Smith Angie

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Every business needs to make a profit to survive and thrive. For many years, e-commerce was a safe haven where tech-savvy people could outsmart rigid offline retailers and make handsome profits. Those days are over.

Online retail is now a mature business environment where technical knowledge is essential, but not enough. The web has been revamped with millions of online stores competing for the same consumer . Price wars have arrived.

People always ask themselves whether they should raise or lower prices . Be very careful before you start thinking about lowering prices . Let me explain why.

Lower prices may bring you more transactions, but they drastically reduce your profits. Even a 10% reduction can cut your margins by half or more.
Entering a price war with your competitors usually causes your competitors to lower their prices as well, and then a new round begins . It is unlikely that you will be the winner.
Basing your strategy on discounts sounds appealing at first and usually attracts more consumers, but over time it positions you as a discounter. Is this really the position you want to be in? (I’m not saying it’s wrong to be in this quadrant, I’m just saying think about it and consider all the other things it might affect).
However, things are not that simple . It is very unlikely that consumers will buy things from you if your prices are higher than the competition.

There will always be a few who are very loyal to your brand and may give you a discount, but overall you need to stay competitive. This means that your prices should be more or less the same as your main competitors, but not necessarily lower.

How to calculate price elasticity?
Price elasticity is a way of determining how changes in price affect how much people want to buy something.

If people continue to buy a product even when the price increases (such as food and fuel), the product is considered to be inelastic .

On the other hand, some products are elastic , meaning that their demand changes greatly with price fluctuations (examples are gadgets, clothing, consumer electronics, etc.).

To calculate price elasticity, use the following formula:

% change in quantity ÷ % change in price = price elasticity

Understanding price elasticity helps you determine whether your product or service is sensitive to price changes. It would be better if your product were inelastic, so that demand phone number list remains the same even when prices change, but in reality, most retail categories are very elastic.

One of the main reasons for this is that there are many online stores selling the same products, making consumers very price sensitive.

How to define a product pricing strategy?
Your pricing strategy should be an extension of your business strategy and should be aligned with your business goals.

Do you want to increase your market share or just maintain your position?
Is your goal to increase your profit margin?
Do you just want to relieve excess inventory in your warehouse?
The fact is, staying competitive on price is a necessity . If you're not competitive, no amount of good marketing and additional features will save you.

This doesn't mean that all your products have to be discounted or that all your products have to match your competitors' prices. You need to decide which categories you want to compete in and use them as attractive, while maintaining a higher margin in other categories.

Things to consider: What are your attractiveness categories?
The same goes for products within your categories. Not all categories are created equal. Develop a similar strategy for each of your main categories, identifying your best-selling products, highest-margin products, compelling products, and products that are selling.

Steps to define a pricing strategy:
List all your categories.
Identify which of them are most important to you and which will form the basis of your business strategy.
Define your attractive categories.
Check (regularly) your competitors' prices and compare them to yours.
Within the attractor categories, identify products where you will match the prices of your competitors.
Do the same with the main categories (they can be the same categories), but in this case, also determine which products will generate your margin.
Refine product category lists.
Set up Google Analytics reports to regularly check the impact of your pricing strategy on your main ecommerce KPIs.
If you’re still confused about pricing strategy, don’t take it to heart. Pricing is a science, and it takes years of practice, testing, and patience to master. And if you’re not sure how to apply it to your business, you can always reach out to us for help.
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