The 3 Ultimate Online Retail Pricing Strategies to Increase Sales

Use Your Analytics and React To Your Customers' Behavior · Leverage Your Layout · Price Setting. Skiptocontent The3UltimateOnlineRetailPricingStrategiestoIncreaseSales JackScullin March25,2021 Blog Howimportantispricingtoyoure-commercebusiness?Consideringthat80%ofpeoplesaythatthemostimportantaspectofshoppingatastoreiscompetitivepricing,theanswertothequestionis“veryimportant.” Implementingatremendousretailpricingstrategywilldramaticallyhelpenticevisitorstoclick“addtocart.”Wehavesomegreattechniquestoincreaseyouronlinestorefrontprofitabilityforemergingecommercetitansorcompanieswithmulti-milliondollarannualrevenues.Let’sdiscussthekeytermsyouneedtoknowandourtopstrategiestodominantyourecommercecompetitorsandoptimizeyourlistingsforprofitability.  TableofContents What’sRetailPricing?WhatAreYourRetailPricingObjectives?WhatisOptimalPrice?HowtoCalculateOptimalPricePoint WhatisSociallyOptimalPrice? 3OnlineRetailPricingStrategiestoOptimizeYourEcommerceListingsUseYourAnalyticsandReactToYourCustomers’Behavior LeverageYourLayoutPriceSettingWhatArethe3TypesofPricingStrategiestoProfitability?CompetitivePricingBelowCompetitionPricingAboveCompetition(Prestige)PricingPsychologicalPricingOddorCharmPricingDecoyEffectorIntroducinga“Useless”PriceAnchoring:IncludeaReferencePriceBundleandMultiplePricing9BestPracticesforOptimizingYourProductPage1.Your‘Buy’buttonistheMostImportantElement2.CatertotheMobileCustomer3.PhotosProvideaCustomer’sFirstImpressionofYourProducts.4.OrganizeYourCopy5.CompellingContentisAlsoaKeyFactor6.AllPagesShouldBeProperlyBranded7.Don’tForgettoCross-SellandUp-Sell8.AddSocialProof9.SpeedMattersIntegrateNogintoTransformYourEcommerceOperationsandNeverReplatformAgain! What’sRetailPricing? Manyfactorsdetermineretailpricing.However,itwouldbebesttoconsiderthecostoftheitemandthemarkuppercentageyoumaketodeterminethenetprofitsforanyitem.Usethefollowingformulatodecideonyouridealretailprice: RetailPrice=[(Manufacturingcostofitem)/(100-markuppercentage)]x100 Forexample,ifyourproductcosts$1.00tomanufactureandyouhopetomakea75%profit,youridealretailpricewouldbe: [(1.00)/(100-75)]x100=$4.00 WhatAreYourRetailPricingObjectives? Althoughsellingasmuchinventoryandmakingthemostprofitisthemostapparentpricingobjectiveforanycompany,therearemanyothergoalstopursuewhensettingyourretailcost.Asmallbusinessmayofferaheavilydiscountedpriceaspartofapaidpromotiontogetmoretraffictotheirwebsite,increasemarketshare,andobtainnewcustomersintheirCRM.Theymayalsoofferadiscountedpricetomoveoldinventoryandincreasesalesvolume.  Someofthemostcommonretailpricingobjectivesinclude: PricingforProfit:Apricepointthatmaximizeslong-runorshort-runprofitability.  Survival:Settingapriceforsurvival.Businessesmayneedtoacceptshort-termlossestoincreasesalesandcoveressentialoperatingcosts.Oncethebusinessweathersthestorm,theycanreturntohigherpricepoints.  IncreaseMarketShare:Ifabusinessistryingtomaximizecustomersandtakebusinessawarenessfromcompetitors.Acompanycanmeasureitsmarketsharebycomparingitssalestoallothercompetitorsinthesameindustry.Sellersmayemployapenetrationstrategytopurposelylowerpricepointstoenticeprice-sensitivebuyersandgainmarketshare.Onceyougainmorecustomers,it’simperativetomaximizeyourcustomers’lifetimevaluethroughupsells.  CompetitiveMatching:Ifsellerssellaproductthatotherbusinessessell,theymayhavetosetapricethatmatchestheircompetitorsorisbelowtheirpricepoint.Forinstance,ifyourcompanysellsaparticularproductfor$5andacompetitorsellsitfor$4.50,youwillhavetoloweryourpriceorprovideadditionalvaluetoenticeyouraudience.  Beforesettingyourprice,makesureyouhaveidentifiedtheproduct’sobjectivesinrelationtoyourbusinesstoreachyourgoals.  WhatisOptimalPrice? Theoptimalpriceisapricepointthathelpssellersmaximizeprofits.Ittakessomeexperimentationtofigureouttheidealpricepointforanitem.Sellingataheavilydiscountedpricewillhelpyoumovemoreinventory,butyourprofitmarginswillbeslim.Conversely,ifyouselltoohigh,youmayhavealotofunitssittingaround.  Priceoptimizationistheprocessofsettingapriceonanitemthatstrikestheperfectbalance—itgivescustomersasenseofvaluewhilegivingyouagoodprofit.Howyourbusinessoptimizespricesmaybedifferentfromhowanotherbusinessdoesit—therearemanyfactorstoconsider,includingpricesatothersites,demandforanitemandyourcompany’ssalesgoals,andtheparametersyou’vechosenbywhichtosegmentyourcustomerbase.Nonetheless,therearesomecoretenetsthatalle-retailersshouldkeepinmindwhendevelopingasuccessfulpriceoptimizationstrategy. HowtoCalculateOptimalPricePoint First,you’llneedtoestablishapricerangeforeachitemthatyousell.Howlowcanitbepricedtoattractcustomerswithoutalossofprofitonthesale?Conversely,howhighcananitem’spricegothatisn’tconsideredtoohighbyshoppers?  Thiskindofflexibilityhelpsbecausepriceoptimizationisafluid,never-endingprocess.Knowingyourparametersallowsyoutoberesponsivetodemandandchangepricesquicklywhenneeded.Marketerscallthisdynamicpricing. Therewillalsobecertaintimeswhenyouwillwanttochangeyourprices.Perhapsacompetitorhaslowereditsprices,andyouwanttoremainaviableoptionforpotentialshoppers,soyoumayalsodropyourprices.Youcanalsoadjustpricesforsalestomakewayfornewstockandattractnewcustomers.Dynamicpricingcantakevariousfactorsintoaccountandusespecificalgorithmstodeterminethebestpricestouseatcertaintimes. Checkoutthisgreatoptimalpricecalculatortohelpyoufindthesweetspot.  WhatisSociallyOptimalPrice? Everyproductorserviceconsumedintheworldhasasocietalimpact.Thesocialcostofanygoodincludesthesumoftwocomponents: Thefinancialcostsofconsumption,suchasdelivery,costsofmaterial,andlabor.  Thesocietalcostsofconsumption,includingenvironmentalconsequencesandhealthimpacts.  Resourcesarelimited,andastheydeplete,competitionfortheremainingresourcesincrease.Sellersmustconsiderthemarginalprivatebenefit(MPB)oftheirgoodsorthehighestpriceconsumerswouldpayforaunit.Thehighertheprice,thefewerpeoplearewillingtoconsumeit.Thelowertheprice,themoreconsumersarewillingtospendmoneyonthegoodsorservices.  3OnlineRetailPricingStrategiestoOptimizeYourEcommerceListings Onlineretailersmustknowtheiraudienceandpricetheirproductsnotonlytokeeptheminterestedbutdrivethemtopurchase.  UseYourAnalyticsandReactToYourCustomers’Behavior Sellerscanleveragemanydifferentverticalstoreachtheiraudience.Whetherit’sasocialmediacampaignorproductpromotionatCostco,sellersmustpurposefullytesttheirproductandusedataandconsumerinsightstoinformtheirpricingstrategies.  Forinstance,iftheynoticethatFridayistheirmostprofitabledayforaparticularitem,theycouldrunasocialmediacampaignonlyonthatdaytomaximizetheirbudget.IftheynoticethatbundlingtheirhumidifierwithafreebottleofessentialoildrasticallyincreasessalesinaCostco,theyshouldusethesamestrategyontheironlinestorefront.  Yourcustomers’onlineshoppinghabitscanalsobeusedinpriceoptimization.Hasaparticularshirtearnedalotoflikesonyoursocialmediachannels?Ifthedemandisincreasingbecauseofthisexposure,perhapsthepricecanbeadjustedupwardsaccordingly.  Conversely,ifyouseeshoppersareputtingaparticularitemintheircartbutnotfollowingthroughonapurchase,youmaybeabletoclosethesalewithalowerpricetag.Somebusinessesevensetpricesthatareslightlylessthanaroundnumber,socustomersthinktheyaregettingadeal. Trackyourcrucialanalyticsmetrics,suchasorganictraffic,ROAS,andbounceratemonthlyanduseittoadjustyourmarketingcampaignsandpricingtomaximizesales.CheckoutourguideonthekeyecommerceKPIsmetricstotrack.  LeverageYourLayout Thelayoutofyourecommercesitecanalsoplayaroleinenhancingpriceoptimization.Productdescriptioncontentshouldhaveanaction-orientedcopyencouragingapurchase,andsellersshouldshowcasetheproductitselfina“CustomerFavorite”or“BuyNow”display.  Useatickingclockforpricesonatemporarydiscounttoleverageurgency.InfomercialsusethisstrategyonTVtourgeviewerstotakeactionandcalltotakeadvantageofanoffer.Additionally,Includethenumberofremaininginventoryonthepagetopromptvisitorstopurchasebeforetheproductisoutofstock.Itwillhelppositionyourproductashigh-demand. Youcanalsogroupsimilaritemssuchaspursestogethertodoamini-pricecomparison,highlightingthemostpopularproduct.Sellersshouldalwaysstrategizetowardstheultimategoalofimprovingtheirconversionrateandprofitability. PriceSetting Anotherimportantaspectofpriceoptimizationisthemodelusedinpricesetting.Someretailersusethetraditionalmethodofaddingamarkuptotheirwholesalecoststodevelopanitem’sprice.Anotherpricingmodellooksattheprofitmadefromsellingproductsinquantitysoyoucangetthedesiredreturnonyourinvestment.  Well-establishedbrandsmayturntovalue-basedpricing,whichbasesthedecisiontosethigherpricesonconsumers’trustandrelationshipwithacompany.Basically,shopperswillbewillingtopaymoreforthebrandtheyareloyaltothanforasimilarandcheaperalternativefromanotherbrand.Andspeakingofcompetitors,it’salwayssmarttokeepaneyeonthemarketplaceandseewhatothere-commercesiteslikeyoursaresellingandhowmuchtheyaresellingitfor. WhatArethe3TypesofPricingStrategiestoProfitability? Therearemanydifferenttypesofpricingstrategies.Aswediscussedearlier,pickingthebestoneforyourproductcomesdowntoseveralfactors,includingpricingobjectivesandthesociallyoptimalprice.Let’sexaminethreetypesofpricingstrategiesyoucanuseifyourmaingoalistosellmoreandmakemoreprofit.  CompetitivePricing Acompetitivepricingstrategyisastandardapproach,andsellerscanleverageitdifferentlydependingontheproductstheyarepushing.Thekeytoacompetitivepricingstrategyistopositionyourproductorbrandnotonlydifferentfromthecompetitionbutsuperior.  Youmustspecifyandhighlightuniquesellingpoints(USPs)thatseparatesyourproductfromtherestofthepack.Also,investinginapremiumonlinestorefront,graphicdesign,andpackagingcanprovideavaluableimpressiononyourcustomers,especiallyforluxuryecommercebrands.It’salsoessentialtohavestellaronsitecustomerservicetohelpreduceecommercereturnrates.  Therearetwomaintypesofcompetitivepricingstrategies: BelowCompetitionPricing Pricingbelowthecompetitionisanexcellentwaytoundercutyourcompetitors’pricetosimplypositionyourproductasthebestpossibledeal.Toleveragethisstrategy,youmustnegotiatewithyoursupplierforthelowestpossiblewholesaleprice,reduceoperatingcosts,andexecuteamarketingstrategyhighlightingthemarketvalue.  Abelow-competitionpricingstrategycansometimesbecomeastickysituationifyourcompetitorstrytoretaliatebyloweringtheirpriceandstartapricewar.Thebestwaytoleveragebelowcompetitionpricingistopresentitasatemporarypricetomakevisitorsfeelmoreinclinedtopurchaseandnotgetaccustomedtobargainrates.  AboveCompetition(Prestige)Pricing Above-competitionpricingisalwaysidealforprofits,butitonlyworksifyouaremovinginventory.Sellersmustjustifyhigherpriceswithfactorssuchasexclusivity,superiorcustomerservice,elevatedbrandexperience,andscarcity.  Jewelryisanexcellentindustrytouseprestigepricing,especiallyifyouhavesufficientlydevelopedaluxuryimage.BrandslikeTiffanycancommandhigherpricesduetotheirbrand’sequity.Thediamondsmaynotnecessarilybeatthecompetitioninquality,butcustomerswillpaythehigherpricesduetoasenseofprestige.Beautyisintheeyeofthebeholder,andsoisyourbrand’svalue.Focusondevelopinganelevatedbrandimagetochargehigherpricesandincreaseprofitmargins.  PsychologicalPricing Thebrainisamysteriousthing,andtherearesomeclevertricksmarketerscanleveragetopriceitemsinaparticularwaytosellmore.Psychologicalpricingpositionsaproductatapricepointthatconveysafair,attractivebargain.Hereareseveraltechniquesyoucanapplytohelpincreasesales: OddorCharmPricing Customerspreferpricesthatendinoddnumberssuchas5,7,or9andtriggerimpulsebuying.Italsogivestheimpressionthattheyarereceivingadeal.Themostcommonwayretailersleveragethismethodistochangeanitem’spricefromawholenumber,suchas$9,to$8.99.Thebraininterpretsthe$8.99as$8androundsdown,makingitappearasabetterbargainprice.Studiesshowthatwhenpeoplespendmoney,theymayfeelasenseofpainorloss.Retailerscanleveragecharmpricingtohelplessenthecognitiveagitationandincreasethelikelihoodtheirvisitorsmakeapurchase.  InhisbookPriceless,WilliamPoundstonedocumentsthatcharmpricinghelpedincreasesalesby24%comparedtoroundedpricepoints.Additionally,researchersatMITandtheUniversityofChicagofoundthatthebestnumbertoleveragecharmpricingis9.Duringanexperiment,theytestedawoman’sclothingitematthreedifferentpricepoints:$34,$39,and$44.Theydiscoveredthat$39outsoldthe$34pricepoint.  DecoyEffectorIntroducinga“Useless”Price Thebestexampleofthedecoyeffecttopriceitemsisatthemovietheater.Thecinemawantsyoutopurchaseasmuchpopcornaspossible,butmostpeoplewillneverfinishthelargebucketofpopcornatthetheater.However,usingauselesspricewillhelpcustomersrationalizepickingthelargesize.  NationalGeographicconductedastudytoprovetheeffectivenessofthedecoyeffect.Theyranthefirsttestandofferedagroupofcustomerstheoptiontopurchaseasmallpopcornfor$3oralargeonefor$7.Mostcustomersdecidedtobuythesmalloption.However,thingschangedoncetheyintroducedamediumbucketintotheequation.  Forthesecondgroup,theypresentedthreeoptions:asmallbucketfor$3,amediumbucketfor$6.50,andalargeonefor$7.Sincethemediumsizeisonly50centscheaperthanthelarge,customerspurchasedthelargeoptionmorethanthepreviousgroup.Thedecoyeffectofthemediumpricehelpscustomersrationalizebuyingalargebucketbecauseitappearstobeabargain(eventhoughit’sthemostexpensiveoption).  Anchoring:IncludeaReferencePrice Includingareferencepricecomparedtotheactualpricepointofyouritemhasasignificanteffect.Theanchorpriceisjuxtaposedwiththecurrentpricerate,andthevisitorperceivesitasabetterdealthanwithoutone.Retailstoresutilizethistechniqueandsometimesincludemorethanjustonereferenceprice.  Let’ssayyoufindaluxurious,brand-namecashmeresweaterinadepartmentstore.Younoticethattheoriginalpricetagis$150,thesalepriceis$110,butthefinalpriceis$70.Theanchoringeffectmakesthepersonbasetheirdecisionontheoriginalanchorpricetheyencounter.  Sincetheyknowitwasinitially$150,theywouldjumpattheopportunitytopurchaseitattheheavilydiscountedrate,especiallysincethisisthesecondtimeitwasonsale.However,doyouthinktheywouldfeelascompellediftheonlyreferencepricewas$70?Theywouldfeelmorereluctanttopurchasebecause$70isstill$70.Sellerscanincreasesalesbypresentingahigherreferencepricetogiveaperceiveddiscountedvalueandtakeactionwhiletheitemisonsale.  BundleandMultiplePricing Bundlepricingisanexcellentwaytosellmultipleproductsandmakeeachconversionmoresignificantonyoursite.Sellerscangivealowerrateforcustomerstopurchaseitemstogetherratherthanindividually.Itisnotonlyagreatwaytomoveinventory,butyourcustomerswillperceivemoresignificantvalueandsavingswhentheypurchasebundledpackages(eventhoughtheyarespendingmoremoney).  Toexecuteanexcellentbundlepricingcampaignonyourecommercesite,includeseveralbundleoptionsonthesameproductpageandhavehowmuchthey’llsavewhentheypurchaseapackage.Forinstance,ifyousellapremiumCharcoalsmokergrill,youcaneasilypresentabundlepackagethatwouldenticeyourvisitors.  Sincetheyarepurchasinganewgrill,youknowtheywillneedothertoolsandproductstocookameal,suchasaspatula,charcoal,grillcleaner,andgrilltable.Ifavisitorchoosestopurchaseabiggreenegg,theyhavealreadycommittedtotheactivity,knowingtheywilleventuallyneedthebundleditemswhentheycook.Bybundlingtheitemstogether,youaresellingmoreinventory,thecustomersavesmoney,andyourprofitmarginsincrease.  9BestPracticesforOptimizingYourProductPage Makingsuccessfule-commerceconversions—ortransformingyourwebsite’svisitorsintoactualpayingcustomers—isn’talwayseasy.Herearesomefundamentalstokeepinmindasyoudevelopandelevateyoursite’scontent. 1.Your‘Buy’buttonistheMostImportantElement Sincetheentiregoalofyoure-commercesiteisforcustomerstopurchaseyourproducts,your‘Buy’or‘AddtoCart’buttoniscrucial.Whateveryounameit,makesureyourcustomerscaneasilyfindit.  The‘Buy’buttonshouldbeimmediatelyvisiblewhenlandingontheproductpage.  Surroundthebuttonwithplentyofwhitespace.  Customersshouldneverberequiredtoscrollorsearchtofindit.  Besurethebuttonisanactualbutton,notjuststand-alonetext.  Useappropriatecolorsthatareprominentandcoordinatewithyourbrand. 2.CatertotheMobileCustomer Didyouknowthatmobilecommerce(m-commerce)isgrowingevenfasterthane-commerce?Thisyear,itaccountsforapproximately44.7%ofonlinesalesintheUSandisprojectedtocomprisenearly75%ofglobale-commerceby2021.Takeadvantageofthistrendandoptimizeyourwebsiteformobiledevices.  Createmobile-friendlycontentthatisbothvisibleandeasytonavigateonsmallerscreens.  Developashoppingapp.–besuretocreatesomethingthatisfunctionalandreflectsthequalityofthebrand.Nothingmoresays“rookie”thancreatinganappthatyourcustomerdoesn’tuse.  Presentspecialoffersordiscountsformobilecustomers. 3.PhotosProvideaCustomer’sFirstImpressionofYourProducts. Theimportanceofpremiumphotographycannotbeoverstated.Becauseyourcustomercan’tphysicallytouchandmanipulateonlineproducts,yourphotosneedtodothis(virtually!)forthem.  High-qualityphotosshouldrevealmultipleproductanglesandofferazoomfeature.  Optforwell-litproductsonawhitebackground.  A360-degreeviewand/orin-contextlifestyleimages(andvideo)arealsorecommended.  Iftherearemultipleproductcoloroptions,eachindividualcolorshouldbephotographedanddisplayed.  Beconsistentwithyourphotographystyleacrossallproductpages. 4.OrganizeYourCopy Whenwritingyourproductpages,bothstructureandcontentmatter.Theformatinwhichinformationispresentedcanbejustasimportantastheactualcopy.  Getstartedwithanengagingproducttitle.  Useheadings,subheadings,andbulletpointstodevelophighlyscan-ablecontent.  Besurecustomerscanquicklyfindtheinfothey’relookingfor.  Includeinformationonpricing,features,materials,careinstructions,andsizingdetails. 5.CompellingContentisAlsoaKeyFactor Don’tbeboring!Putsomeenergyintoyourproductdescriptionsanddevelopabrandvoicethatappealstobothcurrentandprospectivecustomers.  Givecustomersthecontexttoenvisionthemselvesusingyourproducts.  Particularlywhensellingluxuryitems,provideplentyofdetailtosupporthighercosts.  Definetheproduct’svaluebydescribinganyuniqueorigins,superiormaterials,orotherupscalefeatures.  Remembertoanswertheage-oldquestion:Whyshouldyourcustomerchoosethisproductoveranother?Neverassumeyourcustomerknowstheanswer—yourjobistotellherwhy. 6.AllPagesShouldBeProperlyBranded Don’tlimityourbrandmessagetoyourhomepage;itshouldbecarriedovertoallproductpages.  Assumethatcustomershaveneverseenyourhomepage.  Highlightyourbrandassoonastheylandonaproductpage.  Createaneasy-to-navigatelayout.  Keepdesignclean,clear,andconsistent. 7.Don’tForgettoCross-SellandUp-Sell Yourproductpageshouldtaketheplaceofanenthusiasticsalesperson.Youknow,theonewhobringsovertheperfectaccessoriestomatchtheoutfityou’retryingon?  Everyproductpageofferstheopportunitytosellmoreproductsbyencouragingadditional,coordinatingpurchases.  Foreachproduct,recommendaccessories,otherstyles,oradditionalitemsinasimilarcolororfeatureddesign. 8.AddSocialProof Fortoday’stech-savvycustomers,onlinereviewshavereplacedword-of-mouthrecommendationstopersuadeprospectivecustomerstofilltheirvirtualcarts.  Includecustomerreviews,ratings,Instagramphotos,andpersonaltestimonials.  Tohelpdevelopthiscomponent,sendpost-purchasee-mailsandsurveysaskingcustomerstoreviewpurchasedproducts. 9.SpeedMatters Sometimes,peopleareinahurry.Don’tletyoursiteslowthemdown.  Makesureproductpagesloadquickly.  Allowbusycustomerstoaccessshippinginformationquicklyandeasily.  Keepthecheckoutprocessfreeofunnecessarycomplications.  Createasenseofurgency—i.e.“Productonsalethroughtomorrowonly!”—toencouragecustomerstopress‘Buy’rightnow. IntegrateNogintoTransformYourEcommerceOperationsandNeverReplatformAgain! Ifyouarereadytoelevateyourbusinesstoanenterprisejuggernaut,integrateNogintoleveragethemostintelligentcommercesolutions.Ourexclusiveandproprietarycapabilitieshelpbusinessesimproveprofitmargins,sellmoreonline,reduceoperationcosts,andsimplifythecomplexecommercearchitecture.  Ourenterpriseecommercesolutionsareidealforwholeecommerceplatforms,fashion,apparel,lifestyle,CPG,andHealthandWellnessbrandswithcomplexecommercemarketplaces.OurclientshaveseenexceptionalbenefitfromleveragingtheNoginplatform,suchasBlankNYCexperiencing100%growthinthefirstyearanda50%increaseinconversions.  Touchbasewithusbyfillingouttheform,andwe’llsetupatimetochatabouthowourcapabilitiescanexplodeyourbusiness’sales.Inthemeantime,exploremoreofourgreatecommercecontenttohelpimproveyouronlineoperations: BestEcommerceMarketingandConversionFunnel HowtoColabWithBrands EcommerceProductListingStrategies  EcommerceRetailPricingStrategies 3PLEcommerceFulfillment MostCommonEcommerceMyths CoronavirusandtheFutureofEcommerce Sharethis: Shareonfacebook Shareontwitter Shareonlinkedin Writtenby: JackScullin CONTACT Getintouch Whetheryou’reanestablishedbusinesswho’sgrowthhasstalled,astartuporathrivingbrandfacedwithexpensiveupgradesandhires–wehavethetechnologyandexpertisetohelpyoufindoperationalefficiencies,acquirecustomers,drivesalesandminimizecosts. 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