Anyone who runs or has run any type of an eCommerce business can confirm:
Pricing can be an extremely tricky task to do right.
There are various things that eCommerce businesses need to factor into their pricing such as the value of the product, competition, and current marketing trends.
Unfortunately, many eCommerce businesses underperform because they make pricing mistakes that negatively impact their business. These mistakes result in them creating price wars and losing customers’ trust.
For this reason, we’re going to share with you 5 fatal eCommerce pricing mistakes we see people make in their business. So, you don’t have to do the same mistakes.
Let’s get to it.
1. Adding Surprise Fees
ECommerce businesses may feel that adding surprise fees is a good way to ease customers into the full value of the product. However, adding surprise fees sends a bad message and only lays the foundation for mistrust between you and your potential customers.
Consumers don’t like surprises when it comes to the products they are purchasing. They want to know exactly what they’re getting. Move away from that, and customers will believe that your business is untrustworthy and that your product probably doesn’t have the features and benefits you claim it has. If you can’t be upfront about the value of the product, customers will change their perception of not only the product but your business as a whole.
With so many businesses selling themselves online, being transparent is crucial. Customers want to invest in businesses that are honest and trustworthy. The moment you break away from that, they will gladly move on to the competition because they have options.
Remember, with effective value proposition and marketing, customers will become loyal to your business and be willing to pay the price that you set your products for.
2. Products Price Based Solely on Competition
Setting your prices based on your competitors may be a good idea to avoid losing market share. However, basing products on competition alone isn’t good for business.
Every business offers something different to their customers that is factored into their product pricing. With that said, if your prices are based solely on competition, you are immediately losing the opportunity to capitalize on what makes your business different.
Additionally, some competitors price their products extremely low. However, the cost of production for their product could potentially be less than yours. By following your competitor, it will be difficult to keep your business afloat and could ultimately mean closing up shop. Similarly, some competitors’ prices are on the higher end of the scale. However, they could potentially be targeting customers with more income than your customers. By following this competitor, it will be difficult to find people who are willing to pay for your product.
Instead of just focusing on your competition, eCommerce businesses should also consider other important factors to develop their prices such as the product costs, your customer profile, your revenue target, and even where your market is headed in the future. This will help businesses build a more accurate price for their products, leading to more customers who are willing to pay for it.
3. Dynamic Pricing to an Extreme
Dynamic pricing allows eCommerce businesses to change the price of the product or service to reflect changing market conditions. For instance, as the demand for a product grows, you will increase the price of the product to reflect those demands. Dynamic pricing is great when it comes to having more control over your pricing strategy, but it’s not in the best interests of your customers.
Dynamic pricing means that your prices will constantly fluctuate and this can damage your brand value, as well as, have a negative impact on the user experience. Customers can easily mistake your fluctuating prices as manipulation. If customers feel as though you are not being upfront with your prices, they will move on to someone else.
Additionally, it can be difficult for a customer to get used to the idea of prices continuously changing. If a customer is used to paying $10 for a product, they may not be willing to pay $15 the next month. These kinds of changes will make customers feel irritated, eCommerce businesses will experience less customer loyalty, and there will be an increase in competition.
With that said, Dynamic pricing is an effective way to ensure you are getting what your product is worth at all times. However, a fluctuation in price will lead to a fluctuation in customers and businesses must consider that.
Many eCommerce businesses find it difficult to navigate their market and build a solid customer base. For this reason, businesses tend to under-value their products, which results in pricing their products for less than what it’s actually worth.
Instead of automatically assuming that your product isn’t worth a certain value, do a proper product assessment to get a better understanding of how much value your product actually has.
The product value doesn’t just include the current market value and product costs. It also includes the benefit that the customer gets by using the product, product functionality, features, usability, and availability. When you consider these kinds of factors, you are more likely to sell your products at the appropriate price-point, which will result in a more successful eCommerce business.
5. You Fail to Take Marketing into Account
Many eCommerce businesses may not realize it, but marketing plays a key role in product pricing. How you market your product determines how much a customer is willing to pay for it. For instance, if the marketing and promotion of your products communicate that you offer quality products at the lowest prices, then customers expect to see low prices when they visit your website. Similarly, if your marketing and promotions communicate that you are selling a one-of-a-kind high-end product, customers expect to pay more. Marketing your product is the chance to communicate what you want your customers to know before they even visit your website.
It’s also important for eCommerce businesses to take product placement into account. Where your product is placed and marketed online is essential to how well potential customers receive the product. This means that business owners need to take a look at their client profile and get a better understanding of their ideal customers’ behavior, including where they spend their time online. Ultimately, your prices should consider your client’s profile. With that said, if you can effectively place your products in all the right places, customers are less likely to have an issue with the price of your product.
Essentially, effective marketing communicates to customers what they are going to get. Even more, it increases the customer’s perceived value of the product, allowing businesses to better justify their prices. Your marketing efforts should always work in harmony with your prices as this is how eCommerce businesses will drive the best results.
Next Steps for Your ECommerce Business
How you price your products for your eCommerce business is essential for growth. Your prices can easily scare customers away, but it can also help you attract real customers and foster customer loyalty when done right. If you want to learn more about eCommerce product pricing or want to learn more about how we can help your eCommerce business, contact us and we’ll be happy to get you started.