Setting a price for a product is one of the most important and delicate decisions that you can take as an online seller. An immense amount of factors and considerations are involved in making this decision and more often than not, the details you aren’t thinking about are the ones that end up becoming the important ones. We previously wrote about the importance pricing strategy, and how so much of it is psychological. For example, the simple difference between pricing an item Rs.99 as opposed to Rs.100, changes the whole perspective of looking at these numbers. Or the fact that comparative pricing techniques like anchoring – creating a cognitive bias by introducing an ‘anchor price’ first and then subsequently providing another alternative which just seems more reasonable in comparison – work for vendors, both offline and online, on a daily basis, is something worth investigating further into.
In this article we are going to talk about competitive pricing – charging a price for an item comparable to the price charged by competitors. The most important aspect to realize when thinking about competitive pricing, and perhaps also the most sensible one, is the fact that we don’t sell to an isolated market. More often than not we think of sales as a transaction between the buyer and seller, but we fail to realize that a successful sale for one seller is equivalent to an unsuccessful sale for another. What does this imply? For a customer, who to buy from is almost as important a question as what to buy. Competitive pricing is a way to account for the price of the product reflected in the market.
When Should Competitive Pricing Become a Priority?
There are scenarios when thinking about competitive pricing can take a backseat, and there are others where it must be prioritized. Competitive pricing becomes important when your competitors is selling the same or a virtually similar product as yours. This happens regularly with retailers of consumer electronics and apparel, because of the distribution models in these sectors. As opposed to this, if the retailer has the exclusive rights to a particular product, or if the retailer is also the manufacturer, then other factors become more important. If you can observe that your competitor is aggressively slashing prices in an effort to make more sales, it probably is a good time to prioritize thinking about competitive pricing.
How to Implement Competitive Pricing?
It is best to implement a larger strategy around competitive pricing. In thinking this way, we are assuming of competitive pricing as a short term tactic, rather than something that can be sustained for longer periods. It is a good idea to then pair competitive pricing along with specific marketing strategies aimed at creating a sense of awareness and anticipation for the customer. This can be done via sales and offers that have a time cap on them, to provide urgency to the customer – an aggressive call to action to make sure that the competitive pricing strategy gives maximum returns. It is inadvisable to think of competitive pricing as a long term practice.
Is Competitive Pricing the Only Option?
No. In fact, one has to investigate the factors that a customer thinks about while making the sale. Of course, pricing is an important consideration, but it is not everything. More often than not, a customer would not mind paying a little extra if they can avail certain services in return. Also, a seller with bad rating offering products at dirt cheap rates is a sureshot invitation for the customer to feel that something is fishy. This is why, rather than exclusively focusing on competitive pricing, one must devote energies to aspects like customer service, product returns, timely delivery and acquiring genuine reviews. Because it is these things that matter during the sale almost as much as the price. Finally, everyone can slash prices, but only a few can offer good customer service.
How Low Can You Go?
Firstly, there is always a bottomline of the cost price of the product. Selling products at a loss makes no sense, especially if you sell a lot of them. Secondly, it is important to study the market and the competitor behaviour. Because the question ‘how low can you go?’ when it comes to price, really depends on timing. Big Sale Days and holiday shopping seasons are good opportunities to slash prices for short periods of time. Other considerations include logistical and administrative costs. The important thing to recognize is that the aim is to maximize profits, not sales.
To know more about competitive pricing, get in touch with Browtape. We are India’s leading ecommerce experts, and we are always happy to help!
