If you’re selling products online, you already know that your online storefront is an ideal place to gain new customers and sell more products. But when it comes to finding the right online pricing strategies for your virtual store, things might not be as they appear.
Your product pricing communicates more about your products than simply how money is going to come out of your customers’ PayPal accounts when they hit the “Place Order” button. In fact, pricing is an essential part of the marketing mix – without a solid online pricing strategy in place, you might have a hard time making new sales.
Here are some ways you can set your brand apart from the competition when pricing your products online.
1. Let Your Prices do the Talking
When it comes to marketing your products online, your pricing is the main place where you communicate the value that they represent for your customers. Sure, you can communicate value to some degree in your advertising by adding a meaningful testimonial or showing off the superior craftsmanship of your items.
Your prices are essential to communicating value because they require your customers to consider what they must give up in order to own something that that you provide. A price tag conveys value in a more powerful way than any other message you might send because it makes your customers question: “do I really want/need this thing?”
Of course, if your prices are utterly incongruent with your product’s actual value (versus the perceived value your customers infer before they make a purchase), you risk losing out on future business and potential profits. You can’t fool a customer into paying a disproportionate price for the products you sell.
Pricing is a lot more than waving a magic wand over your website and pulling some random numbers out. You need to consider inputs, promotion and time spent to make and market your product, as well as the value you wish to convey. But in the end, the most important thing that your price will communicate to your customer is how much your products are worth – and this goes well beyond raw inputs.
2. Be Aware of Your Competition…
If you don’t know what your competitors are charging, it probably won’t be long before you hear from a customer about how some competitor is selling x service for y dollars and how you should do the same. While you should probably not take pricing advice from customers looking for the cheapest product on the internet, it is important to understand what your competitors charge and how your customers feel about the price differences.
In some cases, you can use competitor pricing to direct your own online pricing strategies. Though most likely, you’ll want to pivot from a similar company’s strategy, rather than copy it outright. Either way, you need to know what your competitors are up to.
Some products don’t have direct competition. And in this case, it can be hard to determine exactly who your competitors are. If your product falls into this category, you should identify alternative products that your potential customers might choose if they don’t choose your product as a solution to their perceived problem.
3. …But Don’t Try to be the Cheapest Product on the Block
One trap that online retailers often run into is the race to the bottom. Usually, this involves a competition to provide the lowest prices on the internet in order to capture a larger share of online sales.
But this plan doesn’t work well for many products or services. Unless you’re selling something like a mass-printed coffee mug, your product probably won’t benefit by being the cheapest on the internet.
Since your pricing should communicate value, a low-priced item suggests that your products are of an inferior quality to those that your competitors offer. You don’t know if your competitors have the same overhead as you, or even if they are following the same legal or ethical requirements that your brand follows.
Set your prices at a fair rate to compensate yourself and/or your employees for the work it takes to make and market your products. While this should be within throwing distance of what your competitors charge, don’t let their rates dictate your online pricing strategies.
4. Review Your Online Pricing Strategies
You can plan and price your products ahead of time, but you’re probably not going to stick with your initial strategy in the long term. You want to schedule periodic reviews in order to ensure that your strategies and pricing match what your market can handle.
Prices that are too high will prevent you from making sales. But prices that are too low can have the same effect. Additionally, changing market conditions can impact your pricing from year to year or quarter to quarter.
For example, the price of your raw inputs may go up over time. You will need to adjust your pricing to reflect the increase in your overhead, otherwise, you’ll risk losing out on future profits.
But often, the factors impacting your pricing strategies are rarely so cut and dry. You need to pay attention to a spectrum of factors, including consumer attitudes, economic trends, competitor offerings and information, public awareness of issues surrounding your industry, and so much more.
If you schedule periodic reviews, you’ll be able to manage your price changes without too much fuss. And if your products experience frequent turbulence from outside factors, you’ll be able to adjust your pricing before your bottom line takes too big of a hit.
5. Don’t be Afraid to Make Adjustments
Along with your periodic reviews, you should be comfortable with making pricing adjustments, should the circumstances require it. For some products, frequent price changes are expected and endured. For other products, price changes may be met with resistance. (This is in keeping with the economic theory of elasticity.)
If you’ve done the proper market research for your product, you probably already know which category your product falls into. You know what your market will pay and when they’ll pass.
If you need to make unexpected price changes, you’re going to have to communicate with your market about why these changes are happening and why your product (and brand) still matter.
But in some cases, price changes, particularly price hikes, are expected. Take creative work, for example. The better you get at doing the creative work that you do, the more valuable your work becomes. The more valuable your work is, the more you should charge for it.
A popular time to reprice products or services is the beginning of the year. In fact, this is when your customers are most likely to anticipate a price hike. If you need to reprice at any other point during the year, consider offering a discount or promotional incentive for those who opt in early.
6. Provide Incentive When Appropriate
On the topic of promotions and incentives, let’s talk about when you might want to offer discounts on your products. Sales and incentives are an important part of your online pricing strategy, but like the other factors, can vary greatly depending on your market.
If you sell physical products, for example, your customers probably expect discounts and sales at certain times of the year – think Black Friday and the holiday shopping season. You certainly don’t have to play along with traditional sale periods, especially if they don’t fit your model. But if you’re going to stray from the norm for your industry, you will once again need to provide a good reason for doing so.
A brand that I follow recently came under fire (mostly from fans) for not offering any sales of any sort during Black Friday/Cyber Monday weekend. Their response was consistent and simple “We don’t do sales at any time”. Their products are expensive and ethically sourced – it’s not exactly like sustainable farmers get a discount on animal feed or labor at certain types of the year. But in a market that expects to see similar products discounted at certain times, a refusal to discount can have adverse effects. So, if you want to go against the grain, understand the risk ahead of time.
In the case of creative products and services, you have much more leeway when it comes to offering promotions, should you choose to do so. You might offer discounts around your anniversary, for bundled products or during a time when your industry holds a well-known event.
There are, of course, hundreds of ways that you can offer promotional pricing for your products. Ultimately, you need to decide when or if it’s appropriate to do so and communicate with your audience accordingly.
Give Your Online Pricing Strategy Some Feet
However you proceed with your online pricing strategy, you’re going to want to get your products – and their prices – in front of members of your chosen audience. If you’re looking to grow your online presence, we can help you with the logistics of managing your web store, running an email campaign or designing graphics that are perfect for your advertising needs. Let us know today how we can help more customers come to your online storefront!