Top 4 Pricing Strategies For Your E-commerce Platform

Posted by Samiksha Seth on Thu, 06 Aug 2015 17:58:11 GMT
Top 4 Pricing Strategies For Your E-commerce Platform

Being well-equipped and mature enough to understand and utilize the smart pricing strategies and it's types while selling your products online is a mandate if you are really wishing to make a mark in the highly competitive world.

Most of the entrepreneurs have been committing the nastiest mistake of releasing the product with just firsthand information.

The current post is dedicated to some intriguing studies done in the field on behavioral economics , which will provide you with a greater picture of how to ix a price tag for your product , and sell it to boost your sales up. Are you ready? Let’s get started –

Applying the Same Pricing Rule would not be beneficial

Applying the same price tag to two similar kinds of categories is one of worst pricing practices and it could work against you rather than increasing the conversions. A recent study done by Yale University concludes that “Adding Small Differences Can Increase Similarity and Choice”. The study explains the fact that adding a difference would make a consumer to enhance and make decisions faster than compared to choosing two products of different categories at same price. The study explains further quoting the fact that too many options when presented to a customer at same price, could lead them to confusion and many of them, and then choose to drop off.

Another small test was done on a group of people; they were offered two variants of gum both at same price, and it turns out that only 46 % of people actually bought it. On the other hand when the same variants where tagged with a slight price difference 77 % of people made the purchase.

Evaluation of 2 items, identical Price vs. 2 items, dissimilar Price

Source - pricing-news

Okay, now that would not imply that for the same variant of your t-shirt of different color you price them differently. It would not work, as now the question churning in consumer mind is for same type t-shirt just for different color option why I need to pay differently and again you would lose your valuable consumer. So, applying above rule has to on two different categories with some similarity just for eg: a V neck shirt and a round neck shirt, same material and same colors could be priced differently.

The Comparison Tactic

The particular strategy is used by Restaurants, highlight the most expensive menus and just besides them put in the less costly items. What would you expect the customers would choose? Most of the customers go easy on pocket and hence choose the less expensive one, comparing a product with the premium ones get more buyers for the mid-range products.

So for a size ‘L’ placing a expensive, followed by less expensive and following the trail in decreasing order would surely work for you. The very common notion is termed as Anchoring and many sellers use this tactic to woe consumers.

In another test conducted by Harvard Business School, two groups [compromising of students and experts] had to estimate the cost of a house. The data was provided in a pamphlet mentioning neighboring houses some with normal prices and others with inflated prices.

The results weren’t shocking as even the learned people were fooled by the trick of anchoring and estimated the price of the house incorrect. Now that’s what you say is a selling tactic.

Placing an expensive products or services close to a standard option, you are actually creating a sense of worth for the potential customers, who view the less expensive one as a bargain in comparison.

Practical Execution OF Weber’s Law

Wikipedia state that Weber’s law which is also known as Weber–Fechner law the just noticeable difference between two stimuli is directly proportional to the magnitude of the stimuli.

Putting the above statement in laymen terms is a change on a subject under diagnosis would depend on the how that subject was before the change or in original state. The law has been extensively used in marketing and especially in increase in prices of services and products. In most of the cases, when we are dealing with price hikes the magical number is 10%, for simple reason that its not prominent and not noticeable by the customers, or in other words, even if few brainy minds notice it, they somehow accept the fact.

But a word of caution here is that, do not simply go by magic numbers, because the pricing is determined by many factors like demand and supply, the raw materials, the taxes and laws and above all the brand and business reputation.

Weber’s law is a more of a guideline which one should use and follow to start testing the price hikes and not to be followed blindly.

Do Away with those pain points

Blame it to wiring of human brains or our desire to shop the neuro-economics experts have concluded that we could “shop/spend till it starts hurting”. And many studies have shown how that could affect your business in attracting the buyers.

Well, if something is hurting, it doesn’t leave a good feeling. Does it? So a recent study done by Carnegie Mellon University (CMU) has shown us the way to reduce these pain points and also how shopping could be more of satisfaction and possible retention of customers.

Putting down few of the preferred methods

Refashion the product’s worth

Its quite an easy task to evaluate how much one is getting out of a $1,000/year subscription or an $84/month subscription, although they average of both comes nearly the same.

Packaging the commonly bought together items

How on Amazon or Flipkart we see a table highlighting a deal, buying X and Y would cost you this rather than a single product. And neuro-economics experts have their recommendations for the same. A combo offer is a must buy choice than going for a single pack.

Panic the little stuff

In one of the study it was revealed that a subscription list was increased by almost 20 % when the advertisement message was altered from ” a 5$ fee” to “a small 5$ fee”, expressing the fact that the magic is really into the details.

Request to utility or delight

For budget spenders a message highlighting the “utility perspective” is very very crucial like “ The balm can ease your back pain” and for the open-minded spenders who spend for pleasure a more pampering sort of message could work – The balm will soothe you and relaxes you.

Its Free Free

We all agree, free word is like ringing bells. Each human is attracted to that word, they either agree or not. So use it: )

All of these strategies could only work if you have a good focus on the audience you are trying to woe and also channelizing the data and using analytics. So Happy Pricing!