E-commerce pricing strategies: What it consists of and how you can implement it
December 16, 2022
A pricing strategy is an online retailer's approach to pricing its products, taking into account production costs and sales target, including the average order value (AOV) and lifetime value of its customers.
This will help you determine what price will generate the highest customer acquisition, customer retention, sales, profit or conversion rates, all depending on what your goals are.
How to create your own pricing strategy
Step 1: Define your e-commerce objectives
Your pricing strategy depends largely on the vision you have for your brand and how you envision it in the future.
Ask yourself the following questions:
- Is your goal to increase your profit margin?
- Do you want to focus on attracting new buyers or retaining current customers?
- Do you want to relieve excess inventory in your warehouse?
- Do you plan to expand your e-commerce to other countries?
If the latter is true, you may want to consider a different pricing strategy depending on the area in which you are selling.
Step 2: Know your customers like the back of your hand
Understanding the demographics of the market, their value and how much they are willing to spend on your product is crucial to pricing and choosing the right pricing strategy.
Step 3: Consider hiring a pricing analyst
If your e-commerce is thriving, now is a good time to consider hiring a pricing analyst to help you evaluate production costs, analyze consumer and market behavior, such as tracking competitor pricing.
When it comes to pricing products, your goal should not only be your bottom line, but also your brand's reputation.
Selecting the right pricing strategy can mean entering the purest of success or leaving empty-handed.