Analytics, business support tools, as well as pricing techniques have seen a lot of huge improvements and advances in the past several years. As a result, traditional retailers are starting to find it difficult to compete with those companies that prioritize digital innovations.
It is no secret that big data, mobile, as well as omnichannel advances have played a big role in turning the retail industry into what we know it as today. However, do you have what is necessary in order to stay up-to-date as well as create the most solid pricing strategy for your company?
Creating a pricing strategy is a lot more difficult than just setting your items at prices that will help you generate a profit. Instead, in order for your pricing strategy to bring you success, you will have to take into consideration custom pricing for various channels as well as customers in order to make the most out of value perception as well as company outcomes like site traffic, order values, sales, and margin; all of which are useful when trying to boost customer engagement and loyalty. Therefore, keep reading to learn about various pricing strategies and methods that you are able to utilize to ensure that your prices are correct each time.
MSRP: Manufacturer Suggested Retail Price
Just as the name suggests, the MSRP is the price that the manufacturer suggests that you should sell your items to customers. Often times, the more conventional an item is, such as a paperback book or a car, the greater the likelihood that the prices will be standardized for the individual items. This means that there isn’t as much space for variability. Although this method doesn’t require you to put in as much work, there is also a much greater chance that you won’t be able to gain a pricing advantage over any of your rivals.
Above or Below the Competition
A few companies can decide to create a pricing strategy that completely depends on rivals’ prices. Pricing higher than the competition could be beneficial to some companies, granted their brand falls under the luxury category or if it is an exclusive brand, for instance. However, pricing under the competition could also be beneficial for those who can capture a solid deal with suppliers, which also helps ensure a healthy profit margin. Good instances of competitive pricing include direct-to-consumer ecommerce companies like Dollar Shave Club and Everlane. Since they don’t have any middlemen while they also boast a solid supply chain price management method, they are able to undermine their more traditional competitors when it comes to pricing their items.
A lot of retailers have stayed with the dependable technique of keystone pricing, which revolves around multiplying the wholesale cost by two in order to figure out how to price their items. Although this strategy is simple, it leaves out crucial factors such as insufficiency of the items that they’re selling or the competitive climate, for instance. In addition, there are a whole lot of situations where the keystone method would cause you to price your items either too high or too low. For instance, if your item is very commoditized and is also easily available online from a number of sellers, you may not want to use the keystone method as it could result in your company getting priced out of the market.
This method revolves around bundling products together in order to make the perceived value higher than it actually is at a lower cost. This is especially beneficial when it comes to purchases that are bought at great volumes. Research on product bundling of the Nintendo Game Boy showed that more units had been sold when the items were sold with a game versus when they were sold on their own. Don’t forget, though, that bundling items at a lower cost can cause customers to be reluctant to purchase individual items at a price that is greater.
Has there ever been a time where you’ve either shopped online or in a physical store in order to purchase an item on sale, but then you also ended up purchasing another item that’s at full price, too? For instance, suppose you’ve been looking at a shirt for a while that is now on sale for $59. However, in order to get it shipped for free, you need to spend $80. As a result, you then purchase a hat as well as some socks, giving you a total of $90. This is a great example of the loss-leading pricing strategy. Companies often use it because they understand that customers will buy more items all full price when they price one item at a loss. While loss-leading pricing can bring companies a lot of success, this method can also result in shoppers coming back thinking that your firm always offers low prices.
This list only mentions a few strategies that you could utilize. In fact, this list is merely a way for you to dip your toes into some strategies that could be beneficial to try to implement into your company.