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”
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.
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.”
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.”
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.
Retail analytics software collects a plethora of data ranging from pricing information, stock levels, catalogue assortments, discounts, and much more. This information is stored and collated into large databases where it is processed using statistical algorithms to record and track trends and patterns. From this data, there is a huge breadth of intelligence that can be extracted, allowing you to make data-informed decisions on anything from creating on-the-fly pricing strategies, to accurately benchmarking your seasonal discounts. This software helps to mitigate the risks of human assumptions that can trigger margin loss, overstock situations, and missing the boat on market trends.
Pricing intelligence is absolutely vital to being successful today in business. As part of the “Marketing Mix,” price has always been top of mind for marketers and business leaders. Ineffective pricing strategy truly hinders an organization’s ability to grow and be profitable. It can even derail success despite having an exceptional product-market fit. One could make the case that price is the most import part of the Marketing Mix. So how can marketers and executives ensure they’re optimizing their pricing strategy and setting their business up for success in a competitive pricing landscape?