5 Special Pricing Strategies To Try
by Andrew Reed, on Apr 26, 2022 3:30:00 PM
After you have calculated your cost, have a layout of your ideal customer, and how your product or service can fit into the competitive market, you can start to settle on a more specific pricing strategy that works best for you.
Below we have listed some common pricing strategies, and their appropriate uses, to help guide you through your decision-making process.
While looking at this list, keep in mind that you don’t have to commit to just one strategy.
Combining approaches depending on the product, season, or audience will allow you to keep your options open, and quickly switch perspectives if you find one strategy that isn’t performing as well as you would hope.
Competitive Based Pricing
This can be a useful strategy for businesses that are just starting in a highly saturated market, as slight price differences may be the determining factor for customers.
A competitive-based pricing strategy focuses on the “going rate”, or the existing market price, of a company’s products or services. A business then decides whether to sell slightly below, above or right on the market price.
Many businesses may look past their production prices to undercut their competitors to gain attention in a competitive market.
A Cost-Plus, or markup pricing, focuses on pricing your products based on the price of producing your products.
This means overlooking competitors and other factors, and simply relying on what it will cost for you to make a profit.
For example, if it costs $30 to make your product, and you need a 25% profit in order to keep things running smoothly, then you would set prices at 37.50.
This strategy works best when your competition is pricing off the same model, so be wary and make sure you complete a pricing analysis before sticking to this strategy. Otherwise, you might lose out as competitors have leveraged their prices to attract new customers instead of growing profits.
High-low pricing is when you set your prices high, but then discount when the product loses popularity or relevancy.
This is a good strategy if you are selling a seasonal product, like winter wear or beach supplies. These kinds of products spike in demand during their retrospective season, meaning you can mark up your prices. Then when seasons change, you can sell at discounted rates to keep customers interested and move whatever product didn’t make it out the door during their regular season.
You can also run promotional campaigns during the off-season to help move unwanted inventory. Consider distributing discount codes through your affiliates to drive traffic back to your site.
Skimming pricing is similar to high-low pricing, but instead starts high and slowly dips in price as the product loses relevancy.
Technology is usually the best example of this strategy. Tech companies usually mark up the price on their new, exciting, or updated products to meet the new high demand, but then slowly cut prices of older products as they become more and more out of date.
If you are announcing a new product, and there is considerable excitement about the new features and updates, match this demand with high prices, while cutting the prices of your less profitable products to spark a new interest in them.
In a bundled pricing strategy, you offer shoppers a discounted price on a group of items rather than lowering each price individually.
By bundling products, you can increase the volume of your sales, while also introducing customers to products that they might not have purchased on their own.
This can be accomplished by bundling popular products with unpopular ones.
Putting items you want customers to try together with ones they already want is a great way to grab their interest, especially when offering the item at a discounted price.
Another helpful hint when setting up a bundled discount is to look at the items your customers often buy together. It can make sense to sell unrelated items together in order to move inventory or have customers try something new, but the most effective bundling will be with items that complement each other.
This way you can add value to the bundle by discounting products customers want to buy together anyway.
Keep in mind that if you are running a promotional campaign with discount codes, it is possible to have these codes leak beyond their intended audience and could end up hurting your revenue.
Try and keep track of how many promo codes you are using, how each is being distributed, and how often they are being redeemed. If numbers aren’t adding up, it's likely you are either a victim of affiliate fraud, or your coupons have grown beyond your targeted audience.
Protecting Your Margins With cleanCART
Whichever pricing strategy you choose, making sure you're keeping your margins tight should be your number one priority.
And for any business, it may not take much to put your business in a dangerous situation. Pricing and promotional campaigns can either bring in new customers and scale your business, or leave your revenue bleeding and struggling to capture new leads.
Having the right tools can make or break your business, and with cleanCART you are given unique, actionable insights into your coupon and discount campaigns.
When discounting your products, cleanCART will block the automatic injection of coupon codes from browser extensions like Honey and Capital One Shopping, while also reporting which coupon codes are being redeemed and how often.
If you believe your revenue is suffering from coupon leakage or falsely attributed affiliate fees, sign up for a free trial, or check out our Shopify and BigCommerce.