4 Essential Pricing Tips for Online Business
Pricing can be a vital selling point for small businesses, especially for those selling online. Fixing your price range can be important when you’re just planning your business, and even well before you need to consider issues such as shelving systems and finding a storage space or warehouse. Balancing competitiveness with a sustainable pricing strategy is the key to making your business work.
1. Finding a Reasonable Price Point
Researching competitors’ pricing strategies is the first step in finding a reasonable price point. You can use the internet or visit physical stores to get an idea of market prices.
- Use search engines to identify key competitors offering similar products to your target market.
- Note down their pricing strategies.
- Visit stores and retail outlets to get an idea of the difference (if any) between bricks and mortar stores and online retail prices.
Once you’ve researched the market prices, it’s a matter of factoring or projecting expected costs into your business plan. While you may be able to sell a high volume product, will the margins be sufficient to make that product line profitable?
Your reasonable price point should not only reflect what others can and are doing on prices, it must factor in how you will cover costs and make a profit. This will ensure that your pricing strategy will be sustainable over the long run.
2. Discovering Your Value Points
As you’re setting your price point, you’ll also need to consider your value points. Will you be competing mainly on price or on other value points? What are you offering to the customer? Is it low price, expert advice with product, or a unique product or level of quality? Great shelving or pallet racking systems in your warehouse can lead to faster dispatch and delivery for a strategy based on high quality service value point.
Pricing is often the easiest way to prove value for new businesses. Alternatively, selling on quality and convincing customers that they should pay a little more for included services may require a bit more selling; marketing strategies should therefore be adjusted.
If you have a wide product range, you may choose to mix different value points to attract customers for volume products based on pricing alone, and to draw in other buyers on quality and service for other, higher priced products.
3. Moving With the Market
It’s useful to remember that a pricing strategy should be periodically reviewed and updated according to the market and the profile of your business in the market. The more successful your business and the higher your brand profile, the higher you may be able to set your price. On the other hand, if your business is based on low pricing alone, you may find it important to keep maintaining low prices for your products.
For some products, price changes can occur as often as once a week or twice a month. For other types of products you may only need to update prices every few months or so.
4. Emphasising Credibility
For new online businesses, competing on quality rather than a low price alone can mean that establishing credibility needs to be a key priority in your market strategy. This can involve anything from providing plenty of information about the products, emphasising timely and quality responses to customer queries, and obtaining and displaying testimonials.