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eCommerce Pricing Strategies

Updated: Mar 3

ecommerce pricing strategies

As you start a business online it can be hard to know where to price your products, how to increase sales and still obtain a profit and how to be competitive. You will often see as a shopper yourself the same product listed at a variety of prices. But why does this happen?

You will also find people are savvier about pricing, have higher expectations and will do the research themselves. So, in today’s post we will look at the different pricing strategies available and explain how these differ and what products, services and customers each one may be more relevant for.

Competitive pricing strategy

The competitive pricing strategy is a simple and low risk strategy.

This strategy takes consumer behaviour into consideration by setting prices based on what competitors are charging. You may charge the same or slightly under your competitors price. Sellers normally use this strategy when there is a good level of competition and they know their audience will show around and do more research.

Be careful with this strategy though, if you keep lower your prices to compete you might be missing out on profit.

Value based pricing

Value based pricing is the preferred option by many ecommerce sites.

This strategy sets a price based on what you think the product is worth to the customer. It typically results in a higher mark up and more profitable. Ideal for those thinking long term rather than the individual sales.

If your offering has a unique quality or something that will make it stand out then this option is right for you. Think sustainability, collectables and luxury.

It requires extension market research and analysis to determine the right price.

Price skimming

Price skimming is suitable for one-of-a-kind products.

You would start with a higher price as the product launches and then lower this as the product develops and competition emerges. Its frequently used in the tech industry relying on early adopters to buy in. A strategy that Apple uses for launching new iPhones.

For this strategy you need to be confident of your customers and the product needs to be high quality, exclusive and worth spending more on.

Penetration pricing

Penetration pricing is basically the opposite to price skimming. This is when you are entering a marketing that is already competitive. You set your prices low to begin with and then increase them over time.

You may be developing brand awareness as the price is low and could offer discounts and incentives. As reputation and possibly the offering builds you can increase your price.

Bundle pricing

If you can see certain products work well together you might want to try bundling them. Or you might want to increase basket spend and encourage multiple products to be purchased at once.

Bundle pricing includes upsell, cross-sell, buy one get one or 3 for 2.

This can increase sale volume but be cautious of your profit when reducing the price. For an eCommerce site you might need to adapt postage as more items purchased means greater weight and typically greater shipping cost.

Psychological pricing strategy

This is where you price a product ending in an odd number. It’s a long-standing pricing method dating back to 1880 and has more of a psychological effort on customers thinking they are getting the product at a much lower price.

Think £19.99 instead of £20.

Alternative methods to this could be paying in instalments so £10 a month could seem easier and more manageable than the full amount in one go. Also showing a reduced price so ‘was’ price is crossed out and the ‘now’ price displaying next to it.

Conclusion on pricing strategies

Now you know the options available you need to consider what would be right for your business. To decide the right pricing strategy, get to know your audience and how they may react. Also define your objectives – what is your goal, what profit margin do you want to achieve, do you want to clear excess stock and so on.


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