Top 12 basic pricing strategies in online stores

At the very start of trading, one of the most pressing issues is to minimize costs and optimize the price of goods. It all comes down to getting maximum profit at minimum costs! Pricing is probably the main factor that determines the successful implementation of what you set out to do.

The main formulas that determine pricing

The optimal price tag for a product can be set based on several factors:

• retail price - this is the original (purchase) price of the product with the addition of advertising costs, taxes, and other development costs;
• markup - it is a markup on the purchase price that takes into account the internal policy of the store and market development in a particular segment;
• margin - determined by the difference between income and expenses from the sale of goods.

The basis is always the cost of goods. In other words, costs, which include materials for production, logistics, wages workers, commissions, taxes, depreciation of equipment, etc.

One pricing scheme cannot be accepted by all market participants without exception! Someone aims at minimum prices, someone overpriced with the idea of getting the maximum margin from the sale, and someone analyzes the market and sets a neutral. What is the most effective strategy known today?

TOP 12 main strategies of pricing in the online store

1. The RRP It is set by the manufacturer itself and has a single goal: to standardize the price tag for all regions and online stores that work with goods of the same format. Comments:
   • The recommended retail price does not take into account the behavior of competitors and therefore is not always advantageous. It is necessary to constantly monitor and adapt the price to current trends.
   • With strict control by the manufacturer over the RRP compliance, it will be possible to eliminate doubts and discussions among retailers and focus on other conceptual goals!
2. "Multiply by 2" is another pricing strategy that is relevant today. Note that it is the cost of the product that is subject to doubling. In this case, the markup on the goods sold will always be 50%. This is the simplest pricing strategy, which also has its own remarks:
   • This strategy does not take into account the uniqueness of the product. But this would increase the price in the online store even more and increase the margin.
   • This principle of pricing does not require additional calculations and is suitable for most products. However, the dependence of the final price value on the competitors, of course, remains.
3. "Low price + additional sales. The essence of this pricing strategy is as follows:

• The price of the commodity is set to the minimum across the market.
• The buyer is inclined to buy along with the main product unit 2,3,5 more...
• It is the additional sales that make the profit, while the main product can be released even with a loss-making price to attract the customer!
• Monitoring of the prices of competitors is especially necessary, which will keep the bottom line price on the site.
• The technique of additional sales will increase the turnover of the Internet store and the average amount of the check. However, too frequent application of the strategy under consideration is also undesirable, because the customer will expect a permanent reduction in price and the number of orders will decrease or cyclical.

4. "Underpricing". The essence of this technique is that the price will always be set lower than that of competitors. It will be especially relevant for online stores working in the field of high competition. The formation of the price is carried out after the next revaluation and according to the results of regular monitoring of the market. Pros and cons:
   • Business margins will definitely decrease! In this regard, the use of it by small sellers is not always a justified decision.
   • The number of sales will increase.
   • The strategy makes it easier to introduce new products to the market.
   • It is possible to increase margins by negotiating a lower purchase price with the supplier.
5. "Overpricing" is a pricing technique for retailers seeking to position the goods they sell as more valuable and therefore more expensive. In this case, it is important not just to increase the price, but also to show the customer exactly what they should pay more for. Provisions:
   • The psychological mood of the audience is important. The strategy does not work if the customer is too sensitive to the price.
   • When the wow effect is achieved, the customer believes he is buying a better product and is better stimulated.
6. Promotions, bonuses, discounts, seasonal sales and other enticements.  Studies have shown that 86% of customers are willing to wait for the cherished Black Friday or New Year's Eve holidays to make big purchases. This pricing strategy will encourage the customer to be proactive at any time! We're talking about a good solution for online stores to not only attract new customers but also to do an audit on the "shelves" by getting rid of stale goods. Notes on technique:
   • It is not recommended to use this strategy on a permanent basis - it can lead to the fall of the image of the online store and the acquisition of the status of the marketplace with discounted products.
   • The technique is well suited for selling seasonal goods.
7. A course on the psychological perception of the price tag. The more positively the customer perceives the price, the more likely he is to buy from you. Research findings on this topic:
   • The customer has a more positive perception of a price tag that ends in "9. When a customer places an order for a product for 9.99, he is sure of significant savings compared to that store over there, where the same toothbrush costs 10!   
   • American scientists made an experiment: they offered to buy clothes for women of identical quality and appearance for €24.34 and €29. Surprisingly, the peak of sales came to the thing that cost exactly 29 euros!
8. Binding of different goods and cost "Anchor".  There are several pricing scenarios when working in this direction:
   • High-priced items are placed next to cheaper items. In this case, the items with a lower price will appear to be discounted as much as possible, even though it will not actually be true.
   • Demonstrate to the client 2 prices for the product - before and after the discount (current). In this case the price tag "before" serves as a kind of anchor for the user, it serves as a reference point for him to draw a conclusion about the final cost.
9. The strategy of price differentiation. It consists in forcing the buyer to buy a product in a set, to encourage him to make a comprehensive purchase. In this case, the price tag on the product sought by the person is set an order of magnitude higher than in a set with another. Advantages and disadvantages of the strategy:
   • Stimulation of sales of different groups of goods, including those that are less in demand.
   • Goods sold individually can be safely written in the category of "unprofitable". Its price tag cannot be lowered in any way, because this solution levels out the value of the position in the set.
10. Dynamic pricing strategy. The formula for the seller's behavior in this case depends entirely on the market situation and the behavior of competitors! The prices of the goods you sell change in response to changes in supply and demand from other retailers.
    • Prerequisite: systematic monitoring of prices in automatic mode to constantly monitor the behavior of competitors.
11. "Customer centricity" is a strategy that negates all numbers and calculations! The main tool in this approach is the emotional component. It is necessary to understand the motives of your customers, which can motivate them to buy your product. Based on the psychological analysis and is formed the price tag. The key questions are here:
    • What does the user need my product for?
    • Who my clients are (social status, income level, gender, etc.) 
12. Cost Pricing. First, you have to determine the profit that you plan to make. Then the cost component is added to this figure = this is the actual price tag of the product in your case. The main difficulty is to calculate the costs correctly, which not every entrepreneur can do! When choosing this pricing technique, you should be aware of the possible dangers. For example, some items from the price list can remain undervalued, while others are uncompetitive. Hence the critical importance of constant systematic monitoring of competitors' prices and reviewing the price offer.

The question of pricing is fundamental not only for small companies but also for large ones. After all, it is what determines both the volume of sales and the profits from it!

Any of the above-mentioned pricing techniques in your online store should take into account the behavioral factor of both customers and other players on the market. Helecos is a system for comprehensive competitor monitoring for any price manipulation - a recipe for the most profitable offer from you! A trial version of the software with accompanying consultations is available by phone: 0730721221.