7 Competitive Pricing Strategies to Make a Profit | The Journey
Channel: GoDaddy
Date: 2020-02-11

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⏰TIMESTAMPS⏰
00:45 – Know your local competition
01:16 – Understand the online market
02:05 – Assess all of your costs
02:56 – Determine your profit margin
03:36 – A/B test your pricing strategy
03:46 – Pricing models
06:34 – The downfalls of underpricing
07:11 – Consistently review your pricing strategies

Knowing how to price products might seem simple, like just another task to accomplish for a business owner in the development phase. However, pricing a product is more than slapping on a price tag (or typing an amount into your eCommerce platform) — it’s a complex process that affects the overall success and profitability of your business, especially when it comes to eCommerce.

Beyond creating and marketing a unique product, pricing will play a critical role in customer perception. As an entrepreneur, you need to determine an appropriate price that your target customer is willing to pay, matches the competition, and still yields a healthy profit.

Use the following steps to establish a competitive pricing strategy for your eCommerce business.

1. Know your local competition
Whether you’re a new business pricing products for the first time or an established business reassessing your pricing strategy, competitor research is invaluable.

2. Understand the online market
Just like knowing your local competition, be conscious of your online competition, as well. Do some quick, informal competitor research of similar products.

3. Assess all of your costs
When evaluating potential pricing structures for your eCommerce products, it’s essential to have a solid grasp on all costs associated with your business so that you can ensure healthy and sustainable profits.

4. Determine your profit margin
Profit margin is the percent revenue you make on each unit after you deduct your fixed and variable costs per product.

5. A/B test your pricing strategy
If you want to try out a few different pricing strategies, test them against one another in real-time. A/B testing, aka split testing, usually occurs in web design or digital marketing, but you can also use this tactic to help determine competitive pricing strategies for eCommerce.

6.Recognize the perils of underpricing

Something that may seem so simple, like how to price a product, is a foundational ingredient to your overall business health and viability. This is why it’s important to exercise caution when you’re trying penetration or economy pricing; in reality, you might be underpricing.

7. Consistently review pricing strategies
You can’t have a set-it-and-forget-it attitude when it comes to pricing products. Business owners and entrepreneurs must consistently assess their data, metrics and pricing strategies to ensure optimal sales and profit. Moving forward, you need to consider cash flow, sales history and changes in the customer market.

Pricing products is not an exact science, and it’s not an art form — it’s a dynamic, business-dependent strategy that can be challenging for even seasoned entrepreneurs. Your decisions will depend on your particular niche, goals, products, industry and other factors.

Know that you’ll need to put in the time to research your market and competition. Crunch numbers on your costs to determine pricing that can maintain long-term product profitability. Analyze current business metrics and A/B test strategies to gather more data to bolster your decision-making. Be cautious of underpricing.

Finally, once you set your prices, know that it’s a living, breathing process that needs to be monitored and nurtured as your business and the market evolves.

The Journey is what everyday entrepreneurs, like you, need to follow in the pursuit of online success. Our experienced GoDaddy Guides are here to take you through all the steps, both big and small, that you encounter every day.

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