Selling online takes a lot of meticulous planning and execution. It can be tedious at times, but losing focus can lead to poor results for your store. Nothing should be overlooked when selling online, especially if you plan on reaching a broad audience. Unfortunately, there are quite a few aspects that are sometimes forgotten in the planning process.
For example, product descriptions need to be optimized for search engines. It’s necessary to pump keywords into your product descriptions, but the natural flow of writing does not always include them. The results of this lead to poor search engine rankings, which can hinder your marketing efforts.
Then there are some areas that retailers trip over that lead to poor results for their entire business. Sometimes these pitfalls are not even the result of poor attention to detail. They’re executed with good intentions, but the final results are more harmful than beneficial. One area that falls victim to this the most is pricing strategy.
These pitfalls can have serious effects throughout your whole business. From your brand value to your bottom line, these are the five pitfalls you want to avoid when pricing your products.
Slashing Prices Until You’re the Lowest
Lots of retailers are constantly changing their prices to stay competitive. This involves the fluctuation of prices up and down to match demand. A lot of the time retailers choose to avoid frequent price changes and instead take what might be considered the easy road and slash their prices remarkably low.
While this is a good way to keep your mind at ease about repricing, it is very far from sustainable. Unless you’re as big as Amazon, you can’t afford to slash your profit margins and potentially be left with net losses at the end of the quarter. It defeats the whole point of a business, and leaves you with no money to reinvest back into your company to help you grow.
Unfortunately, eCommerce is not this easy. Your competitors are using your static price as a benchmark for their own repricing, meaning they will always be undercutting you, or even pricing above you. That’s right, retailers who reprice often test their price changes to measure the corresponding demand. If they can price above you and still win sales, they aren’t even going to consider pricing below you.
Letting Price Dictate Brand Value
If you set your prices high and work towards becoming a luxury brand, that’s great. However, that’s going to take a lot of work for your store and overall brand image. Unless you put in that work, you can’t let your price alone dictate your brand value. Your brand positioning should define your price, not vice versa. If you fail to do this and you’re getting beat on price from a competitor’s site, you’re going to lose a customer to them.
That means you’ll have to find ways to differentiate your brand from your competitors to justify a premium price. If you cannot deliver a luxurious shopping experience, then you cannot attribute a high price to an improved brand experience. You can’t simply introduce yourself as a luxury brand with your price, you have to work your way up and go above and beyond retail standards. One of the easiest ways to do this is to introduce live chat. It’s just as helpful as a salesperson in-store, and a great way to personalize the experience.
Engaging in Price Wars
It can be tempting to engage in price warfare for the sake of winning sales. But it brings up the previously stated problem: you win the sale, but you lose your margins. You make no money, and only move some inventory. This inhibits your business’ growth and curbs competition. When you compete solely on price, you lose focus on other important aspects of your business.
Frequent Discounts and Sales
Discounts are a great way to clear out poorly performing items. If you have old inventory that is just taking up space in your warehouse, heavily discounting the items can help move it on out. Unfortunately, frequent discounts are not a good idea to preserve your brand. There’s no reason to constantly discount products, especially popular ones.
Frequent discounts cheapen your brand, and also condition your shoppers to only shop at your store during sales. They will spot a pattern in your discounts and understand that there’s no need to shop at your store if everything just goes on sale in a matter of weeks. It’s like Pavlov’s dog experiment where a dog learns that when a bell rings it gets rewarded with peanut butter, just with far more disappointing results for your business.
How to Avoid These Pitfalls
Dynamic pricing also understands your brand value. By setting up price guards, you can make sure your prices never exceed or drop below certain price thresholds to ensure your brand value is respected. Dynamic pricing can also be designed to mark down slow moving inventory, that way the prices drop only on items that need it.
Pricing pitfalls can be intimidating, but avoiding them is actually quite an easy task. A dynamic pricing strategy is the ultimate pricing strategy for the digital age of retail. You can make sure you move inventory, obtain your desired margins, and build strong value all because your tool’s self-learning algorithm can take hundreds of factors into consideration to make sure your price is always right.