E-commerce: How to create a successful pricing strategy?

The pricing strategy is one of the most important steps for an e-commerce business as it will have a number of impacts. Cash flow, margins and expenses all depend on this decision. At Boxia, we know how difficult it can be to define the right pricing strategy for your e-commerce. In this article, you’ll find some solid guidelines to get you started!

The simple pricing strategy

There is a very easy and effective way of creating an efficient pricing strategy. Simply add up the costs of selling your product, including the fixed costs, and define a profit margin.

It sounds simple, but it works! If prices are too low your business will be short-lived, on the other hand if they are too high then you will not be able to outweigh competitors.

Set your price according to your customers

Another great idea for setting prices is to adapt to your customers and determine if they are more interested in high quality or if they prefer a bargain.

In the collective mind, an expensive product implies quality, whereas a cheap product implies lower quality. It’s therefore essential to find out who your potential customers are and what price they are willing to pay.

What is dynamic pricing?

Dynamic pricing involves understanding customer trends and desires. Prices depend on the time of year and on supply/demand which means you must adjust prices several times a year. This strategy is used by airline companies: their ticket fares can change within days or even hours.
Keep in mind that this pricing strategy in more time-consuming than others.

Big brands use the price skimming strategy

This involves marketing a product at a high price and gradually lowering it. This means that you initially sell at a high price to break even and make good margins, before lowering to a reasonable price as the demand wanes. Electronic brands in particular are keen to use the price skimming as new products come out every year.

The reasonable “Gabor-Granger” method

This method is based on questions asked to a sample of about 50 people. The idea is to estimate the average amount potential customers would be willing to pay for your product. Then multiply the purchase intention rate by the price obtained, and you will know the average basket size of each customer. The result will give you the answers to a reasonable pricing strategy.

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