Three errors to avoid in your pricing strategy

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Three errors to avoid in your pricing strategy


Profile picture for user Ángela de la Vieja

Ángela de la Vieja

The price is a key variable for the success of an ecommerce, this is no secret. Of course, the value proposition, the product catalogue and marketing in all its breadth are also important. But in an environment of digital buyers more and more experts, the price is final for an electronic commerce to gain a place in the portfolio of its customers.

When defining a pricing strategy, any ecommerce knows that it must do a thorough job, ranging from analysing the prices of the competition to thinking about promotional actions based on the behaviour of customers. And yet, despite the well-known and studied importance of the price, it is still common for online stores to make mistakes, often quite basic.

And those price errors should be avoided at all costs, otherwise they can not only weigh the benefits, they can directly condemn the brand forever. These are three of the most common:

1.- The lack of knowledge of the costs

A priori it may seem a mistake that nobody in the business world is capable of committing, but it is not like that. In principle, it is something as simple as knowing that the sale price of a product must be greater than its cost.

But in electronic commerce, an over simple analysis can lead to very serious errors, because very often the right components are not included in the equation to calculate the cost.

Here may be the beginning of the problem, since the unit cost of a product is not only what the ecommerce pays the provider, there are many other costs (direct and indirect) that must be considered for the calculation to be correct. Many times, the search for simplification means that companies do not adequately consider the costs of staff, financial, commercial, marketing, delivery, etc.

The red numbers appear very fast if a cost calculation is not made in detail. If, in addition, the pricing strategy is based on costs, a price is presented that can be attractive to customers and triggers sales, which will only increase the red numbers.

To avoid this 'oversimplification' error, it is essential to define a perfectly detailed cost calculation system.

2.- The price update process

Prices in electronic commerce expire, age, and have an end date. The entire e-commerce ecosystem is constantly boiling, with launches, news, offers, new competitors, events, promotions and a long etcetera. And prices are not an exception, they must move.

It is striking to see how in some sectors, prices are still set for quarterly or annual periods, against all the dynamics of the sector.

The price is a critical variable in electronic commerce, but that does not mean it should remain untouchable. On the contrary, if it is a key variable of ecommerce, it must be managed and respond to the dynamics of sales and marketing operations. The optimal price point should be sought, questioned, and improved, as if it were a marketing campaign.

So to not lose the context, the ideal thing is to use technology that allows you to monitor the prices of the competition. In this way, the internal vision of electronic commerce over its own prices is combined with the price movements of the sector or the price strategy of the competition.

3.- The attitude to the downside

Digital buyers are experts in finding the best prices, but supposing that they only buy the cheapest can lead to an error: the permanent downward price attitude. And this can put profitability at risk.

Obviously, with the importance of the price for online sales, before acting on the price to the downside, it is necessary to make price intelligence and resort again to technology. If you analyse the main competitors, their prices are tracked, their catalogues are tracked and their stocks are tracked, the information can be very valuable and can provide two types of opportunities:

On the one hand, price intelligence allows prices to be seen in perspective and in comparison with direct competitors in the market. With this panoramic vision, the reflection on whether or not to lower prices, or the decision of how much to lower them if it is decided to do so, is taken in context and seeking to maximize the benefit.

On the other hand, opportunities could be detected of not touching the price to the downside, when the prices of the competition are much higher than what was believed or when they no longer have stocks of the same product that sells the ecommerce.

Find out how Minderest can take your business to the next level.

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