Today’s post about the best pricing strategies comes from our friend Burc Tanir, Co-Founder and CEO at Prisync.
Pricing is one of the main forces that affect conversion rates for every e-commerce business as online shoppers around the world have a significant interest in a good deal. And because of that, they will never hesitate to leave an organization for another, the moment they find a better option.
Let’s dig into some pricing stats in e-commerce to detect its cruciality.
- More than 6 out of 10 customers select e-commerce pricing as the very first criteria that affects their buying decision.
- 54% of shoppers will purchase products left in shopping carts if those products are offered at a lower price.
- 67% of US online shoppers claim they will buy products from different e-commerce websites to get the best deals.
As we can see from these quick research results pricing and conversion rates are highly correlated.
Therefore, just as merchants of e-commerce need to stay away from price compromising, they still have to find a strategy for competitive pricing. Regardless of the market they’re in, this means monitoring the competitive landscape, and evaluating the way customers will feel about the pricing decisions.
Ensuring prices are kept constant, rather than altering them to show market movements, places organizations at the risk of missing out on profit opportunities. However, to get this done intelligently, you need the smart tactics and knowledge of competitive pricing.
Another outstanding and very cost effective way to gain insights is to use an automated tracking software for competitor prices. That will give you a suggestion on the decisions of price change the moment they become pertinent.
Automated competitor price tracking and monitoring software will help you maximize profits and boost your conversion rate. The adjustments for smart pricing performed on the basis of competitor insights are one of the ways to be profitable and competitive.
Through the application of different approaches to prices, e-commerce organizations can really make use of pricing both as an optimizer of conversion rate and a marketing weapon. Let’s consider ways in which your e-commerce organization can tackle the pricing challenges from various angles. I will show you the way you can act really fast and smart.
#1 Do not underestimate the value of your products and effectively distinguish the opportunities to increase prices
Even if you are able to offer your products for sale at a relatively competitive price, when compared to those in your competition, your prices can probably be excessively competitive.
The low prices for your products will get you the attention of many shoppers, which will reflect in increased conversions and more potential customers. But the question is, how far can you lower your prices? In a case where the deal-breaker for a client was to find the best deal on the Internet, why not price your product at the highest value of the minimums? Put differently, try to raise your price until it is nearly priced as the second least expensive competitor, yet stays well beneath that.
Let’s go through with a real example and show how you can still be competitive and have fattened conversion rates.
Below, you see two different e-commerce retailers selling the same Bose Soundtouch 300. The first retailer is the most competitive in terms of price, selling it at €699,00 and the second retailer sells the same product at €799,00.
In that scenario, the first seller can raise the price just below its competitor by setting it at around €750,00. This decision will bring increased margins (€51 more out of every Bose Soundtouch 300 sold) that raise up the balance sheet and still let the product be the most competitive in the market.
In the comparisonengines of shopping, and in the online shoppers’ minds, these increments in price never make any difference. In any case, it will only give you increased profit margins that get the balance sheet lifted up. The best part is that this increase in price will not cost your organization anything. This means you still keep the conversion rates at a desired level and also bring the margins up.
#2 Study the strategies of brand-level pricing and category of your competitor
In many situations, the prices in e-commerce are led by the decisions made for brand level or category. This means that budgeting operations inside of an organization or deals from certain suppliers are in place for certain brands, etc. The moment this fact is considered, exclusively concentrating on micro-managing product prices and competitor product price monitoring become somewhat dull.
With the appropriate technologies, e-commerce organizations can get category level and brand pricing insights about their competitors. Additionally, aggregation is a technique to consider here. This implies grouping products based on a specific brand or category and then having their overall price performance calculated for an individual site. A calculation of the index value, particularly for the aggregated level (a brand or category) will give an idea about how an organization is carrying out pricing-wise for that specific category and brand vs. its competitors.
An analysis of this nature can show the exact competitors that have noteworthy pricing benefits and for which categories/brands, and which remain inadequate. E-commerce organizations can follow up on comparative results like these and modify levels of pricing on the basis of the overall category and strategies of brand management
#3 Make an analysis of the historical trends of pricing to recognize sales like nighttime flash sales or weekend discounts
Shopping happens typically in the current state – “it’s a matter of the present moment.” In any case, this may not be true of pricing. The majority of organizations have discounting strategies or time-based pricing strategies. A few of them have public campaigns, particularly for their weekend sales, and others developed a loyal shopper base, essentially for their late-night discount frenzy.
Also, getting insights into trends of this nature and acting competitively on them is as essential as remaining competitive at the product level.
This is because these campaigns or trends go past providing basic discount; they are tied in with creating a loyal customer base.
In this way, e-commerce organizations need to additionally monitor as well as analyze the trends of historical pricing of their competitors, while closely tracking actual prices.
A more sophisticated approach that stands at the top of instant pricing approach is,dynamic pricing. Using it, updated competitor pricing information can be utilized as a triggering factor to update your own prices depending on certain rules for your product assortment.
A useful, profitable and sustainable way to enrich your pricing strategy is to set smart prices by defining repricing rules through competitor pricing intelligence software. With these smart tools, you’re able to set pricing rules by targeting certain profit margins and competitive pricing positions.
#4 Concentrate on your competitors’ out-of-stock products
The costs of products matter a lot, but just as long as an organization can ensure the product is delivered.
Online shoppers take the availability of product and the prices of products into consideration at the same time. If a product is not available at the time the buyer needs it, he or she will probably purchase the product somewhere else. It works in the same way as how an expensive product functions in an online shopper’s mind. It would never attract the buyer’s attention and compels the customer to get a different alternative.
This gives a representation of the opportunities for the majority e-commerce organizations. You can take your competitors’ availabilities of stock into consideration as a strong pricing opportunity.
The moment the competition is out of stock for a product that is tight-margin, it implies that the shoppers will not have too many pricing alternatives, so their readiness to pay more will get higher. In this way, the e-commerce organization with competitive benefit and availability of stock gets the potential advantage in pricing. Making use of the appropriate technology, organizations can get insights on the competitors’ prices and availabilities of stock, and then execute this strategy, instantly.
#5 EXTRA: Make Use of Psychological Pricing
1 – Charm Pricing
If you are not part of this train yet, you’d better do well to get moving, because for as fundamental as the charm pricing strategy appears (ex. Getting a product tagged for $19.99 rather than $20.00), it doesn’t only increase the conversion rates, but it maximizes them to almost 100%!
2 – Smaller Fonts
Who desires to see a substantial, looming price?
It’s a proven fact that prices shown in smaller fonts attract better conversion and revenue than prices in larger fonts.
Consequently, check back your online shop immediately and reevaluate how you can reduce your font-size to convert your visitors in a better manner, alongside smaller prices.
3 – Fewer Syllables
This is another fascinating aspect to consider, and a psychological pricing tip that is not given serious attention out there.
There’s a saying that, the number of syllables in a price tag’s text version, i.e. the way a price is read and pronounced impacts the process of decision making of an online buyer.
While it’s uncertain that most online shoppers have to read prices loudly when they are shopping on the Internet, in some way, when the two prices below are compared:
$28.92 or “twenty-eight-ninety-two” vs. $30.17 “thirty-seventeen” will give a better conversion at all time.
4 – Emotional vs Rational Prices
Based on psychology, purchasing decisions of buyers can be divided easily into:
- Purchases controlled or motivated by emotions or feelings
- Purchases performed based on logic or rationale
Relying on the area in which your product category falls in the aforementioned segments, the prices of your products or services should have a specific visual character.
It doesn’t take a too serious calculation for us to be convinced to purchase the two different products you are offering for sale, and indicating extra details can destroy the simplicity of the process and can reduce the conversion. For products we buy based on our feelings (such as
For products we buy based on our feelings (such as these lovely wooden pieces) prices such as $190, $285, or $140 have the tendency of converting visitors better compared to their non-rounded counterparts.
On the other hand, when buying tech products, purchasers take into consideration technical details, specifications, and any other relevant data points. The moment a customer takes stock of details like these, they are clearly in a logical decision-making process.
For products like these, prices such as $286.45 are visually more suitable due to the fact that it’s not a rounded number, and thus, it has a serious calculated appearance and character.
Competitive pricing intelligence is a multi-dimensional analysis, way more complex than just a simple look at competitors vs. monitoring product prices. Although such monitoring provides substantial sales and a boost in profit, moving further with the implementation of the pricing strategies can help eCommerce organizations of varying sizes outcompete their competitors in the wildly competitive eCommerce market of today.
This blog post was written by Burc Tanir, Co-Founder and CEO at Prisync. Burc is an entrepreneur with professional experience in Sales & Marketing operations and is involved in a couple of start-up projects.