E-Commerce Seller Financing • February 17, 2020
A pricing strategy can make or break your e-commerce business. Therefore, it’s important to set fair prices no matter what your industry and what products you offer. Let’s take a look at what the most common product pricing mistakes are, and now your e-commerce business can avoid them.
7 Common Product Pricing Mistakes
1. Prices Are Too Cost-Oriented
When you set your product prices, you must take all your costs into consideration. Your product prices should be higher than your breakeven point, or you won’t make any profits. However, focusing solely on costs may not meet the needs of your buyers and may not be competitive.
You should also consider the place your product has in the market and whether it’s compatible in your niche. Therefore, make sure to review what your competitors offer and how your product compares to them.
Do you offer the same product, or is it’s quality or features different? Perhaps you are using better materials? Make sure to know the features that set your product apart and reflect those in your product description to justify your pricing.
2. Expecting Lower Prices to Deliver Better Results
It’s a common belief that lower prices make products more appealing in the eyes of potential buyers. While it is true with certain products and certain target audiences, it’s won’t always work.
First of all, your profit margin is going to be lower and so will be your profits.
Secondly, if you set your prices too low, you risk making an impression that your products are of lower quality than what your competition offers.
To avoid this product pricing mistake, you should know what your ideal target audience is and what their expectations are. You can also review your competitors’ products and customer reviews. This will allow you to learn what there are dissatisfy with and how you can meet their need either by offering a better product or a more competitive price.
3. Not Revising Prices for a Long Time
All products have a life cycle, and the demand for them will not always the same. As a result, you must be aware of the potential changes in the demand and adapt your product prices accordingly.
This does not only apply to lowering your costs but also increasing them. Many e-commerce store owners are afraid of increasing their costs. However, if that is warranted due to circumstances such as increased production costs, a price increase can make sure that you don’t lose profits by absorbing hidden charges.
Make sure to regularly monitor the market as well as other factors that may impact your product price and make the necessary adjustments.
4. Same Profit Margin for All Products
Setting the same profit margin for all your products can make pricing your products easier. However, that’s one of the most common product pricing mistakes that e-commerce businesses make. Instead, you should take two factors into consideration – your breakeven point and what your customers are willing to pay.
Therefore, you can set higher product margins for products that are in high demand or that your potential buyers are willing to pay more for while lowering for them for other products.
5. Not Taking into Account Other Elements of the Marketing Mix
While product pricing is important, it’s not the only element that matters. Product pricing is one of four elements of the marketing mix, various factors that can impact customer decisions. The other three elements of the marketing mix are placement, promotion, and the product itself.
Therefore, ensure that you provide a quality product that provides value to your customers and helps them solve a certain problem in their lives. Next, you should ensure that you place the product where customers can find it, for instance, by using marketplaces like Amazon, Wal-Mart, and eBay. Last but not least, promote your products. This will increase your exposure and ensure that the right people will see your product.
6. Not Segmenting Customers
If you offer a variety of products or product lines, it’s highly likely that they will appeal to slightly different audiences. Most businesses appeal to different audiences and will have more than one buyer persona.
As a result, they may be willing to pay different prices for different products. Make sure to keep that in mind and adapt your product prices to meet the needs, expectations, and financial situation of your target audience.
7. Overcomplicating Pricing
While it may not seem like a huge difference, however, $69 and $69.99 or $69.00 can make a difference, and even a split second of hesitation can make them choose not to purchase from you, especially if you offer a pricier product.
However, if your products are cheaper, and your buyers are focusing on saving, offering a product for $2.99 rather than $3 may be more appealing to your customers.
Keep your target audience’s priorities in mind, and, if you are unsure, take a look at what your most successful competitors are doing.
Have you made any of these product pricing mistakes? How did they impact your sales and profits?