How To Set Your Pricing Strategy
You have a business idea that you believe in. The pieces are starting to come together, and you’re ready to kick things into gear with a virtual storefront. As you develop your online store, your pricing will be fairly fluid before it settles in the right place. Here’s a quick overview of the things every e-merchant should keep in mind.
Check Out The Competition
The easiest way to get a radar fix on where your prices should be is to shop around for similar products. See who else is out there, and see what prices are working for them. After all, if
they’ve been in business for a while, then they’ve already done the hard work for you. No need to reinvent the wheel. It’s never a good idea to copy your competition too closely, but there’s no harm in seeing what the market can sustain for your product.
- Google search. Do you make the best Doohickey around? Search for Doohickies. If you get few local results, try “Doohickies near San Diego” or “Doohickies in Austin, TX.” Do the same with other search engines like Bing and Yahoo as well.
- Dig a little deeper. Search again in online marketplaces such as Etsy, Amazon, eBay, and even Craigslist. Take note of how their products differ from yours, any special discounts and promotions they offer, and any details you hadn’t yet considered.
Understand Your Cash Flow
It’s nice to think that for every product you sell, you can afford to make two more, and still put a chunk of that profit in your pocket. It seems almost too good to be true. And it is. Once you start selling online, you’ll have incidental costs to take into consideration. But don’t worry, this is not all bad news. Some of these costs will be yours to cover, while others may fall to your customer. Either way, these may have an impact on how you choose to price your products.
For example, selling online means that your customers could be anywhere. Shipping fees are generally handled by the customer (along with a choice between various shipping options — see our related blog post.) On the other hand, some vendors pay for shipping themselves as a promotional hook. Some of these vendors bump up their prices slightly, so that in reality, the shipping fees are split between the customer and the vendor.
Another factor to think about is sales tax. This has less of an impact than shipping fees, for instance, but it could still influence your fine-tuning. Be aware that local tax rates can swing by several percentage points, which may put you over the edge of where you want your final prices to be. To learn more about managing your tax rates with Ecwid, visit this article in our Knowledge Base.
Use Sales and Promotion
Just because it’s President’s Day, Boxing Day, Flag Day, or Thursday, that doesn’t mean it’s a good time for a store-wide sale. Frequently offering special sales may seem like a great way to attract new customers, and sometimes it is. But it can also backfire. There are many ways to offer special prices without earning an unwanted “discount” reputation. Remember that Ecwid supports these promotional features:
- Coupons. Offering percentage discounts for orders over a certain amount can boost your larger sales, especially for regular customers. Or, you can email coupon codes to your existing customers, giving them a nudge to come back. To find out how to include discount options into your Ecwid cart, here’s our tutorial.
- Bundles. If products X, Y, and Z are commonly bought together, putting them in a bundle deal can often lead to higher conversions. If each product is sold at $10 individually, try selling all three together for $25. This can be a great way to upsell at checkout, rather than making it your standard price.
- Loyalty programs. There are many ways you can offer special pricing using Customer Groups. These groups can include frequent shoppers, business partners, and wholesalers.
A lot of factors can affect your sales. If customer traffic is coming in more slowly than you expected, don’t panic; it may be temporary, seasonal, or indicative of a problem other than your price point. It will be tempting to slash prices in order to gain sales, or to raise prices to make up for the recent drop in your earnings. These are almost always the wrong first step.
Obviously, it is best to establish your prices as well as you can before you open your virtual doors. Having said that, the above-mentioned tools can help you to adjust your pricing strategy at any stage in the growth of your business. Experiment. Track your results. Be patient. Try enabling features in your shopping cart to get a clearer picture, like Customer Reviews through Yotpo and Shoppilot, or track your traffic with Google Analytics. The Ecwid App Market is here and will help you find the apps and integrations you’ll need to optimize your sales!