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Does your business have a pricing strategy? If your answer is no, that’s not a good sign.

Two things are likely to happen if you don’t have a pricing strategy; you will either overprice your goods, make limited sales, or underprice your products and earn less income.

That’s why you need to find the right pricing plan for your online store.

In this article, you will learn the following.

·      What is price strategy?

·      What are the benefits of a price strategy?

·      How to choose the right pricing strategy for your business

Let’s get started.

What is a pricing strategy?

A pricing strategy is a technique businesses use to price their products or services.

Setting the proper pricing necessitates balancing several variables. Some factors such as manufacturing costs, labor, and advertising costs have a direct impact on pricing.

Benefits of a pricing strategy

A good pricing plan will assist you in determining the price point at which you can generate earnings on product or service sales.

The right pricing strategy helps you to maximize sales, boost your profits and beat your competitors.

So now you know what a pricing strategy is, let me show you some of the most frequent pricing methods utilized in the small business world and the pros and cons of each technique.

1.       Anchor pricing

An eCommerce store uses this method to display the original price alongside the current discounted price.

This way, the buyer is reminded of how much money they will save if they purchase the advertised product in this manner.

Pros

  • Boosts sales.
  • Increases the number of impulse purchases

Cons

  • Profit margins are reduced.
  • Increases the level of competitiveness

2.       Bundle pricing

This type of eCommerce pricing, also known as multiple pricing, is used to sell many products simultaneously.

You can sell several items for a single price using this method. You could, for example, bundle a scarf, blouse, and a skirt, selling them as a set.

This price technique is most effective if you sell food or clothing.

Pros

  • Increases the value of low-cost items.
  • Increased sales of Out-of-season and old stock.

Cons

  • Shrinking profit margins

3.       Consumer-oriented pricing

This pricing strategy is based on the estimated or perceived value that your product or service will provide to the customer.

A rigorous market research of your client base is required.

Pros

  • Improved customer loyalty
  • Increased brand awareness

Cons

  • Time-consuming
  • Not suited for all clients

4.       Competitive pricing

You can choose to price your products at the same level as or lower than your competitor using this strategy. In other words, your competitor’s pricing data will serve as a standard in pricing your own products.

Pros

  • Bigger target market
  • Increased sales and it’s a simple method to keep track of the competition.

Cons

  • Shrinking profit margins
  • Challenging to achieve future product price increases.

5.       Comparative pricing

The premium and regular products and services are compared side by side in this eCommerce pricing approach.

If you put a $200 ladies bag next to a $1,000 ladies bag, for example, you’ll have a better chance of selling the low-priced bag.

This strategy, psychologically, makes the former item appear to be a big bargain, motivating the customer to buy it right away.

Pros

  • Increases traffic and boosts sales
  • Increases customer satisfaction of getting a good deal on goods.

Cons

  • Demand for higher-value products declines.
  • Profit margins may be reduced because fewer luxury products are sold.

6.       Premium pricing

Premium pricing is on the opposite extreme of the eCommerce pricing strategy spectrum from bargain pricing.

This technique comprises charging a higher price for your goods and services than your competitors.

This gives your products and services a more exclusive and expensive feel, appealing to buyers looking for high-end items.

Pros

  • Enhances the exclusivity of your items
  • Provides a premium sense to your brand

Cons

  • It’s possible that it won’t appeal to a budget-conscious clientele.
  • If your clients can receive the same quality for less money somewhere else, you can lose market share.

7.       Psychological Pricing

This pricing strategy is used to emotionally connect with your customers.

For example, you can charge $49.95 for a product that would typically cost $50.

These minor differences in the price can significantly impact a consumer’s purchasing behavior, as they may feel forced to purchase a product that appears to be cheaper at first glance.

Pros

  • Boosts traffic and enhances sales
  • Triggers compulsive buying

Cons

  • Reduces profit margins

8.       Market-oriented pricing

Price your items and services using this eCommerce pricing approach depending on current market conditions, particularly as they relate to your competitors.

Take your time to evaluate the prices of your products to what is currently available on the market.

Finally, this pricing plan can assist you in staying ahead of the competition by offering competitive prices.

Pros

  • Harmful pricing competition is minimized.
  • It can be used in conjunction with other pricing strategies, such as cost-based pricing.

Cons

  • Difficult to implement

9.       Cost-based pricing

You fix a percentage of the total cost of your goods into the pricing to establish the selling price.

You can add anywhere from 10% to 50% of the total cost to a product’s price, depending on your target market.

Pros

  • Implementation is simple.
  • Increased likelihood of receiving minimum returns on products sold

Cons

  • When a product is priced too low, profit margins are reduced, and target clients react differently.

10.   Discount Pricing

Customers, unsurprisingly, appreciate discounts and special offers.

With this price approach, you can potentially increase sales by offering clients reduced items and services.

Pros

  • Improved customer loyalty
  • High traffic

Cons

  • Shrinking profit margins
  • It’s possible to make high-quality products appear cheap.

How to select the right pricing strategy for your business

Choosing between various pricing tactics for your business can be a daunting task. You won’t generate enough profits if you give a low price, and potential clients may hunt for cheaper options elsewhere if you give a high price.

The following factors should help you choose the right pricing strategy for you.

Brand position: regardless of the pricing strategy you choose, you should evaluate your final rates to see if they are appropriate for your brand positioning.

Business objectives: Your pricing plan should be aligned with your company’s overall goals.

Competitors: If you choose a pricing plan that causes your prices to be significantly higher than the competition’s, you’ll need to think about how you’ll explain the price difference through value.

Target market: Setting a price that no one is prepared to pay is pointless. Assess your prices and determine whether or not your target market is able and willing to pay the price you have set.

Costs: Last but not least, you must think about your expenses. Finally, your pricing strategy should assist you in increasing your profit margins.

Finally, there is no one-size-fits-all pricing strategy for your business.

Make sure to experiment with various other pricing strategies to see what works best for your product or service.

 

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