When you are of many providers available in your marketplace, how do you know what price point you should set for your products or services? Competition is something every business owner is worried about and that often plays a large role in how people set their prices. This shouldn’t be what determines the pricing of your product or service. In this article, we are going to talk about how to optimize your pricing in a competitive market.
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Being Smart About Pricing
When you are looking at the options for your pricing, you of course want to make more profit off of every sale. Your thought immediately goes to drastic pricing changes. While you might think this is the quickest way to success, it could actually cause you to lose a lot of business. People who have been in your sales funnel for a while will notice a drastic change in pricing and without justification of value added, you are likely to lose these potential customers.
After you’ve put so much into marketing to the leads that are in your funnel, you do not want to scare them off with a massive price increase since it would end up costing you more in the long run since you will be required to acquire another lead to replace the one you’ve just lost which was further through the funnel. This rings just as true with optimizing ecommerce as it does with a business that is operating offline.
What Is the Value to Your Customer?
You might think that you blue and brown dotted neckties are adorable and want to sell them for $100, but if your customer does not agree with that valuation, you won’t make the sales that you need to make to have a business. One of the places we see customer valuation in action is through bidding platforms like eBay.
If you haven’t done much business in the industry, you can see what people are paying for products from your competition. This will give you a good idea of the price that the market will bare. You shouldn’t go change your prices to that of your competition, but it is good to know since it does help you understand more about what your customer sees as a fair price for the product you are selling.
Cost Based Pricing
Most people go with cost based pricing since it is easier to do than to figuring out all of the other elements that go into pricing. When you do cost based pricing, you figure out all of the costs you incur when providing a product or a service and you put a reasonable margin on top of that so you are able to be profitable in each transaction.
While cost based pricing might be the easiest way to set your price, you also have to think about opportunity cost. Are you leaving money on the table for the sake of ease? Are there certain people that would be willing to pay more for your services? Would there be enough people in this category to keep your business rolling without the people that demand lower prices? Knowing the answers to these questions are important and if you only go with cost based pricing, you will never know.
Make People Willing to Pay
People always want a deal and you don’t always have to give a discount to make people feel like they are getting a deal. If you have two similar products, one being a premium version and one being a basic model, you can put the two products side by side so you can show that the lower priced item is a good deal.
When you are selling online, you have to have a call to action so that they will buy. You have the price there and you believe you’ve set it at a good point, but no one is clicking. Have you told them to click? Use buttons with words on them like “buy now” “get it now”, etc. Let people know what they need to do next.
Don’t let people get lost in confusion. If people are confused about which option you choose, they won’t choose any option. Setting up a price comparison chart is a great way to help people understand the differences in the pricing and why they would need to pay more for one product than they would another.
You go through the stores and see it all of the time. $9.99, $11.99. What is so important about the 9? According to Gumroad, adding a 9 to your pricing can double your conversions. You can do a split test of a couple of different price variations to see which ones convert the best. As with the study, you will most likely see that the 9s have it.Personalization
Using personalization of your ecommerce store will allow you to get people to pay attention and be more likely to buy from you at the price point that you have set. This is why it is important that you do list segmenting so people only see relevant content.
Finding the sweat spot for your pricing can be a little challenging, but if you work with the proper tools to increase your conversion rates, you will be able to get the sales you need at the price you want as long as you have been reasonable with price setting.