that is sometimes used to generate interest in an eCommerce store; however, this strategy may not be effective as customers tend to research prices on their mobile devices and then head over to the retail to purchase them. Imagine having a customer arrive at your store only to discover that the in-store product is slightly more expensive. Customers that buy online also want to be able to return an unwanted item to a physical store for a refund amount that is the same price as the online store. Keeping things consistent across online and offline platforms is therefore an important rule to maintain convenience for shoppers and promoting your brand.
Charge a high price, and then lower it
If your eCommerce store sells a variety of products, you could start out by asking a premium price for new or top selling products (especially luxury items) while keeping older others at a market value. Then, after a while you can begin to lower those high prices. This is because it's more difficult to sell products on which you have instated a price hike than it is to sell stock that has been reduced.
Apple Inc. is an example of one company that follows this pricing strategy. Consider how expensive every new version of their iPhones is when released. Yet, there are early adopters who are willing to pay for the higher priced product. When a new product becomes widely known or used, Apple will lower the price on that product.
If you have an in-demand product, you can set a high price point in the beginning. Consumers know that the price will eventually decrease as the market value declines and some would prefer to wait for the product to become more affordable.
This strategy aims for a psychological impact on customers to make them believe that they are actually paying significantly less for a product. One way to achieve this is to not round off a price to a whole number such as ₦ 3, 000. Instead, use the psychological bearing of the '9's such as ₦ 2, 999. The customer often perceives this number as ₦ 2,000 instead of ₦ 3, 000, and would thus be charmed into buying. Another way is to show reduced prices next to the previous higher price. Usually, the initial price is displayed as a reference point above the discount, with a more striking font and colour. This tactic has the potential to convince customers that they are in for a bargain.
Keep tabs on your competitors
Your price needs to be competitive but also needs to point toward a product's value. If the features and benefits of your products are comparable to your competitors, you can use their pricing as a basis for setting your own. When topping the price of your competitor, your product should incorporate exclusive features or improvements to rationalise its higher price. If your product is of an inferior quality to your competitor's you may want to keep the selling price lower.
Implementing a competent pricing strategy for your eCommerce store can be the difference between more conversions and a high bounce rate. Attach the right price tag to your product and you'll have a bigger chance of convincing your customer to shop from you, giving your business a solid foundation for success.