When you set a price equivalent to your competitor’s, then the differentiating factors cease to exist. However, there’s the risk of diminishing profit margin and you might not be able to recover your sunk cost and even face bankruptcy.ģ. If you can increase the volume without affecting the production cost to a great extent, then this might be a good strategy for you. Pricing below your competitor’s price depends on your resources. If you’re planning to set the price above the price of your competitor, then you’d need to bring in new features and improvements in your product that would justify the increased price.Ģ. You have three choices-price your product lower, higher, or same as your competitors: :ġ. This is where setting prices according to the competitors becomes one of the most popular pricing strategies, also known as competitive pricing strategy. Once the product is part of a mature market, and fighting with a relatively high number of substitutes and competitors, the pricing actions of your competitors could well be a factor driving your profit. When it comes to a competitive pricing strategy, the purchasing behaviour of customers is an important criteria. With the ever-increasing competition in the retail market, competitive pricing is fast becoming one of the most sought after pricing strategies. Sellers enter the market at a lower price point to generate demand and a consumer base and then increase prices once they are established. This strategy is usually used to enter a new competitive market. A similar strategy is often followed by the hotel segment as well. During high demand periods like holiday season and weekends, prices go up with a rise in demand, and vice versa. Demand pricing strategyĭemand pricing strategy is where prices are determined in correlation with demand to maximum sales for during high demand periods.
This eCommerce pricing strategy is not always the best way to establish the right price for your product as it is often determined with minimum research and does not consider consumer demand or competitor price strategies. In this strategy, a prefixed profit margin is added to the total cost of the product which becomes your selling price.
Cost-plus pricing strategyĬost-plus pricing strategy is one of the simplest methods of determining a price for your product. This blog post provides a glimpse of four major eCommerce pricing strategies and deep dives into competitive pricing strategy, which is used by most companies around the world. Many competitors are eschewing the various pricing models and methods in favour of competitive pricing but setting pricing strategies based on competitors’ behavior isn’t an easy task. In order to ensure sustained profitability, firms have to set a price that: covers the production cost, contributes to company overheads costs, and delivers suitable profits. Some of the factors that companies consider when setting prices are costs, competition, and price sensitivity. These factors are also important considerations while setting the right price in eCommerce. Comparing prices online is easy and customers are well aware of the monetary value of a product. Businesses need to keep an eye on their competitor’s pricing strategy while setting prices to get the much needed competitive edge in the market. With the rise in eCommerce sales, and the friction-less comparison shopping digital commerce enables, competition in the market has gotten much more aggressive and real-time. The price is one of the first things that a consumer notices about a product and is one of the deciding factors when it comes to their decision to buy it or not. In fact, pricing is one of the most important components when it comes to creating marketing strategies. It can set a price to stop competitors from entering the market, or to increase its market share, or simply to stay in the market. A business can set a price to maximize profitability on each unit sold or on the overall market share. An effective pricing strategy is essential to help a business maintain competitive pricing, such that it may set and offer prices that are in line with competition.Ī business can pick from a variety of pricing strategies based upon a variety of different factors.
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