You have an online store. Congratulations! The next step is to market your shop so that you can optimise sales. What we often hear when talking about marketing is the 4 Ps: product, place, promotion, and price. As a major component of the 4 Ps, it’s important to price your products or services strategically since knowing how to manipulate prices can directly affect sales and profit. Balance between competitor prices, price of the product, and consumers’ willingness to pay. With an effective pricing strategy, you can quickly and effectively improve your bottom line.
How you decide to price your products can depend on a number of factors. Ask yourself how you want your brand to be perceived, how quickly you need to break even, or who your target audience is. Whatever your long-term pricing strategy, there are several pricing techniques that you can implement to maximise profits. Experiment with a few of these to see if it works for your business and its products. Since prices can be changed easily on e-commerce platforms like Carousell, you can revert back to your original price point if it’s not meeting your expected performance. Here are five pricing techniques to try.
1. Raise prices incrementally
As a general rule, you will want to increase your prices incrementally, say 5%, so as not to scare consumers away or change how you are positioned in the existing market. Prices should also not be raised very frequently, especially if you rely more on repeated customers instead of new customers. Having similar prices each time can attract customers to come back and recommend your shop to others.
2. Raise prices for cheaper items instead of expensive items
It’s obviously more noticeable when you go from $500 to $600 compared to $50 to $60 even though it’s the same percentage increase. The nominal value just looks significantly higher. Thus it is best to raise prices for cheaper items instead of expensive items as consumers are more willing to pay an extra $10 compared to $100. The extra $10 is not so much of a deal-breaker. This is especially true for high-value items since consumers tend to be more price-sensitive and spend a longer period of time doing in-depth research for the best deal.
3. Choose a strategic timing
Seasonal marketing is a good strategy to use in price changes. For example, the holiday season is a good time to raise or lower your prices to attract more consumers into your shop and buy more. If your product is catered towards students, summer might be a good time. At the same time, avoid exam periods as their priorities would not be to shop. Constantly monitor the market as it is constantly changing. If a certain product has become more popular due to a spike in social media influence, know how to take advantage of it using pricing tactics.
You may also want to keep tabs on your competitors regularly, whether they’re on the same platform or other e-commerce websites. Online shoppers are savvier these days and might check prices across different businesses that sell similar products. Keeping prices competitive may give you that extra edge.
4. Lower prices
Increasing prices is not the only way to maximise profits. You can also lower the price of some of your products in order to draw consumers into your shop. This strategy focuses on selling in high quantities to make up for the profit instead of increasing the profit margin of a specific product. By luring customers in with lower pricing, they may be tempted to buy other items in your shop that are regular or higher priced. Ensure your product is suitable to use this strategy on, as it often requires high volume purchases for profits to reel in.
5. Use pricing psychology
When a consumer makes a decision to buy something, it’s because they think that it’s worth the price. Increase the perceived value of your product by using pricing psychology. One example is by using nines in your price tag and not ending with a zero. The price difference between S$11.95 and S$12 is negligible but the impression of the S$11.95 price seems significantly cheaper. This is why many products out there are priced this way. However, take caution with this pricing technique as premium or luxury products may be perceived to be cheap or ‘low-class’.
Another strategy is to price similar items differently to help facilitate the consumer’s decision-making. According to a study by Yale, when similar products are priced the same way, consumers are less likely to buy either compared to when pricing is slightly different. In their final study, just introducing a 3% difference in price nearly doubled purchases. They concluded that when prices are the same across similar products, shoppers tend to hesitate and ultimately decide not to buy. The process of deciding which one is better causes a sort of analysis paralysis where they end up over-thinking. By having differing prices, the decision is made easier. If consumers think the extra money is worth it, they will purchase the more expensive option. If it really doesn’t make a difference, then consumers will go for the cheaper option.
Lastly, you can also increase the perceived value of a product in terms of guarantees such as free gifts or free shipping. Both of these reduce the perceived cost of a product even if it’s already included in the price of the product. It makes consumers feel like they’re getting a good deal.
Boost your online sales and maximise profits by utilising and manipulating prices, one of the 4 Ps of marketing. Carousell makes it easy for you to implement any of these pricing strategies so that you can succeed. Check out Carousell Insights to learn how you can further optimise and grow your e-commerce shop.