While the list price is the maximum price at which a product can be sold, the net price is the price at which the customer buys it. This difference is due to the fact that, between the list price and the net price, the ecommerce can implement a series of discounts or pricing strategies to try to achieve a higher conversion rate or increase the profit margin. The variations between these two types of prices, according to the company's objectives, can be controlled more precisely and accurately with the help of a price monitoring tool. But first, we explain in detail their differences and importance.
List price: the maximum value
To know the list price of a product, that is, the maximum price, you must start from the manufacturer's recommended retail price. This price already covers all the production costs of the item and a possible profit margin for the ecommerce. From this initial value you should analyze your shipping costs of the products to customers and the profit margin you expect to achieve.
In addition to this, the brand image must be assessed. In this sense, a prestigious brand will be able to increase the price of its products because users consider them to be unique or higher quality items and are willing to pay more. Once you have this possible maximum price, you can decide whether to apply discounts and offer consumers a different net price.
Net price: the most attractive option
A high percentage of products are sold at net prices, after applying some discount or offer for retail users or price reductions in wholesale channels. The objective of net pricing is to attract a larger number of potential customers. However, a key factor to keep in mind is that discounts should not reduce or suppress the ecommerce profit margin. Your pricing strategy must strike a balance between lead acquisition and economic solvency.
Benefits of offering discounts on list prices
The application of discounts on the list price allows you to increase the volume of sales, create loyalty among existing customers and generate greater engagement with them, thus reinforcing their trust in the brand. You can create campaigns on special days, offer discount coupons or launch post-sale promotions with discounts for future purchases.
These fluctuations in prices also ultimately allow you to gain a competitive advantage over other companies in your industry. If a key competitor decides to offer its products at list price to more price-sensitive users, you may choose to reduce yours to shift demand to your e-commerce. Therefore, along with the previously mentioned factors, it is essential to perform an analysis of your competitors' prices, both current and historical. In this way you will be able to build a solid pricing strategy with which to satisfy your customers' needs and compete with your competitors.