6 Pricing Strategy To Boost eCommerce Conversion
Setting-up the price for your product is like slacklining adventure.
Your right-half of the body demonstrates a high-profit margin and market share you need to cover for staying in the hunt, and the left half of the body indicates the stream of sales with paltry survival ratio.
The former one is the high-margin low-sale game, and the latter one is a low-margin big sale game.
Each model has its merits and demerits, and in the longer run— you may need to hang in the greyish-pricing strategy for your eCommerce products.
And unless you do it, you may fall on either side.
As a retailer, you have to consider factors like purchase rate, competitors’ SP, shipping cost, and the final cream of profit.
That’s just the maths around your pricing, and you’d mostly come successful.
However, there are a lot of psychological variables that impact the buyer’s decision, and you need to learn them before labeling the price.
The price of your products can make or devastate your brand. You’ve no other choice than to read the customer’s behavior.
Let’s examine these variables before coming up with the price.
1. Recommended retail price by manufacturers.
The recommended retail price is the standardized price suggested by the manufacturers to the retailers.
It means that manufacturers fix the selling-price and profit margin for the retailers.
At RRP, the customers will mostly get the same price across all the channels.
- RRP pricing strategy is a safe practice considering the customers will find you credible or wouldn’t expect negotiation.
- You’ll save a lot of time in reading customer’s behavior and pricing them accordingly.
- There wouldn’t be any complain regarding the price list.
- If you are a new eCommerce owner, you can’t lure new customers with low-pricing.
- You can’t compete with bigger-brands who give more buying options than you.
2. Playing around the discount.
Usually, most of the retailers get the same maximum retail price (MRP) across the slack.
But everything revolves around the discount.
For example, the MRP of the watch is 100$, and the total manufacturing discount ranges from 20 to 40%.
The discount rates are dependent on the payment cycle, bulk orders, and relationship with the makers.
The idea of playing around the discount rate is to be good at at least two of the three mentioned factors.
Your decent payment cycle or bulk order with early outstanding clearance can also strengthen the relationship with the manufacturers.
That helps you achieve the best rate.
And with the best price, you can have higher profit-cushion or manage to sell at a low price to attract massive conversion.
- You can earn your share by merely passing the discount. For example, get a 20% discount and give 10% to your customer. You don’t have to spend time finding the correct pricing.
- You can change your profit margin depending on user behavior. For example, if a 10% discount doesn’t convince them, change it to 8 or anything.
- Unless you are a strong e-retailer, it’s possible that the makers may have a bias towards them and treat you alien.
- Discount figures are easy to remember. If you pass 10% and your competitor passes 12%, you might lose the customer.
3. Package pricing.
Package or bundle pricing relates to selling more than one item in a package at lower prices than the individual product.
It’s a unique strategy for upselling the product.
For example, you are selling an individual wallet and a belt at 10$ and 15$ respectively, and both together at 22$.
Most eCommerce brands follow package or bundle pricing tactic for better conversion rate.
- It increases average order value per purchase as users prefer bundle pricing over highly-priced individual items.
- It’s driving users to perceive higher value products at a low price, eventually leading to better purchase value.
- You will have difficulty in selling a higher-priced individual item because the users will have contradictory ideas about the product.
- You may have to offer some percentage of discount to make the package look attractive. It can lead to a loss of revenue.
4. Price-skimming strategy.
Price skimming or the new product pricing strategy means enabling the highest price tag for the product and skimming the colossal amount of revenue from the people who are willing to pay the price.
For example, you are selling the flagship product.
Try to skim the revenue layer by layer by targeting the users who want to pay for the product.
Cometh the sixth month, and drop your prices to target another set of groups.
Continue this until you target all the segments in a year or two or until the next flagship product launches.
- It’s a quirky way to cover all the segments of customers layer by layer.
- It generates considerable revenue. So, even if the product fails to succeed than anticipated, you’d make enough revenue despite closing the product.
- It’s not successful for all the products. Your item should be different from the market and live the launch-hype.
- The quality of the product should make sense as per the industry standards. There’s a difference in selling Apple and apple.
5. Market penetrating price.
It’s contrary to price-skimming as it’s about setting the lowest price for easy penetration in the market.
It ensures massive volume sale and highest possible conversion, but at the expense of profitability.
However, once your product receives rave reviews, bulk order/manufacturing balances the cost.
Big brands such as Ikea follow the same model for quick penetration in the market.
- It’s definitely a hit for high volume sales and a brilliant conversion rate.
- The large volume of the order covers the loss of revenue.
- It may affect the initial bank balance, and a lack of orders can enhance the severity of the damage.
- It may not work for all the products. Your product should be in continuous demand.
6. Psychological pricing.
Psychological pricing involves some of the oldest pricing techniques to appeal to the customer’s emotions.
It’s pricing your product in a way that it doesn’t hurt the psyche of the customers.
Some of the psychological pricing techniques are:
- Charm pricing: You want to develop a notion that the product costs less than the whole amount. For example, keeping the price as 4.99$ than 5$.
- Font pricing: You want users to ignore the right side of the decimal, i.e., 99 in 4.99. So, you change the font size to 4.99$ to highlight more on 4.
- Discount numbers: Nobody wants a 2 or 5% discount on the product. Listening to 40 or 50 or even higher discount numbers is a pleasure on ears.
- BOGOF: We simply can’t overlook free stuff. Buy one, get one free is the purest form of psychological pricing.
- It pushes the customers to make an impulsive buying decision. The rates ending with odd numbers generate the feeling of discount which the users can’t neglect.
- As people naturally read from left to right, the decimal figure gives a camouflage value to the item.
- It might not work with expensive luxurious items. I would personally prefer 1.4M$ over 13,99,999$ as rounding up the number gives satisfaction.
- Rational customers know how to round up the number, and they’d mostly come up with statements like “why did you keep it 7.99 and not 8.”
The bottom line
Not all pricing strategy would fit to your eCommerce.
Setting up a pricing strategy is like a Rubik’s cube.
You try several permutations and combinations to eventually which move gives you the best result.
End of the day, you may also have to apply more than one strategy to finally see the results swaying your way.
So, what’s your favorite pricing strategy or what strategy gives you the maximum benefit? Let us know in the comment section.
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