Whenever inaugurating a new business in today’s e-commerce era, where comparison of products is done digitally, the utmost challenge is pricing your products profitably. Pricing your products too high can lead to no or fewer sales and pricing them too low can lead to negligible profits. On the customer’s side, the most crucial and noticeable factor before purchasing is price. So, businesses should focus on such strategies for pricing that can increase sales as well as can increase profit too. But, this is hard since competition is so tough now. A single product is manufactured and sold by various industries. Among all, success is one that follows competitive pricing strategies.
- Competitive Pricing Strategies
Competitive pricing is generally a strategy in which pricing of a product is done after considering the prices of competitors’ similar products. The strategy focuses mainly on competitors’ prices and not on production costs. Following this strategy requires a market analysis in detail. This can lead to a quick response to competition by setting an optimum price for your product leading to more sales.
- Options for Competitive Pricing
While setting the price of your product, the prices of competitors’ products serve as a benchmark. There could be various options for competitive pricing. The most important three factors are:
- Set price below the competitors’ price – Low price is a consumer’s, first love. This is an excellent strategy that leads to grabbing a customer’s attention and increasing sales. This strategy can be adopted by those who are sure of the fact that their products are superior to their competitors in any way. But, while choosing this strategy you should not in any way hurt your bottom line or compromise on your profit. This can be done by reducing your production cost by building a strong relationship with your vendors. Low prices will eventually encourage customers to purchase more products thus boosting your profit margin.
- Set price above the competitors’ price – Pricing products at a premium price should be done when you have a valid reason to do so and you are sure enough that your product is superior to the competitors’. Firstly, this strategy should only be adopted only if you have already built a strong and innovative reputation in the marketplace. Secondly, your product should have something unique and be of premium quality to justify buying a high-priced product.
- Set price same as the competitors’ price – This strategy should only be adopted if you have added value to your product features. Setting prices the same as the price of competitors’ products may lead to the risk of losing business. This strategy could only be effective if you provide other benefits to customers that choose your products for instance adding an extended warranty.
Choosing a competitive pricing strategy efficiently can convert shoppers into buyers which means converting customers into regular customers. Choosing strategies wisely can be done by Price Optimization Software. This software is a genuine tool used by merchants that tend to sell their products via e-commerce websites. For gauging the best price for your products, the price optimization software uses survey data of competitors, historical transactions of customers, and other user input thus increasing your profit and converting shoppers of your product into buyers.