When launching a business, pricing isn’t necessarily the sole deciding factor in how well your product or service will perform. However, it is certainly a major contributor to your company’s potential for long-term success and not a decision to be taken lightly. More specifically, your price point — that is, the suggested retail price you put in place to win customers — often helps to define your business, what it stands for and the consumers your product attracts. Continue reading “How to Define a Price Point that Will Push Out Competitors”
One of the daunting tasks being in retail is setting the price and setting it right. Pricing isn’t easy when you’re in the retail scenario—you set the price low and you lose out on profits—you set the price high and you lose out on customers.
It’s completely up to you to decide whether you want to sell a lower volume and charge a higher price or high volumes and lower prices. It’s for you to decide the direction which will enable you to make profits.
However, when you have a range of products to see, you can take the risk of lowering the prices of few products sometimes, as long you can keep the prices of other products marked up higher.
No matter if you are a novice in the eCommerce game or an expert, there is no doubt you are familiar with the splendors of bundle pricing. From McDonald’s Happy Meal option to a 2-for-1 deal of your favorite shampoo at Walgreens. Businesses around the world use it all the time and customer’s love it.
With the right bundle pricing strategies, you can use this as a marketing tool that can benefit everyone involved. Customers are getting a deal, your store is receiving business, and the consumer may be encouraged to return to this one source for a multitude of needs. In order to fully understand how bundle pricing can achieve all of that, let’s take a deeper look at the advantages that come with it. Continue reading “10 Ways to Use Bundle Pricing for eCommerce”
With each passing year, eCommerce sites are becoming more and more established as consumers’ preferred way to shop. Thanks to the convenience involved in online shopping and the wider variety of products that sites can offer, the customer experience offered online is both rising in prominence as well as shaping the retail landscape in general.
Shipping options, for example, are now one of the deciding factors in where customers choose to shop. However, in addition to its vital role in setting up product offers, there’s another side to shipping and fulfillment in general that needs to be addressed, namely the concept of eCommerce fulfillment pricing.
What Is eCommerce Fulfillment Pricing?
At its most basic, fulfillment is defined as “the process of receiving, packaging and shipping orders for goods.” The term is generally tied to the eCommerce world, and when it comes to designing a fulfillment strategy, companies are often faced with handling their own fulfillment or outsourcing to an organization that specializes in this specific niche. Both sides carry their own drawbacks and benefits that eCommerce businesses need to consider carefully, especially seeing as fulfillment has more than its fair share of additional costs associated with it.
However, with fulfillment costs continuing to rise across the board, many eCommerce businesses are having to shift their approach to pricing in response. With fulfillment needs in mind, this technique allow businesses to compensate for increased fulfillment costs and design their price points to offset this ongoing trend. With the proper tools to navigate the changing fulfillment costs, pricing can keep your company firmly on the upswing and prevent your profits from suffering in the long run.
Ways to Optimize
In keeping up with fulfillment costs, you may need to switch up how you price your products going forward. Fortunately, there are more than a few ways to optimize. We highly encourage adopting the latest technology — such as automated systems — to help streamline your operation and declutter your fulfillment process. However, here are some other tips that can help you achieve optimal results.
- Offer free shipping: We’ve previously discussed the strategic power of incorporating free shipping into your offer. Though free shipping may seem in direct contrast with maintaining a tight fulfillment strategy, the benefits in reducing shopping cart abandonment, boosting sales and edging out competitors will more than make up for any perceived loss. Moreover, you can structure it based on a minimum order amount and devise the best way to offset any lost profits through pricing.
- Work with a variety of carriers: Based on your customers’ and your business’s needs, you should have relationships with several carriers and fulfillment partners to help maximize your profits. This will be based on a combination of delivery needs, service level and costs, but when all is said and done, you should be able to keep your fulfillment running smoother than ever. As a bonus, you’ll have easy access to shift towards other carriers if something changes.
- Real-time carrier rates and flat rates: Introducing real-time carrier rates or flat rates is another way to adjust your shipping in the face of changing fulfillment costs. With real-time carrier rates, you can use any number of eCommerce platforms to integrate your shipping process with standard postal organizations to ensure that the most updated rates are applied to a given purchase, giving your customers the chance to choose one. Flat rates can be just as rewarding, though you must be careful to establish a median rate that will not overcharge or undercharge the shipping of a certain product. If all your products are fairly similar in terms of size and weight, this might be the best way to go.
Just the Beginning
Although we’ve discussed a few ways that you can adjust your business to compensate for the cost of fulfillment, countless options still remain. Be sure to delve into in-depth pricing comparisons before instituting any widespread changes, and calculate what works for you. After all, eCommerce fulfillment pricing varies wildly from business to business — due to your location, your products and a number of other factors — and such a specific decision is one that only you can make for your business. Price mapping, for instance, is an excellent way to investigate whether any changes you might be considering make sense within the context of your business.
For more invaluable insights into how you should approach your company’s pricing, check out our Comprehensive Guide to Competitive Online Retail Pricing Strategies.
Product pricing is one of the biggest questions retailers face for a reason. The relationship between an item’s price and its quality — and perceived value to consumers — is oftentimes the deciding factor in shaping whether or not a purchase ever takes place.
In such an increasingly crowded marketplace, the concept of cash cow marketing has been called into question, leaving sellers in the eCommerce space and beyond to reevaluate how they approach their respective businesses. Fortunately, the Price Quality Matrix presents a simple way to leverage product value and address the pricing dilemma head-on.
What Is the Price Quality Matrix?
Designed by Philip Kotler, the Price Quality Matrix centers on the cross-section between the two metrics that lend the model its name. By determining the position of your products or services relative to the competition, retailers are able to use the price and quality of each item to identify where they stand in the market. Of course, this knowledge can then be incorporated directly into your decision-making process when it comes time to devise pricing strategy. Just think of it as another way to assess your relevance in today’s fast-paced and ever-changing business landscape.
How you price your products plays an integral role in how they’re perceived by consumers. So it’s important to ensure that the quality of your offer complements your price point accordingly. Based on Kotler’s nine-variable model, let’s take a closer look at the possibilities that result depending on how price and quality interact with each product or service.
- Premium (high price/high quality): When a product’s high price is matched by its quality, this creates an image of a premium item that consumers consider a worthwhile investment, such as Apple products.
- Over charging (high price/medium quality): Even if a product’s quality is sound, it can be tricky to elevate the price point beyond what the product offers. Tread carefully in this scenario.
- Rip off (high price/low quality): In case the name of this category isn’t a dead giveaway, steer clear of this one at all costs, as selling a subpar product for such a high price point is a surefire way to stir bad word of mouth when consumers get wise.
- High value (medium price/high quality): Conventional wisdom says that your price should surpass your product quality, since the implication is that your business will be able to turn a profit more easily. Yet, it may be worth it to offer a high-quality product at a slightly lower price upfront to build word of mouth.
- Average (medium price/medium quality): As its name implies, these products are the very definition of “you get what you pay for.” Generally, consumers know that the value they receive from a given product is in line with the price point. It’s always a good idea to offer a lower priced alternative of premium products to encourage engagement.
- False economy (medium price/low quality): The aforementioned danger in overpricing your products applies here as well, though to a lesser extent. You’re better off developing a better product or dropping the price to fall more closely in line with your product offering.
- Superb value (low price/high quality): The best-case scenario for consumers, a high-quality product with a low price can be tricky to pull off and could end up getting into your bottom line.
- Good value (low price/medium quality): Consumers are always on the lookout for an affordable, quality product. To foster long-term customer loyalty, it might be worth it to feature your medium-tier products at a slightly lower price point.
- Economy (low price/low quality): There’s something to be said of economy options. In your business, this may simply be a free version of a product that offers fewer features. However, it’s an easy gateway to establish more profitable customer relationships down the line and well worth considering.
The Price Quality Matrix Revolution
In recent years, product pricing has become a bigger issue than ever before, thanks to the dynamic created by increased automation and the expansion of online retailers. However, by developing a better understanding of the connection between price and quality as described by Kotler’s model, you can use the psychological aspects of product pricing to create a trust with customers that will ultimately reap long-term rewards. Simply asking yourself where each of your product offerings fits within the above categories can shape a clearer vision of where you fit within the marketplace and the possibilities for growth that lie ahead of you.
For more details about how you can optimize your pricing and foster the success and reach of your business, check out our eBook, “A Comprehensive Guide to Competitive Online Retail Pricing Strategies.”
Pricing psychology is more essential than ever to position your business for success in the marketplace. In fact, its use dates back at least to the late 19th century, as newspapers battled for readership supremacy. Nowadays, consumers are inundated with sales offers at every turn, and while today’s technology makes it easier than ever to reach prospective customers, it also means that your message is more likely to get lost in the shuffle. Yet, the key to distinguishing your product or service from your competitors lies in how well you grasp the conscious and subconscious thought processes that governs the decision-making of your target customer base. Continue reading “Pricing Psychology Tricks: How and Why They Work”
Before we dive into the subject, let’s establish what ‘list price’ is just so we are on the same page. In very simple terms, list price or manufacturer’s suggested retail price (MSRP) is the full price for which a business entity is willing to sell its products, without applying any discounts or special offers. While the manufacturing and distribution costs are taken into account for arriving at the list price for consumer goods, it’s the demand vs supply dynamics and level of competition which dictate how much profit margin can be applied.
Price is generally driven by three external factors: the market, demand, and supply. A deep understanding of how these factors impact pricing is critical to developing a pricing strategy that will move units at scale and with a desirable profit margin. Generally, organizations staff teams of analysts to study the market, identify trends, estimate demand, and gauge supply levels. This model, however, comes with substantial costs and risks, especially as it pertains to accuracy and timeliness of strategic pricing initiatives. If you want to avoid the costs of staffing a team to ensure a successful pricing strategy, yet still want to optimize your pricing, consider implementing a price optimization platform instead.