How to use pricing strategies in your eCommerce

Learn about the pricing method and which strategy is best suited to your eCommerce.

This week in our blog we will show you what is the method and strategies of pricing and how to use them properly in your eCommerce.

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What is pricing?

Pricing is the method used to establish the appropriate price for a product, taking into account costs (manufacturing, distribution, etc.) and the desired profit margin.

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However, there are several external factors that affect the pricing of a product and that we must take into account when determining the price of our products and services, such as supply and demand, competitors' prices, available stock, the economic level of your customers, your brand's perception, positioning and image, etc.

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What is the purpose of pricing?

The successful pricing of your products will be a key factor in the sales and turnover of your eCommerce, so it is essential to use this method properly for your business to work.

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In addition, the pricing of your products will determine what your brand is like, whether it has high, medium or low prices, what the quality of your products is, what your position is in relation to the competition, etc. So, if you are looking for your brand to be considered a luxury brand, your pricing will be high, while if you are looking for your brand to address a medium target audience, you must keep a good quality-price ratio.

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The survival of your eCommerce will depend largely on pricing, because if you do not take into account the costs involved in maintaining your business in the market when setting prices, it may be that the profits from sales are not enough to pay off all the expenses involved in having an eCommerce.

Pricing objectives

Increasing eCommerce sales
Survival of eCommerce
Achieving return on investment (ROI)
Setting market benchmark prices
Achieving market penetration

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Pricing strategies

We tell you what kind of pricing strategies are the most used in eCommerce, together with the psychological pricing strategy we talked about in our post "Psychological pricing strategy for eCommerce".

Competition-based strategy

This strategy consists of setting the price of your products based on the prices of your direct competitors, an important factor to take into account when using this method, as mentioned above.

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To use this strategy, you must first conduct a study of your competition, so you can reach your target audience, which will be the same as that of your competitors and you will understand how much your customers are willing to pay for your products or services, as well as how to differentiate yourself from your competition.

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If you want this differentiation to be based on having lower prices than your competitors, you should set prices below those of your competitors. On the other hand, if your intention is to differentiate yourself by other aspects such as the quality of your products or services, the shopping experience, etc., you can set a higher price than your competitors. In case you are looking to maintain a sales strategy like your competitors, prices should be similar.

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Discount pricing strategy

The discounted pricing strategy is a type of competition-based strategy, in which you price your products below those of your competitors.

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To develop this strategy in your eCommerce you can add discounts to your products to make your customers see that the price is lower than usual, showing the original price and the final price with the discount.

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Penetration pricing strategy

This strategy is common in products that are new to the market, and consists of setting low prices on your products in order to attract your first customers.

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In this way, you will obtain loyal customers who, having tried your product, will be willing to pay a higher price.

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Price skimming

This strategy is also used for new products in the market, however, unlike the previous strategy, the starting price of a product will be high.

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Being new products in the market, competition will be reduced and therefore, customers will pay a higher price for your product, thus increasing profitability.

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When this product is known, and when competition increases, we will reduce the price of the product so that our customers do not buy the competitor's product at a lower price.

Price bundling

Package pricing consists of setting a total price for a package of products or services, being a price that is lower than the total price of the products purchased individually.

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This strategy will help you to increase the average purchase ticket of your customers and to promote and increase the sales of certain products with higher stock or new products.

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It is common to employ this strategy on related products and to allow products to be purchased individually at a higher price.

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