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How to price goods and use the strategies available in Dynamic Pricing? Check out the tips from IdoSell
Setting the prices of goods in an online shop is an important point of your business. How much a product price should be in order for sales to generate the most profit is not so obvious. Many factors influence the price of a commodity. Learn the basic principles of merchandise pricing and increase your chances of successful sales with the Dynamic Pricing module.
According to research conducted for the Economic Information Bureau ERIF in 2018, the customer who makes a purchase decision primarily considers the price (51 percent). The latest findings from KPMG's consumer research highlight that in an era of social isolation and an uncertain future, an important element of e-commerce is the need for customer personalisation.
To build a strong and recognisable brand, you should take care of the right pricing strategy and long-term customer relationship.
How to price goods in an online shop?
What should you keep in mind when pricing your products? Consider several factors:
Costs
To sell goods, you must incur certain costs associated with purchasing products from the manufacturer or manufacturing them. Estimate these costs, your assumed margin and other operating costs.
Tips
- Determine the costs of purchasing and producing the goods.
- Estimate additional operating costs (e.g., storage of goods, promotion, etc.).
- Check what margin you usually set on the goods.
Through the eyes of the customer
The price of goods should reflect not only the value of the goods, but also the needs of the customer. Therefore, answer the question of who your customer is and what he expects. Does he appreciate promotions or prestige more? Does he prefer expensive novelties or discounted classics?
Tips
- Define your customer's profile.
- Consider whether you sell seasonal goods. Maybe you should price them according to the temporary needs of your customers?
- Observe trends. Is the product in demand in the market? Or has it declined in popularity?
- Assess whether you sell unique goods (hard to find in the market) or popular goods.
- Determine if you offer luxury products that will reach a small group of customers. This group values quality and is willing to pay more
Competition
Unfortunately, you probably already have competitors in your industry. Find out at what price they are selling goods. It is important to monitor their prices and react quickly to changes. All it takes is a big price cut from your competitor for you to see sales drop in your shop.
Tips
- Know your competitors, their offerings and prices.
- Consider whether to lower your prices (e.g. by a few percent from your competitors' prices)
- If you decide to keep your market price level, offer your customers something more (e.g. free and fast delivery, discount on repeat purchases)
- Respond to competitive price changes.
- Change prices and test customer behaviour.
- Adjust price to availability of goods.
A sales channel that works to your advantage
Customers do not only follow the price. What matters is the relationship between price and customer benefit and the value of the goods in question. It makes sense to price products according to their value to customers and to differentiate the price of goods according to the target group. A customer who buys in the marketplace is a customer who is primarily focused on fast delivery and low price. Remember that sales in the marketplace are short-term sales with no chance of a longer-term customer relationship. To build a successful shop, it is worth having a loyal customer base.
Tips
- Reduce the share of sales in channels that are crowded in your industry and thus start overpaying (check if it is Allegro, eBay or maybe Amazon)
- Invest in Google ads and try to get the customer to go directly to your shop instead of to the marketplace.
- Know your competitors through Google search, check their offers and prices
How to use Dynamic Pricing strategies?
There are many aspects that you should consider when you are pricing your merchandise. Remember that the price should be beneficial to both the seller and the customer. An effective pricing strategy is based on an analysis of your target customer's needs and a competitive analysis. To determine the optimal pricing policy, use the module from IdoSell - Dynamic Pricing.
Who is Dynamic Pricing for?
Dynamic Pricing is for you if:
- you sell on Allegro, eBay and Amazon.
- you use the service Google Ads from IdoSell.
- you care about building a strong personal brand
I sell niche goods, which means I am a manufacturer:
Take advantage of the fact that your products are unique in the market and make sure that the customer buys them directly from you in the shop. We recommend using the strategy "in the marketplace more expensive", while advertising your goods intensively on Google through the service Google Ads from IdoSell. Thanks to this pricing policy, you have the chance to attract customers directly to your shop and build a long-term relationship with them.
I sell popular goods and have a lot of competition:
If you sell popular goods, it most likely means that you have a lot of competition. If you base your sales on a marketplace, you've probably felt at times that you're in a tough position as a seller. Not only do commission fees continue to rise, but the requirements that are imposed on the seller are also increasing.
To exist in the marketplace, your offer should be attractively priced, which means preferably the cheapest. Price is basically the only bargaining element in the eyes of potential customers.
If you sell in the marketplace, you are probably concentrating on short-term sales and missing the opportunity to build a long-term relationship with your customer. What's more, any attempts to establish such a relationship are severely punished by the marketplace, even blocking the seller's account. This sales model does not give you the space to build an independent shop brand and reduces the merchant to a mere nameless supplier of goods to the marketplace customer.
Tips & Tricks
- If inaccuracies in the commodity prices appear in your shop panel (e.g. the price in the panel is different than in the auction or you run several auctions of the same product), we recommend using the functionality that enables to download the prices from the last auction of a given commodity to the shop panel. The price visible at Allegro will be saved on the editing tab of the given commodity as the base price for Allegro and you will be sure that the prices in your shop reflect your offer at Allegro.
- Shop cheaper strategy will allow you to effectively manage prices in your online shop.' By selecting Cheaper than on Allegro'' and indicating 5 percent, you will reduce the prices of goods in your shop panel by 5 percent compared to the price at which you sell them on Allegro. This will leave you space for selling on Allegro, but, most importantly, the offer in your shop will be more attractive to customers. But how to encourage the customer to visit your shop directly? We explain.
- If you set the price of your product a bit lower than the market average and additionally invest in Google Ads from IdoSell, you give yourself a chance that a potential client, after typing in Google the product they are looking for, will come across an advertisement of your goods at an attractive price.
Tip! If a customer goes to your shop after entering an advertisement, make sure that the customer experience is the best it can be and that the customer will come back to you for the next purchase.
With Dynamic Pricing:
- attract customers directly to your shop and create a long-term relationship with them
- build a base of loyal customers to whom you can direct further marketing activities (e.g. newsletters, discount offers)
- You become independent from the marketplace and the imposed changes in commissions.
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