A good sale is one that’s clearly advertised well in advance, has a creative and emotional marketing message and includes quality products sold at the right price. Those first three aren’t too difficult to get. With a well-planned timeline and innovative marketing and product development teams, your marketing message, advertising game plan, and products are ready to go.
But what about pricing?
Pricing matters to consumers. Research found that 65% of online shoppers compare real-world prices with online prices, and then buy from whichever place offers the better deal. You want reasonably cheap prices that grab a consumer’s attention, but you can’t price your merchandise too low or you won’t make any profit off your sale. And during the holiday shopping season—a make-or-break season for retailers—your sale prices matter even more.
Holiday sales are expected to reach $1.04 to $1.05 trillion between November and January, with eCommerce total sales estimated to increase between 18-21% from last year, peaking around $114 billion. How can you get your hands on some of this cash? You price your products correctly.
But figuring out the correct pricing for holiday sales can be tricky. Luckily there are ways to relieve some of the holiday pricing strategy pressure. Here are 5 pricing tips to use this holiday season to help maximize your profits.
1. Review your costs.
This is obvious but essential when determining the price of your products. While what’s going on in the current market and what your competitors are doing price-wise matters, looking over your costs matters more. There are plenty of pricing templates and calculators out there to help you determine your pricing structure.
Some key things to consider include: what it costs to buy and produce your products and indirect costs, such as storage, equipment and labor costs. Knowing this information helps you set your margin and be able to play around with a few different deals. You first have to know your numbers though.
2. Research your competitors.
After knowing your costs, now you can look into what your competitors are doing. But be careful focusing on single products. Doing this is likely to give you a one-sided idea of the market. Instead, break pricing down by different categories of similar products.
Offering lower prices than competitors isn’t always the best choice. But, knowing their prices helps you better gauge where the market is and the price range your customers are expecting, so you can offer the right prices.
To help you with this one, look into using a competitive pricing tool. Prisync is a great competitor price tracking and monitoring software, and it’s made for every size and type of eCommerce business. It’s easy to set up and use, and updates prices every three hours. And companies that use Prisync have seen an average of 20% margin improvements. Below are some data screenshots of what you’d see from this tool.
Another user-friendly and effective competitive price monitoring tool is Competera’s Competitive Pricing Platform. It turns the time-consuming task of pricing and inventory monitoring and data management into a hassle-free automated business process that keeps your price competitive.
3. Evaluate the historical change in market prices during the holidays.
It’s not just smart to know the market’s current prices; knowing the pricing trends for the last several years during the holiday shopping season is what’s smart. Do your research and find out what the pricing pattern has been for the retail industry as a whole, as well as with your specific niche. Some good places to start your research include the National Retail Federation—it’s your holiday headquarters for insightful consumer research and data with holiday spending. Internet Archive is another site you can check out. It’s a non-profit archive where you can search through various archived websites and find out what they looked like in the past, including their product prices. This would be a helpful tool to use for competitors.
And those pricing tools I listed above, you should pull data from those as well to evaluate pricing changes.
Understanding these pricing patterns will give you a leg up with pricing. It allows you to forecast upcoming patterns, and then be able to adjust your holiday pricing strategy accordingly.
4. Experiment with holiday pricing strategies.
Smart business experiments are good for business. They unlock innovation, drive more eCommerce traffic and increase profits. And if there’s one experiment you should be doing this holiday season, it’s experimenting with your pricing strategy.
In one study that tested different levels of pricing for beer varieties, the findings concluded that offering cheap beer didn’t work, but that offering regular, premium and ultra-premium beers had a positive effect on customer purchases. More customers were open and willing to pay for the premium and ultra-premium beers despite the higher prices.
You may be charging too little and you don’t even know it. Your profits could be higher if you offered a premium version of your main product, but you haven’t tested that so you don’t know that yet either. And you won’t know what pricing strategy works best for your company and your products unless you experiment with them, slightly lowering and raising prices to find out what works.
5. Think in bundles.
Pricing doesn’t just relate to what you should price each individual product. Bundles can be a win-win—if done correctly. Take this study done in the consumer electronics industry. Consumers were more willing to get items if they were offered in a bundle. The demand for video game consoles increased by roughly 100,000 units when offered together with video games. Use caution though.The study also pointed out that when bundles were the only option it could deter consumers from making an immediate purchase, citing that, “Consumers know they can put off buying and wait for a better deal because, after all, prices for video games and other electronics drop significantly over time. Nintendo’s Game Boy console, for example, started out at $100 but within a year had decreased to $70.”
Look at your products and see what makes sense to bundle together. Create bundles in different price ranges and see what sells better. Showing products related to one another can also help boost your cross-sales especially if your bundle includes products from new categories.
Product pricing continues to get more and more competitive as online e-commerce sales increase year over year. Knowing how to price your products can make a big impact on sales and revenue for your business. For more tips on how to market your products, feel free to check out our blog.