It’s all about (the) pricing strategies

On its own, pricing is a complex subject that requires thorough understanding, yet it is massively important. If you set it right, the sales and profit will flow. Get it wrong and, well, you know, you’re doomed, to put it mildly. Your pricing affects everything, from profit margins and sales to brand positioning and market share. So, what’s the trick? How do you implement a pricing strategy that conveys everything you want to stand for as a company while bringing in profit in the process?

Businesses have the luxury to choose from a variety of pricing strategies, depending on the goals and objectives they set. Of course, none of those matter if they are not based on market research and customer demand. It is vital to understand who is your target audience and competition, only then will you be able to utilize an effective pricing strategy. Not every price you determine needs to produce maximum profit margins.

Without further ado, here are some of the pricing strategies that businesses often employ in order to determine the prices on their products and/or services.

1. Premium pricing

Premium pricing strategy allows business to set their prices higher than the competition. It’s great for a small business whose niche is selling unique goods, as well as for the times when you are first in placing a product on the market that has a specific competitive advantage. Premium pricing strategy can be a good choice for businesses entering a new market and trying to cash in the early days of a product’s life cycle.

In order to justify the premium price, a company must create a perceived value of its product or service. Every aspect needs to support the notion of the premium price, including packaging and marketing efforts in order for the customers to perceive the product as worth its prices.

2. Penetration pricing

In the instance of penetration pricing strategy, a company is looking to establish its presence by entering the market and offering lower prices (sometimes at a steep discount)  than their competitors. The reason why is to attract customers away from the competition, which often results as an initial, albeit calculated income loss.

The point of penetration pricing is to raise brand awareness and brand loyalty in the crowded market and stand out so that in the long run, a company can effectively raise its prices that actually reflect their true market positioning.

3. Price skimming or milking

In the third P of pricing strategies, price skimming acts as a way for a business to leverage their competitive advantage and maximize their sales on new products and services. Contrary to penetration pricing, a company initially sets a higher price, then gradually lowers it as competition begins to catch on and offer similar products or alternatives.

The primary benefit of price skimming is a strategic approach to gain maximum revenue advantage on early adopters until it lowers prices to cater to more price-sensitive groups. It can be highly useful for smaller businesses who can cover the developments cost of their unique product, all the reaping the benefits of perceived exclusivity in the early stages.

4. Psychological pricing

Psychological pricing strategy is more of a technique that plays on the customer’s emotional perception (thus the name) of the price, down to the small details that can make a difference. It’s a widely used strategy that is one of the favorites by many marketers.

As an ever-present example, a product with a $99 price tag is cheaper that a product of $100. That is clear as a sunny day but in the mind of a buyer, $99 is psychologically “less” than $100, possibly due to the fact it has one less digit (as in our example) or that consumers have a tendency to pay more attention to the first number on a price tag than the last. In essence, you are creating an illusion of enhanced value (cheaper price) for the consumer.

5. Economy pricing

Finally, something that doesn’t start with a p. Economy pricing is often used by large companies, especially in the food market, like Wal-Mart and Target, as it aims to attract a particular segment of the market – the price-sensitive buyers. In this case, companies reduce their marketing and production costs to a bare minimum in order to maintain low prices.

This strategy is not suitable for businesses that lack the large sales volumes which are needed to stay profitable with low prices. Instead, they can opt for discounts tailored to most loyal customers to cement their patronage long-term.

price strategies

The balance of price and quality in pricing strategies (image source: SlideShare)

6. Bundle pricing

Bundle pricing is a great way for small businesses to sell multiple products for a slightly lower rate, convincing buyers that they are getting a bargain as compared to purchasing each item individually. The main point of bundle pricing strategy is that it increases the customer perceived value while also providing an effective way of selling unsold items that are stored for far too long.

The strategy is most effective for businesses that sell complementary products, that actually have something to bundle. It makes the entire shopping process a bit easier by bundling similar items together (although, when was shopping ever anything but easy?). However, it’s very important to remember that the profits earned on the higher-value items must cover the losses you take on the lower-value product. Otherwise, it’s all for naught.

Honorable mentions:

  • Optional pricing – offering optional extras together with the initial product to maximize revenue. For instance, an airline company will offer an optional extra such as a window seat or a printer company will offer extra ink cartridges with it.
  • Product line pricing – different products within the same product line have different price points. An example would be a smartphone company offering different models within the same product line but with different features (bigger, thinner, sturdier, etc) or a same room type in a hotel having different rates due to amenities and facilities.

Conclusion

Choosing a right pricing strategy for your goods can be a rough, often intimidating process without the right facts because so much depends on it. Hopefully, this post explained some of the most used strategies today and their effectiveness. The four P’s (premium, penetration, price skimming, and psychological pricing), along with the economy and bundle pricing each have an approach that suits particular companies. Pricing your product follows the overall strategy of your business. Performing market research and competitor analysis will help you find that pricing sweet spot and cater to the psychology of your customers.

Fear? Not If You Use Competitive Intelligence The Right Way!

Holding your ground in today’s business environment can be scary. The competition is huge, the technology is advancing and consumers are becoming more savvy and demanding. This all forms a highly competitive market whereas competitive advantage can be as easily lost as it was gained. Businesses “live” in a world where information is widely available than ever before. Each day, there are massive amounts of data generated that just waits for it to be gathered, analyzed and used for best purposes. However, it often just floats around, which brings us to the word of the day (actually, two words): competitive intelligence.

In essence, competitive intelligence (CI) is understanding and learning about your products, customers, and competition, as well as every other facet of business in order to make strategic decisions based on knowledgeable insights. It a learning curve about everything that affects one business, from the tiniest details to global-like situations so it stands to reason there may be instances where CI is not used to the best of its abilities.

Theoretically, that’s all fine and dandy, but as we favor a direct and practical approach, here’s what competitive intelligence can do for your business.

1. Focus on what you want to know

Finding out everything about every competitor in the marketplace is a good idea, but not particularly effective if you want quick results in today’s fast-paced business environment. A better choice is to focus on a few specific business segments or problems whose understanding and addressing is key to company’s success. That way, the aim of your intelligence operation will be to collect information to help resolve the matter that matters to you the most. If that requires monitoring large companies for openings in the market, so be it, but try not to dilute your efforts too much. Collecting information for key strategic decisions and identifying new competitive threats is usually an ongoing, day-to-day operation in which you always need to have your goal in sight.

2. It’s not solely about your competition

We know what you are going to say – it’s precisely called competitive intelligence, not business intelligence or market intelligence or whatever adjective you want, therefore, it must be all about competition. Still, CI is a multi-layered business discipline that branches out like a tree from the earth. The focus of competitive intelligence in not on your rivals alone, it’s on the market as a whole and everything that makes it a highly competitive battleground.

 

demand for information

Source: B2B International

Failing to recognize the full value of competitive intelligence leads away from greater strategic flexibility. Using CI, a business can quickly adapt to market fluctuations and, if necessary, change its business strategy. For an example, we’ll use Pratt and Whitney, an aerospace manufacturer whose commercial engine division utilized CI by looking at all market aspects in an effort to stay competitive against its rivals, especially GE and Rolls Royce. As a result, the company deployed a highly successful breakthrough agenda for their new Geared Turbofan (GTF) engine, which wouldn’t be possible it P&W looked at each competitor separately.

Let’s get into specific details about what CI enables:

3. Perform win/loss analysis

A win/loss analysis requires surveying two groups of people

  • new customers
  • prospects attracted by competition

Why? You want to unfold and understand the reasons for their actions. During these interviews, it would be highly beneficial to ask your customers the motives for looking for your product and the reasons why they chose (or didn’t choose) your company, if they went with a competitor’s offering. Gaining insight from these simple, yet valuable questions will provide you with an understanding of your product among customers, competition’s selling points over your product, as well as what features are necessary to change or implement.

In 2015, Nestlé’s popular Maggi noodles had to be recalled from India due to containing a whopping seven times more lead (no big deal) that allowed. Up to that point, Maggi’s sales accounted for a quarter of Nestlé’s $1.6 billion sales in India, with the food giant having a 63 percent market share. The subsequent five-month ban of Maggi cost Nestle $277 million in sales with a half a billion dollars of damages to the brand name. However, Baba Ramdev, a famous local yoga guru and an owner of the growing local consumer goods company in India, launched a competing product (Patanjali noodles) to a great success. The key was catering to what people wanted to the product was marketed as a healthier option than Nestlé’s, while also having a lower price to incentivize sales.

4. Use competitive intelligence tools

CI presents a vast field of data that takes a considerable amount of time to sort out into actionable insights if you do it manually. Time matters greatly in today’s business operations which is why there are competitive intelligence tools that automate the process and provide real-time results. Therefore, a company should opt for a software solution that provides data about both your competitors and market, all the while keeping your budget in place and minimizing risk. What these tools offer are

 

  • Competitive market and competitor data (product tracking, industry trends, etc.);
  • Real-time intelligence;
  • Market gap minimization;
  • Predictive “what if” scenarios;
  • Time-saving through minimal human intervention;
  • Recommendations and more.

CI could also present you with potential problems regarding your sales approach, which you should discuss and coordinate with your sales team to correct.

Conclusion

Competitive intelligence, at its core, means learning as much and as quickly as possible about one’s industry in general, competition and market in order to be able to anticipate and face numerous challenges head on. In order to use competitive intelligence the right way, businesses must use it for insight management, not as a tool to search and distribute information. It allows a direct access to input into company’s strategic plans, smartly tapping a vast amount of external data to remain competitive.

CI has the power to be a facilitator of strategic advancement and change. Optimally, it will breed an organizational culture that relies on modern tools that provide real-time intelligence to deal with real-time challenges of ambiguity and prevailing competitors. It’s not enough to gather data and employ it, but rather to use it the right way as shown in this post.

What you should have asked your teachers about pricing policies in marketing

Pricing is considered one of the four basic elements of the marketing mix, together with product, place, and promotion. It is probably the least attractive element of the four in terms of marketing. The bulk of the marketing efforts goes to product and promotion before turning to pricing. However, the price is a rather flexible element of the mix and this post will show how.

We have already established that pricing policy is very important for a business that aims to gain success by finding the somewhat mythical price point where sales and profits enjoy maximum levels. A business might employ a variety of pricing policies and strategies, depending on its vision of marketing objectives and goals. It often seems like marketers have a nasty habit of underestimating the strategic importance of pricing. Those are probably the ones who missed the point (or a whole class) about pricing so they don’t perform revenue potential optimization. No worries, we are here to remedy that oversight. Here are some of the question you should have asked your teacher:

1. What pricing policy is best for marketing?

There is a no clear cut answer here as every business is unique. A pricing policy is set to reflect a part of a larger business strategy, accounting the principal market indicators like customer demand, supply, the profitability of products and so on. Pricing policy serves as a beacon for setting prices your customers can afford, not marketing it to them as something set in stone from the get-go.

2. What about my product?

Setting an adequate pricing policy requires serious market research and evaluation. Also, it must go in line with your overall business strategy and reflect the supply and demand relationship. Having a too low or too high price can hurt your business and your product equally. Here’s how:

  • If you set a price too low, potential customers might perceive it as an inferior quality, cheap product. This is fine if you are aiming to cover your costs and get a minimal profit margin. In that case, a cost-based pricing policy can do the trick as it will cover all production and delivery costs while attaining a certain level of profit. However, you lose any perceived value with your customers and potentially lose money in the long run.
  • If you set your prices too high, you might give off a feel of a high-end, prestige brand. This is a risky ploy as it should be guided by a demand-based policy, meaning there is a demand for your product at the price you are selling. Utilizing this pricing policy requires a comprehensive market research, best provided by intelligence tools with real-time insights. Otherwise, your product will be labeled as expensive and won’t sell.

The middle ground here is to evaluate the unique aspects of your offering and the consumer’s bond with it. That way, you are creating a perceived value for your customers and increasing their satisfaction. Once more, a company opting for value-based pricing needs to perform an extensive market research (really, it’s an essential part of modern business undertaking) to underline the value of your offering and thus motivate your customers to pay what you want as you’ve modeled your goods on what they want. An example would be car dealers who charge different customers and in a different situation.

Alternatively, you can opt for competition-based pricing whereas you assess your own goods, compare it your competition and then price it lower, higher or equal. It’s quick and relatively easy to implement with less market research, but it’s not quite accurate in terms of demand and your value.

3. Is there more than one market segment?

Of course and it’d be foolish not to use it to your advantage. Determining both primary and secondary market segments allows you to better understand how customers perceive your product’s value. Not every customer is the same and will not pay the same. Market segments are important for your company’s positioning and merchandising your goods to provide maximum sales at the established price points. Once again, this is where research about demand kicks in as you can fully use it to uncover where your potential customers are ready to pay more than usual.

4. Why does the pricing of my competition matter?

It’s perfectly fine that you want to be your own self, irrelevant of others. Nevertheless, what your competition charges matters in multiple ways:

  • You can base your whole pricing policy on the competition;
  • It affects your customers as the competition might define your price range;
  • It opens new opportunities for you.

Let’s say you are entering a market with a new product or a new market in general. One of the ways to price your product is to employ penetration pricing. This allows you to present prices with a steep discount, maybe even with a loss, all in hope to create brand loyalty and increase the willingness of your customers to spend more in the future. But how do you know if you can compete, you are not losing money right from the start by lowering prices too much?

It is tempting to price higher than your competition and certainly justified if there is a demand for it or if your product or brand is perceived significantly better. However, it a tough feat to accomplish. Let’s not forget that Apple spent almost all of the 90’s decade soul searching before it established itself as one of the tech leaders it is today, delivering high prices on quality-perceived products.

You can also price on parity if your offering product has better features or price lower if it has almost the same features to competing products. The key to competitive pricing is attaining insight from this detailed analyses that show how customers perceive and interact with your product so you can understand how they relate to it. This also includes analyzing thousands of competing products and how your competition reacts to you in order to package and promote your goods based on effective pricing.

Conclusion

As seen, pricing is an equally important part of the marketing mix as the rest of the elements. It can be rather tricky, but whatever you do in your marketing efforts, make sure you base your decisions on knowledgeable insights. It’s critical to know and monitor the market and your competition (especially their pricing) at all times in order to reassess pricing if necessary and stay ahead. There are tools that can help you optimize your prices. Market fluctuations and new products have the power to influence and change consumer demands and needs. Be the one that influences them.

3 Competitive Pricing Secrets You Never Knew

As pricing goes, competitive pricing is one of four major ways (the other three being cost-based, value-based and demand-based) how businesses set and develop their pricing policy. Basically, with respect to competitors, a company sets its pricing based on either lower, higher or roughly the same as it’s competition. Competition can be either direct or indirect. Direct competition happens when a company produces similar products that cater to the same group of consumers. Indirect competition exists when different companies make or sell items which, although not in head-to-head competition, still compete for the same share of the customers’ pockets.

A competitive pricing method is quick to implement as it doesn’t require as much in-depth market research as some other pricing methods like demand-based or value-based pricing. Instead, its foundation lies in the prices companies that sell similar products set. This way, a company can rapidly attract and influence customers because there is already a potential pre-established customer base. However, a competitive pricing policy has its own advantages and disadvantages that companies looking to implement should be aware of. In this post, we’ll show you three competitive pricing secrets that can help you boost your business.

1. Underpricing can harm you in the long run

A common occurrence in the e-commerce world is that companies often turn to underpricing their goods believing lower prices or being the least expensive solution will drive sales volume. While the theoretical basis is sound, the practical part carries two big downsides.

  • Pricing your products lower than your competition takes a toll on your bottom line. Sure, lower income is better than no income but you are needlessly leaving money on the table and seriously thinning and decreasing your profit margins.
  • You lose any form of brand recognition, at least the good one. Being too cheap might signal customers your product is shady and possibly of questionable quality, ultimately steering them away to your competition.

Underpricing is typically a result of lack of knowledgeable insights. It’s essential to avoid crossing the line between providing competitive pricing and underpricing. Pricing intelligence tools assert themselves as the logical solution in this case, as they will provide data driven insights to help a business stay competitive without underpricing.

2. Lower your prices the right way

Continuing the subject of lower prices, here is another thing that you might not know. Chances are, there is a group within your target audience that perceives your pricing a bit expensive. This might pose a dilemma – to cater to them by lowering your prices or not?

Consider resorting to alternative measures such as offering buyer benefits in order to be more appealing. For instance, you can offer brand club membership with exclusive coupons and discounts. The essence of this method is that you are not lowering your price in general but offering special prices to specifically targeted customers at specific times.

Lower your prices

Source: Harvard Business Review

Another way to achieve this is by offering less product or service for the same price. Taking into account your customers, product proportions and sizes and order sizes can effectively reduce your costs and produce a desired result without reducing the value to your customer base.

Fairly recently, the maker of Toblerone, popular Swiss chocolate, changed the overall look of it and reduced the overall amount of chocolate from the 170-gram and 400-gram milk chocolate bars (about six ounces and 14 ounces) to 150 grams and 360 grams in order to reduce cost because the necessary ingredients achieved higher prices. The company said the effect of the changes was less noticeable, thus continuing the established practice of companies trying to avoid price increases by reducing the contents of their product. Most consumers are not aware of the alteration because the product usually looks the same and has the same price, the only difference there is a tad less of it.

The same can be done with other aspects of your product like shipping. Instead of offering a two-day delivery, a business can switch to three-day deliveries, saving enough money to keep the existing price without decreasing its margins.

3. Reframe your product

This is an effective method that provides lots of breathing space for experimenting what works and attracts customers and what repels them. You will often find the term “psychological pricing” (also known as odd-even pricing) accompanied with the example of charging $9.99 for your product instead of $10.00. This way customers feel they are getting a fair, lowest or best possible price.

Simply switching up the product description can play a large role in selling your product. For instance:

  • Selling something that costs “$10 per month” rolls better of the customer’s tongue than “$120 per year”, even if those price points are exactly the same in the end.
  • Changing a $4 shipping fee to “only a $4 shipping fee” or “a small $4 shipping fee” could increase the response rate among those hesitant to commit to a purchase.
  • Another way to reframe your product is to provide a “free shipping” benefit with the actual shipping costs included in the product cost.

Conclusion

Balancing competitive pricing with profit margins can be a difficult task without proper tools (and secrets) of the trade. It’s important to understand what can propel you in the business environment, as well as hurt you in the long run. The most valuable pricing methods consist of constant planning and management, as well as competitive price intelligence, which ultimately points to pricing software. It joins big data with historical information to help retailers set the prices of their products in accurate and timely fashion.

Having in-depth knowledge of your market and target audience is vital. Lowering your pricing can certainly be a tempting proposal, but it can also cost you money if you lower it too much. Also important is knowing how you can appeal to customer’s price consciousness by reframing your price to appeal even to those hardened buyers. Keeping the competition factor provides a fast way of scoping the market and setting prices accordingly. By utilizing these little secrets, you will avoid the pitfalls of competitive pricing and turn them to your advantage.

Pricing Your Product: Part Art & Part Science

Pricing. It’s that enigmatic element of any business that’s sure to keep executives up at night and constantly second-guessing themselves. Fire up a Google search or read any business advice book, and you’re bound to come across a bazillion different pricing strategies, all of which are purported to be an instant shot in the arm to your profitability. Continue reading “Pricing Your Product: Part Art & Part Science”

5 Powerful Psychological Pricing Strategies

If you think your small brand can’t compete with the big box stores, it’s time for a reality check. Consumers gleefully buy from businesses of every size. Even the smallest brands can gain a dedicated, cult-like following. To do so, you need more than just an amazing product and incredible customer service. Continue reading “5 Powerful Psychological Pricing Strategies”

How to Use a Dynamic Pricing Strategy for Your Shopify Store

If you have a Shopify store, then you likely already know that the market is forever changing, especially in the online marketplace. Therefore, to keep your sales at their highest, your pricing strategies have to change along with the prevailing market conditions. Dynamic pricing strategies will allow your store to be at the forefront, and still make profits, no matter the conditions of the market at that time.

Not a lot of people know how to use dynamic pricing strategies for their Shopify stores, however, and this can lead to a bit of confusion in how to see returns on their investments. In an effort to take that away confusion, let’s break down dynamic pricing strategies, so you can learn how to use them in your Shopify store successfully.

Dynamic pricing basics

In dynamic pricing, a price is never firmly set. Instead, it is constantly changing to suit the current market conditions. It is similar to the law of supply and demand in that when the demand is up the prices go up, and when supply is up the prices go down.

The difference between supply and demand and dynamic pricing is that dynamic pricing relies on more than just whether or not the customer wants the product. In this case, the customers already want the products but the amount of profit you make depends on more than just demand.

Time the purchase is made

Knowing what time of year your products are in the most demand is the first factor to consider in your pricing strategy. In the season of highest demand, your price will go up to maximize profit. Typically buyers will pay more for products at certain times of the year. For example, during the holidays. It’s not uncommon for consumers to pay above average for products to get that perfect gift for their loved ones. Conversely, if your store specializes in football accessories, odds are your sales will not be going up during basketball season.

Time it takes for you to deliver

When consumers pay more for a product, they expect fast delivery. If your Shopify store delivers items quickly, then it stands to reason that you can get away with charging a higher price. The cost of convenience generally justifies the higher price. However, if you take longer than the expected delivery time, your customers could be left feeling duped by your higher price and next time may go to your competitor.

Targeting of particular groups

This is one element of dynamic pricing strategies that has been seen as controversial to some, and that is because some groups will be given different rates than others. The idea is that the standard of living is higher in some parts of the country, so charging more for those products won’t be as big of a deal. In lower standard of living areas, the prices will be lower so that they can still purchase the product, but your store can still make a profit. It’s important to note that the key here is not to change pricing solely based on race, gender, or sexual orientation. Although difficult to prove, you don’t want to open your online store up to that kind of scrutiny.

Peak user pricing

Similar to time of year pricing, if the demand is high, the price can go up. The difference here, however, is the sudden surge may have nothing to do with the time of year. For example, if you have a product in your Shopify store that Kim Kardashian happens to promote randomly on Instagram, you could see a spike in sales. During this peak time you can maximize your profits by adjusting your price.

Quantity of goods being purchased

If there is a customer that buys your products in bulk, or they are always there to buy from you, then it is good idea to make an exception for this customer, and reduce the price for them. It may be risky for first time bulk buyers, as they may not be a return customer. On the other hand, they could become exceptionally loyal allowing you to not only recover quickly from the discount, but make a higher profit overall.

Hint: You can utilize technology from software like IntelligenceNode’s Incompetitor to analyze these price peaks in real time and adjust, automatically.

Pricing your store

These are just a few of the factors you can use in your dynamic pricing strategy in your Shopify store. Be flexible, keep an eye on demands, and be sure not to focus solely on exploitation of customers. By pricing your goods based on the market conditions, your store should be able to make a consistent profit all year long.

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9 Retail Sales Strategies You Can’t Be Without

In any business, strategy is often the difference between a soaring success and a futile effort to connect with the customers you crave. However, with its continuing evolution and increasing competition in recent years, the eCommerce space might be even more reliant on the strength of retail sales strategies in order to capture business.

After all, the way you price, present and market your online products defines the way in which consumers perceive the value you offer and guides their decision to make a purchase or wait for one of your competitors to scoop up the opportunity.

The Pricing Is Right

The most obvious obstacle standing in the way of more sales is often the pricing. Customers are rightfully discerning of how they spend their hard-earned money, and it’s up to you to decide how best to convince them that your product is worth a try. Here are a few must-have pricing strategies you should be using to entice customers.

  • Loss-leader pricing: Selling your product below market value may initially seem like a no-win scenario. Yet, conventional wisdom isn’t always useful when it comes to the sales game. This approach, known as loss-leader pricing, opens up the potential for future marketing to customers and presents the chance to boost the average revenue per user, encouraging customers to add more items to their carts. (Find out how you can automate this process.)
  • Bundle pricing: One of the most widely used pricing formats, this one simply relies on grouping related items together to jointly persuade customers to make a purchase. By combining multiple products into a simple bundle, you’re able to streamline the decision to buy and create the perception of increased collective value.
  • Personalized pricing: Because of all the data out there, you may very well be able todetermine optimal prices for each specific user. Using a number of different factors, this system creates a real-time understanding of a customer’s purchase history, product searches and customer loyalty. Personalized pricing is often best employed with regular customers or in concert with newly available products.

Offers They Can’t Refuse

Though the pricing associated with a specific product could ultimately make or break a potential purchase, don’t forget to finetune the offers themselves. How you present a product to consumers can be just as instrumental in closing a purchase as pricing. So let’s review some tips you can incorporate into your product offers as soon as possible.

  • Free shipping: Companies like Amazon have set the tone within the industry, and now customers all but expect free shipping to be on the table. Perhaps it’s a blanket offer, or it might be one that only applies when users hit a certain minimum purchase price. Regardless, shipping options like this one are among the biggest incentives to buy from one site over another. It’s not an area that your business can afford to ignore.
  • Featured products: When you present too many options to consumers, the result can overwhelm them to the point that a purchase decision actually becomes more difficult to achieve. By focusing in on just a single product on your homepage, you’ll have more space to highlight its benefits and be able to more successfully guide consumers through to checkout.
  • Urgent offer: There’s a reason that so many retailers rely on impulse purchases to boost their bottom line. No matter what your product is, urgency sells. The very fact that a limited-time offer might slip past consumers is enough to drive sales up, especially if you have done your homework from a marketing and pricing standpoint. Act now to make this technique part of your regular strategy.

Revisit the Marketing

Long before customers can ever even be presented with your products (no matter the pricing), you must first establish a sense of trust and confidence with them. Customer relationships have to start somewhere, and luckily, several key strategies can help you boost awareness and spread word about your business and the products you provide.

  • Customer connections: Although social media should be a key part of your marketing efforts, it’s even more essential that all of your communications with customers centers on engaging them in a conversation. Today’s consumers are too savvy for cold sales pitches to remain effective. Get to know your customers, and hone in on the benefits your products can offer them.
  • The omnichannel approach: Mobile technology has necessitated the importance of a more multifaceted way to tackle your marketing. Tapping into the current omnichannel philosophy, you can unite your desktop website, mobile-optimized site, mobile application and other venues customers use to engage with your business. The possibilities for boosting sales and cross-promoting are limitless.
  • Content marketing: We can’t say enough about the advantages of implementing content marketing into your business. The internet is so often used as a free source of information that creating blogs, whitepapers, ebooks, videos and endless other forms of content is undoubtedly one of the best ways to hook consumers and keep them with you for the long haul.

For more details about how you can tailor your retail sales approach to optimize the success and reach of your business, check out our eBook, “A Comprehensive Guide to Competitive Online Retail Pricing Strategies.”

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7 Pricing Experiments That Will Help Boost Sales

Whenever any kind of sales is involved, pricing will inevitably play an integral role in your business. Because consumers are always on the lookout for a deal, companies have come to develop a number of pricing strategies to convince prospective customers to take a chance on their products and/or services.

Yet, because so much information is readily available to consumers, it’s more difficult than ever for companies to determine what pricing techniques are best suited for their niche. In today’s marketplace, businesses can no longer afford to play it safe. It’s time for pricing to get experimental.

Try These Pricing Strategies

To the untrained eye, pricing is nothing more than a means to an end, a number designed to find that sweet spot between turning a profit and enticing a willing consumer. While that general description still applies to pricing, there’s actually a lot more nuance to the art of pricing than some might expect. The exact structure you use for your business may vary, but by far, the strongest way to identify how to best reach customers is to explore a number of options. Here are just a few of the most tried-and-true pricing experiments you can apply to your business.

Test Anchor Pricing

Shape customer perception by positioning your product’s price as a frame of reference for its value. For example, putting an item next to a more expensive alternative allows the first product to appear like a better deal, thanks to the adjacent “anchor price.” This tool can often direct consumers to the intended purchase anyway.

Engage in Comparative Pricing

As with anchor pricing, this tactic involves the contrast of two different prices, but unlike the first approach, comparative pricing hinges on pitting your products against those of your competitors. The objective, of course, is to create a context in which customers opt for the superior experience you have to offer. (Find out how you can automatically discount your prices lower than your competitors!)

Offer a Variety of Options

When two similar items are priced too closely to each other, this experience can discourage customers from making a purchase at all. In order to highlight a given deal and limit the obstacles to securing a sale, be sure to differentiate between your products. Ultimately, it makes both options look more attractive.

Bundle Items Together

Sometimes, a single item simply doesn’t present enough incentive for consumers to part with their hard-earned cash. However, even if the price point is remarkably close to the aggregate price, a bundle of two or more items can overcome buyer’s hesitation and create the impression of a value-added purchase.

Implement A/B Testing

Pricing experiments in general are a good way to explore new territory, but one specific way to find out which sales pitches — and pricing approaches — are most effective is to set up A/B testing. This design allows your system to alternate between two different price points and discover which better connects with customers.

Use Charm Pricing (also known as the rule of “9”)

Ever notice how most prices tend to end with a “9”? Believe it or not, there’s a marketing precedent for that. It’s human nature to perceive $14.99 as a better deal than $15.00 despite it’s being one of the oldest tricks in the book. This is certainly a tactic that works more often than not.

Consider The Presentation

As with many other elements of marketing your business, presentation makes a huge difference. Often, something as small as whether or not your price listings feature dollar signs can affect your sales. Given your business, it might be less impactful, but there’s no harm in investigating whether a small tweak can help.

Time to Experiment

Since every business — and, by extension, its customer base — has its own set of needs, it may take some trial and error for your company to discover a pricing strategy that perfectly meshes with your business model. Even then, the need to innovate and continue building towards a brighter future for your business never truly dissipates.

The secret to long-term success is to never be afraid to adjust with the times and customers’ changing needs. Pricing experiments can give you the opportunity to gain critical knowledge about how your company operates, and the potential reward is far too promising to ignore.
For more details about how to maximize the positive effect pricing can have on your business, check out our new eBook, “A Comprehensive Guide to Competitive Online Retail Pricing Strategies.”

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Pricing Psychology Tricks: How and Why They Work

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”