Pricing Strategies in E-Business
Selling products online requires several different marketing strategies. One important point that is often overlooked in online marketing is pricing strategy. While it may seem simple to set a price for an item, several consumer psychology factors come into play. The price point you set for your item may even determine how successfully it sells.
Paying attention to what your competitors charge for a similar product or service is vital in e-business. It is all too easy for your customers to search and find a lower price. If you want to succeed, you may need to undercut your competition, particularly at first, until you become more established. While this may narrow your profit margin, you can often make up the difference by selling more than you would have if your prices were higher.
Another common pricing strategy for e-business is using odd numbers in a price. For example, instead of selling a product for $199, you would sell it for $197. This increases the perception of saving for a customer. It's not quite $200, so in her mind, she is saving extra money. Most businesses utilize even pricing schedules or drop off that extra dollar to bring it down under a set amount. By taking it down a little further, you can entice more customers.
While competitive pricing is important, it is also vital to make sure that the perceived value of your product is not low. If you are offering too much for too little money, your customers may perceive this as meaning that your product is not valuable. In their minds, if you aren't charging much for it, it must not be worth much. While you do not want to fall into the trap of overpricing, set a price that is a fair value for the information or product you have to offer, while not undercutting its perceived value.
Many e-businesses have found success by bundling. Once again, this increases the perception of value in the mind of the consumer. He's not getting just one product for $197; he's getting something more. Pick related products to bundle with your larger-ticket item. For example, he can get the main product for $197, but if he orders now, he can get an additional product for just $10 more. Make sure you state the actual value of the bundled item so that the consumer knows how much money he is saving.