Maintaining the pricing of products and services and maintaining the e-commerce website development cost in India is one of the most interesting yet challenging processes in any online business. A pricing strategy will help in determining the price that will maximize the profits while remaining attractive to the consumer. It’s a logical equation used by an eCommerce Website Development Company in India to establish what is the best price for their product. The e-commerce pricing strategy is crucial as it is like taking a stab in the dark and plucking a random figure from nowhere.
At one end, from the customer’s point of view; the main motive is to get the best products at affordable rates. On the other end, from the company’s point of view, if the strategy of eCommerce Website Development Cost in India is in affordable condition, and its pricing strategy is correct and falls in place, it can pave a path for online channel success. And without a pricing strategy, there is always a fear of failure. The danger is that if the prices of the products are too high, the e-commerce website of any company won’t achieve sales and if the prices are too low, the e-commerce website won’t make any profit.
So, as an e-commerce business, one should take appropriate time to consider the best pricing strategy for their audience because, like any other business, the main motive of any e-commerce business is to maximize profits through maximum reach and reception
Following are some of the most effective pricing strategies that can be implemented in e-commerce:
- Cost-Based Pricing: In this mode of pricing, the e-commerce website development company mainly sets prices without doing much research about consumer behavior or the demand-supply chain. The process is quite simple in approach and ensures minimum return of the products that are being sold. In most cases, the e-commerce website development company adds some extra markup on the cost price and creates a profit. For example, If you are manufacturing a pair of shoes at an overall cost of Rs.700 and want to keep a 20% profit margin, you will sell the shoes at a cost of Rs.840. This is precisely what is cost-based pricing. This model of pricing strategy works well for small and medium businesses that cater to a local target audience. Factors affecting the cost-based pricing strategy include capacity, material cost, overhead expenses, shipping costs, and labor costs. As shipping costs are a major contributor, thus, tie-ups with shipping solutions are done to reduce the shipping costs and price the products more competitively. Shipping at discounted rates with multiple courier partners can easily improve shipping.
- Competitor-Based Pricing: In this pricing strategy, the e-commerce website development company tries to set the price after doing a comparative analysis of the pricing of other competitors. Myntra and Ajio are two e-commerce stores that sell identical products like men’s and women’s apparel from similar categories and house several brands. They usually follow competitor-based pricing and most of their product prices are very similar and have only a small marginal difference. This pricing model is ideal for selling identical products in the market. However, one drawback of this form of pricing is misleading information, which may hinder the progress of the business.
- Value-Based Pricing: This is one of the most effective pricing strategies applicable to e-commerce. This is mainly focused on the quality of the product delivered to the customer so that the demand increases. In this method, the e-commerce website development company thoroughly researches deep into the industry segment, the product segment, consumer tastes, behaviors, and buying preferences and accordingly comes up with the right price for the products. Although value-based pricing requires in-depth market research and customer analysis, the returns and profits that are earned from them are wonderful. Value-based pricing requires the e-commerce website development company to be extremely mindful of the pain points of the customers and then price the products accordingly. In case of huge competition in the market, to be successful, it is important to assess the value of the products and the customer’s demand.
- Dynamic Pricing: The dynamic pricing strategy is a flexible one and the prices derived using this e-commerce pricing strategy can alter depending on the demand and supply in the market. A company has the opportunity to increase or decrease its product price considering the dearth of competition and the flow of goods in the market. The price is inversely proportional to the competition, i.e. if a new business is setting foot in the market, one should decrease the selling price to beat the competition and lure more potential customers. Another valid reason to lower the prices may be to quickly sell piled-up dead stock that could expire, go out of fashion, or perish. Whereas, if the businesses are selling a high-demand product, then they have the privilege to sell it at a higher price. The e-commerce businesses that have ample time and resources to stay abreast of their rival’s pricing, market demand, and same niche suppliers, benefit the most from this pricing model.
- Bundle Pricing: This e-commerce pricing strategy suits businesses facing cut-throat competition. It helps attract more customers to their online stores and get higher sales. This strategy focuses on bundling or grouping complementary products and selling these items at a lower price. Putting such goods together increases the overall value of the order and helps to sell multiple products in one transaction. The best way to bundle the products is by identifying the bestsellers and pairing them with less popular or low-priced products to make a bundle. It’s a tactic that delights the consumer in getting more by paying less. The technique also works wonders when there is a need to clear out extra stock.
- Loss Leader Pricing: If any business sells goods with add-ons, this e-commerce pricing strategy may be perfect for them. Following this pricing model, one can price their main product at a meager rate and use it as bait to draw in customers to explore the website and buy more products. Many businesses trick their customers into thinking that they’re almost at a loss for selling their products at exceptionally low prices. It gives the impression that the business is barely even covering its costs or expenses.
- Price Skimming: The idea of making the products appear scarce or special, like a limited edition or an exclusive offer, is price skimming. This e-commerce pricing strategy is like a psychological trick that makes the customer crave such products and creates a state of emergency in the customer’s mind to purchase them. Price skimming acts as a catalyst for impulsive buying and quick conversions. Businesses usually showcase their most expensive items as limited or special edition products to steer their customer’s attention in the direction of those products. Customers mostly feel that the limited-edition collection will be gone soon, and they’ll miss the chance to have something unique. They even end up paying higher prices for such products.
- Anchor Pricing: Businesses give buyers an anchor or a reference price point using this e-commerce pricing strategy. E.g., one may slash the original price and display its next discounted price during an ongoing sale or offer on the e-commerce website. Businesses usually use anchor pricing for subscription or bundle orders by displaying the cost savings a consumer gets on buying more or subscribing to the product, in comparison to buying once or making a single purchase.
- Odd Pricing: Odd Pricing is quite a popular e-commerce pricing strategy. It’s one of the most effective ways to offer competent prices on the e-commerce website product range. The hack behind this psychological pricing trick is that a customer almost always notices the left-hand side digit while looking at the price. A product costing Rs.599 appears cheaper compared to a product priced as a round figure of Rs.600. Although the difference in the amount is almost negligible, the buyer prefers the first product because number 5 is less than 6. Use odd pricing to encourage the customers to buy more from the website or store.
- Break-Even Prices: The break-even pricing model is perfect for businesses wanting to clear their stock before it expires, turns obsolete, or perishes. At this stage, one wants to cover the expenses or costs even if they lose on profit margins. It’s like an emergency where one has to save the business from gathering additional costs of dead stock or bear any potential losses.
- Geographic Pricing: Geographic pricing is where one needs to consider the country in which the products are being sold. If the e-commerce store deals in international sales, it’s difficult to maintain the same selling price for all the locations. One must evaluate the freight charges, taxes, and customs duties to derive the actual product cost.
It’s not necessary to implement one pricing strategy at a time, a mix and match of these e-commerce pricing strategies can be done to suit the business needs. Combining these e-commerce pricing strategies helps in the enhancement of sales and profit margins. Pricing strategy is a key binding factor for business growth, acquisition, and customer retention. One should make sure to choose one that maintains a balance between both.
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