Pricing strategies are a must for any eCommerce business in retail. They are a planned system that helps set product selling prices. To do this, it’s important to strike a balance between the value of the company’s products and customers’ expectations.
Why you need a pricing strategy
Having a pricing strategy for our online businesses is essential. When developing it, we need to pay attention to the following key aspects:
- Profitability: Maximizing profit is the foundation for pricing a product or service. You need to cover costs and make a profit.
- Competitiveness: To take on other companies in the industry, you need to set a price that lets you compete. The right strategy improves our market positioning.
- Segmentation: Tailoring the offer to a specific market segment lets you break into that niche and win customers.
- Evaluate and adjust: We need to review our strategy constantly to optimize results through small adjustments.
Pricing strategy models
The different pricing strategies and their examples are the best way to illustrate this concept. It’s important to remember the link between pricing strategies and marketing. These are some of the main ones.
Differential pricing
A set of criteria is defined to offer different prices to customers in different segments. For example, geographic location can be one reason to vary the price. This may be due to factors such as purchasing power or import costs.
Psychological pricing
At the moment of payment, customers feel a sense of loss or pain, but some figures can minimize it, such as odd numbers. Several studies, which you can find in William Poundstone’s book Priceless, confirm that odd numbers are more attractive and that we should avoid round prices. For example, the classic €19.99 instead of €20 helps increase sales by up to 24%.
Competition-based pricing
In this case, we take our cue from the competition to set prices. These strategies can be seen in sectors such as fashion or consumer electronics. There are three types:
- Premium: Above average, highlighting the premium or superior features of our product compared to the competition.
- Mid-range: Similar to the competition, seeking to stand out through other strategies.
- Discount: Lower, to be more attractive.
Pricing strategies help companies become more competitive in the market. It’s important to design and implement them properly to cover costs, generate profit and attract customers, without forgetting their implications for marketing.
