The following is a guest post by Burc Tanir, CEO at Prisync.
Have you been tempted to think that price consideration is something only very big businesses like Amazon need to do?
Maybe you feel that you can’t compete on price, so you aren’t devoting much attention to it.
But you should do it, because prices are important for every business regardless of its size.
And here I’m going to explain why it is important and how it can help even small ecommerce businesses.
Let’s look at pricing for what it is: a powerful marketing weapon.
Why pricing is important for all ecommerce companies
Have you experienced that feeling of being in a “buying mood ” when you enter a shopping center? Is it perhaps just the smell that puts you in that mood? It happens to me, too.
As it turns out, many retail stores deliberately craft their own smell. They’re doing something called scent marketing, and it works well.
The idea is a kind of retailer extension for the old Proust’s madeleine:
No sooner had the warm liquid mixed with the crumbs touched my palate than a shudder ran through me and I stopped intent upon the extraordinary thing that was happening to me. An exquisite pleasure had invaded my senses, something isolated, detached, with no suggestion of its origin. […] And suddenly the memory revealed itself. The taste was that of the little piece of madeleine which on Sunday mornings at Combray (because on those mornings I did not go out before mass), when I went to say good morning to her in her bedroom, my aunt Léonie used to give me, dipping it first in her own cup of tea or tisane. The sight of the little madeleine had recalled nothing to my mind before I tasted it. – Marcel Proust, In Search of Lost Time
That is the power of sensory experience. Sadly in ecommerce we can’t yet offer such powerful experiences. (Augmented and virtual reality, we are waiting for you!)
So when buying online, things are much more aseptic. The price is there at first sight – but the buyer can’t touch, smell or try the product, so all these subjective buying pushers are removed from the process.
Did you know that 90% of online shoppers say they compare deals on the Internet? Or that 47% of buyers only choose discounted products? Or that more than 6 out of 10 buyers say pricing is the key factor when it comes to the buying decision?
The fact is that price is an essential buying factor for objective purchases.
Internet: The big booster of an objective purchase
Ecommerce is in an environment where objective buying prevails. As we said above, the experience is quite different from brick-and-mortar buying, and the information is much easier to get. Nobody wants to pay more, and the Internet offers some incentives to encourage objective purchases:
- Ease of comparing prices
- Ease of comparing technique characteristics
- Motivation of users to research in order to make better purchasing decisions
- Availability of different buying options
- Access to other users’ experiences through reviews and social media
In short, access to all this information encourages customers to research and become experts in almost every kind of product buying.
Other factors that make pricing important
Pricing is not just a way to sell more, but also a factor that affects the most important KPIs of your business. Here are just some KPIs that your pricing affects directly:
- Conversion rates
- Profit margin
- Market share
- Website visitors
Al these factors and much more are affected by your pricing. Do you know any ecommerce business that doesn’t have at least two or three of these KPIs in their marketing plan?
In addition, price is an essential part of your brand’s market positioning strategy. It doesn’t matter if you’re in the luxury of low-cost market, your prices are sending a clear public message about your brand.
As price is important, you need a pricing strategy
Because the price is important no matter your size, you must giving careful consideration to how you set your prices. As with everything in business, you can improve your results by using a proper strategy.
The first step you need to take is to decide on your objectives.
Do you want to increase your market share? Then go for lower prices.
Do you want to boost your conversion rate? Then try some deals and offers.
Maybe you want to establish your brand as the premium choice in the market? Then set high prices and don’t play with them.
In any case, your objectives should be informing your prices.
Remember, information is the key for good decision-making
If the ability to get information is the key to your customers making good decisions, why would it be different for you?
When it comes to pricing, you need to know what your competitors’ prices are. If you rely only on what you personally see on the Internet, chances are that your idea of market prices is influenced by your selection bias, and does not really represent the market. While you can’t track all the marketing prices, you can follow the most prominent competitors in your sector.
So it isn’t about tracking all the stores, but just the 20% of businesses that rule the market. However, even in this case, you’d need to check prices for hundreds of products in tens of ecommerce websites, which means studying thousands of individual pages. Done manually, this is hard work and highly time-consuming. But you can do it efficiently several times a day with a price tracking software like Prisync.
After deciding your objectives and getting information about where you are, you have to create a strategy.
You need to include…
- your costs,
- your cash needs,
- your competitors’ pricing,
- your product value, and
- the current market demand.
With all this information, you can create your pricing strategy and decide in what segment of the market you should be, and when you should launch deals and offers.
What is competitor pricing intelligence about
Tracking competitors’ prices isn’t simply about going for the lowest prices. You can do it, if that’s your brand’s goal, or if you want to run a “best price in the market” campaign. But that’s just one of many ways of doing things.
Here are some other ways competitive pricing intelligence can help you:
- You notice your prices are too low and you decide to raise them. Maybe you can increase your margins without affecting your competitive position.
- Notice that by lowering them just a little, you can offer the cheapest price and appear first in price comparison engines. This one is really powerful and sometimes the effect on the profit margin is almost imperceptible.
- Allows you to conduct best-price campaigns.
- You can also track your competitors’ assortments and manage your prices accordingly.
- It can inform you about which of your products are not competitive at all so that you don’t waste your marketing budget advertising them when you could invest that money in the most attractive ones, to get more visitors.
- You can make historical analyses to forecast next market movements and get ahead of your competitors.
In the end, avoid guessing and make your decisions with certainty. That way you will be able to control what you are doing and really measure the performance of your business. Also,it is a good idea to make pricing a responsibility of the full organization.
The benefits of pricing intelligence and strategy
With a good strategy and price intelligence, you will get important benefits:
- Your marketing campaigns will perform better: Because you will know which of your products are really attractive and this will enhance the conversion rate.
- You can avoid running out of stock: When you see your competitors are out of stock, you can forecast an increase of purchases in your store and take appropriate actions, such as ordering more products from your suppliers or raising the prices.
- You can play with the price comparison engines to get more visitors.
- You will improve your KPIs.
No matter what your branding goals are, you need to know what is happening with prices in your market and decide what your pricing strategy is going to be.
Adapting your pricing strategy to your brand is essential for businesses of all sizes and approaches. If you fail to do it, your customers will feel confused about you, and your brand will seem murky.
Before, knowing competitor’s prices was expensive and only big businesses were able to afford it, but now there are affordable options. If you can’t beat the biggest companies’ prices, you can adapt your marketing campaigns to them and take advantage of opportunities when they show up. Don’t miss the opportunity to take advantage of the power of big data.