Low price strategies allow for a rapid increase in the volume of sales of an e-commerce, but you should use them in adequate forms and contexts. Your main risk is the existing possibility that a second business can produce and sell the same product at a lower price. In this scenario, if you do not have an added value, your sales will be affected. Aside from this, low price are a resource that you can employ within a global pricing plan combined with other strategies with the end goal of increasing the growth of your business. We explain to you your advantages and disadvantages and what are the most effective tactics.
Advantages and disadvantages of low-price strategies
On one hand, low prices, other than increasing sales, help the e-commerce to reach a greater potential audience and attract sector of the population with a greater price sensitivity. You will just have to value the convenience for the brand to incorporate this new target, more difficult to build loyalty. On the other hand, they are a good tool for launching new products.
In terms of the disadvantages that low prices present, the risk supposed by your competitions movements adds possible damage to the image of the brand. This is because lowering pricing without justification can drive users to consider if there has also been a decrease in the quality of the items. This can condition both the conversion of habitual clients and the attraction of new ones.
More effective low-price strategies
In this scenario, we recommend you analyze beforehand which products or moments will be most suitable to apply low prices to and follow one of these strategies, that have demonstrated a greater efficiency in the optimization of sales.
Market penetration prices
Strategy that consists of the fixing of prices notably low when opening your e-commerce or incorporating into a different market. The objective is to capture the attention of user and drive them away from your competitors. They are especially effective in markets with an elastic demand and for new businesses prepared to absorb initial losses. Afterwards, as users start to get to know the brand, it is possible to go about lowering prices in a progressive manner.
Bundle pricing strategy
Another strategy that you can apply is setting prices for purchases of multiple units in a set that will have a greater price if bought separately. Generally it is employed with complementary products, like beauty or body hygiene products. For businesses, these prices are especially useful for stock release. At the same time, they generate a greater client satisfaction and allow them to acquire more products for a lower price, so they are also being reinforced with your brand image.
A low price can also have a psychological character, meaning, appealing to emotion of users to foment the purchase of a product or service. The clearest example can be found in the reduction of the price of a product from10€ to 9,99€. The user perception will be that it is a product with a good relationship between quality and price.
Discounts and promotional prices
The planning of offers and discounts is the perfect occasion to establish low prices. You will be creating a context within which reducing the price won’t affect the brand image of the e-commerce and without generating false expectations in consumers. You can apply a time limit to offers to generate a greater sense of urgency in potential clients. Furthermore, you can seize milestones like summer or Black Friday offers to design discount campaigns better than your competition’s.
In order for low-price strategies to be successful it is essential to provide tools for monitoring competition. Knowing the prices of your competitors will allow you to know up to what point you can reduce yours to capture the attention of users and maintain your profit margin. At the same time, the analysis of competition will help you to anticipate the movements of others e-commerce and offer a better shopping experience to users. Look here for a demo