There are thousands and thousands of websites all competing for your customer’s hard earned money. It isn’t enough to have low prices, anymore. Unfortunately, huge sites like Amazon and Zappos will always have the advantage because of sheer size. With their amount of traffic and customers, these heavyweights can be cheaper and blow your small business pricing right out of the water. So, how can you use an effective pricing strategy for your e-commerce store and compete in the busy online marketplace?
1. Margins! Margins! Margins!
I wouldn’t recommend getting in a pricing battle with your competition. As you slowly lower your prices, you may end up dropping them to an unacceptable level. Unless you’re bringing in the traffic you need to justify the lower pricing, you could be losing money. Additionally, having the cheapest prices may not be feasible with other products, but your customers are already used to your low prices and may search somewhere else, the next time around.
2. Create a Unique Selling Proposition
It is always important to ask yourself, “What makes us different than our competitors?” and, “Why will our customers continue shopping with us?” For Zappos, it is their unbelievable customer service. For Sevenly, it is their contribution to a weekly charity. Your business needs to discover what makes it unique and then cultivate and incorporate this angle into your pricing strategy.
3. The Loss Leader Strategy
This is not a new concept. Let’s sell something at a ridiculously discounted rate and hope that customers purchase more once they are in the door (real or virtual, of course). This strategy can work with the right products and can help with customer acquisitions. The best example is that you can now buy printers for $25-$30, but the ink costs $50 to replace. If you have a product you can use this strategy for, while still keeping your margins vs. traffic in mind, you might want to give it a go!
4. Incentivize Your Customers
Now that you are comfortable with your margins and have figured out a solid pricing strategy, it is time to motivate your customers to open their wallets. There are many different ways to do this, but what is really important about your incentives is the psychology behind them.
Limited time offers are a great way to motivate. For example, “During the next 6 hours, you’ll get an additional 20% off!” The knowledge that the offer won’t always be around could help someone decide to purchase immediately, as opposed to procrastinating and forgetting about the item, altogether.
The way you structure a deal can also help push the customer to purchase your product or, at least, think twice about it. When a customer sees, “Buy one, get one 50% off,” their mind processes a 50% discount, when really, they are only getting 25% off.
If you happen to have extra inventory, offering a two-for-one deal could work. This can give your e-commerce store the reputation of offering great deals but you don’t have to kill your margins to gather attention for your products.
5. Test and Test and Test and Test
Every product and every store is very different. You will need to measure and test each strategy you implement to see what works and what fails. Use tools like Google Analytics to track and analyze the website traffic results of your pricing strategies. Find out if your “Winter Sale” converted the results you were hoping for and if not, find out why, so that you can fix it for your next pricing campaign.