6 Tips for Ecommerce Price Optimisation
Let’s talk about a common scenario.
You are browsing the products on an e-commerce site. You come across an item that you want to buy. The specifications and everything else seems perfect. So, you look at the price tag.
Unfortunately, it’s beyond your budget.
You feel disappointed. And start looking for similar products at a cheaper price elsewhere.
When purchasing online, 60% shoppers report price to be the number one factor influencing their choice (source: Strategy&). If you are the owner of an ecommerce website, then the above scenario is something that you want to avoid.
It’s quite hard to come up with the right price for any product. You need to make the profit. But you don’t want to lose potential customers. In other words, you must optimise the price.
In this post, we will discuss how to optimize product prices.
1. Avoid listing similar products with the same price
It is a scenario you will see on every e-commerce website you visit. There are two products with almost similar prices and according to a research, most of the consumers will leave the website without buying anything.
A research was conducted for this scenario where two similar products priced at $62 each. 64% of users left the store without buying any of them.
The same study was conducted with the same products with pricing $62 and $64 respectively. Here, 77% of users made a buying decision in just no time.
What this study reveals is that it is not wise to keep prices the same as it will affect your sales negatively.
2. Apply the magic Of 9
Visit any physical store or an online one and you will see pricing such as $29, $99, $199 and so on. Why e-commerce marketers conduct such a practice of trusting the 9 factor?
You will not believe that it actually works tremendously as it is a psychological thing. You will not buy a product costing $200, but you will think about when a cost is $199.
A research by Quantitive Marketing & Economics, when you have two similar products, keep a price of one product relatively higher and ends with 9 and it will outsell the same product at a lower price.
There is a term in psychology called- Left Digit Effect. When you see a price $7.99, you actually think that the price is 7 and not 8.
2. Use Accurate Competitor Data
A smart businessman always keeps their competitors closer and sometimes it pays off well too. If you are planning to design a dynamic and effective pricing strategy that actually works meaningfully, you need to go for competitor pricing analysis to come up with superior prices.
The best way is to collect as much raw data as possible and go for data cleansing. Use this data to define your pricing strategy.
3. Be Dynamic, Don’t Discriminate
It is not healthy for your business to discriminate prices for different mediums. It is a marketing tactic that the same product is at the higher price when a user visits the website from an Apple laptop.
It is not an ideal practice to offer different prices demographically or customer traits. It is a simple discrimination and it might be considered as illegal. Customers are becoming smart too, and they use price comparison site to verify product price. You simply don’t need it as it will take you nowhere.
Instead of it, research a lot and let your research outcomes decide the prices of the products.
4. Peak Pricing
It is one of the best ways to earn revenues when you have a competitive edge. In seasons when demands are high or your competitors have low stock, it is a high time that you encash such opportunities. Most of the hotels and airlines booking agencies follow a similar practice just to boost their revenues and profits.
5. Lose-Leader Strategy
It is also a proven pricing strategy that works every time. A lose-leader strategy is all about a psychological tendency of humans. It simply means when a person finds products at below market values, they end up shopping more.
You can upsell, cross-sell and increase the total cart value by offering highly discounted prices. Overall, your profit margins will increase drastically.
Sometimes, you might not find good profits, but remember, client acquisition is also a valuable asset you have earned by implementing this strategy. Overall, it will work in either way.
There are many ways you can come up with dynamic pricing strategies that work in your favour. All you need to do is to analyze and monitor every aspect of pricing and modify your strategies as per consumer patterns and behaviours.
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