You might wonder, why the need for this article? What is the big deal with setting a price on a product? Well, there is a great deal that comes with pricing. Pricing comes with a lot of strategies and taking into consideration the right balance of profit-making per unit. In essence, the continuity of your e-commerce business is dependent on how effective your pricing system is. You are advised to put in enough time in understanding these pricing strategies. There are a number of things about pricing you should know and understand before you go ahead to begin implementing these pricing strategies.
Things to know before pricing
Know your product margin. This is very essential in any pricing system. You have to consider the cost you incurred in getting each product, whether it is the cost of production through raw materials, or from transportation, also considering possible levy and taxes. All these have to be factored in before arriving at any pricing model. This should then be set as a base for your pricing. It is important that your pricing does not fall below the cost because then you will be running on loss and that is obviously bad for business.
In addition to this, factor in your cost of pricing. You are definitely going to get the word out about your product online. This is going to cost you money. Now it is advisable to factor in the cost of advertising this product into the overall pricing of each product. So whatever amount it costs you to advertise your product online, you can evenly distribute it across each of your products.
Now, having understood the essence of product margin and factoring product cost, you can now begin to implement any of these pricing strategies, and if you choose, you can combine them.
- Pricing based on cost
This pricing system is primarily based on the costing as earlier discussed. It is a pretty straightforward strategy. All you are to do is to factor in your total cost on each product then add the desired margin that you might consider your profit. How you set, your price is important in your e-commerce development. Although this strategy may seem pretty straightforward, however, it comes with a bit of a challenge depending on how effective your e-commerce operations are. You might be faced with having to figure out the cost of each unit and not forgetting a single one of them so that you do not end up pricing below your cost. Another challenge you might face is having to set the margin, ensuring it is appropriate, not too small so that it will not be detrimental to your sales and at the same time you cannot make it too much, so you do not make your product too expensive. You can do a bit of tracking on your competitors’ prices, that way you are able to know where to base your prices.
- Pricing based on market trend
This pricing system takes into consideration two things, the competitors, and the market condition. This pricing strategy helps you determine when to lower your prices and when to increase it, but most importantly without compromising on your first strategy. Depending on the market demand, your prices can go up if you choose to squeeze out that extra profit.
- Pricing based on customers
This pricing strategy is for non-commoditized products. Here prices are kept reasonable. This is prevalent when you consider novelty products which might not have a direct competitor. Then such product can follow this pricing system
Pricing is a very important part of an e-commerce business. It takes skill and the right technique. A good pricing system can promote your webshop and boost sales. Getting to fully understand the way pricing works both by taking out the cost and adding the desired margin or by varying your price with the dynamics of the market can be a bonus in getting your e-commerce solution running effectively. Also, ensure you develop a solid and profitable pricing strategy rather than focusing only on revenue and number of sales. In addition, make do of pricing tools to keep you competitive. Proper use of the marketing strategy either individually or combining them will get your webshop up and be running.