How Data Can Boost the Efficiency of Your Pricing Decisions
How do you price your products? In the online world, data must be the leading driver of your pricing decisions.
If you’re relying on not so flexible but common pricing strategies like cost-plus pricing, it’s almost certain that you’re leaving money on the table, or not selling as much as you can. Both cases impede your ability to grow profitably and thrive in this competitive environment.
But don’t worry, because it’s not as hard as it sounds. By the end of this blog, you’ll learn how to make data-driven pricing decisions on a tight budget.
Let’s dive in!
Ignoring the competition is the biggest mistake an online seller can make. Because online prices are visible to anyone.
Shoppers can find the best deal on a product within seconds using price comparison websites like Bizrate or Pricegrabber. And they do so.
87% of shoppers say knowing they got a good deal is important when deciding on a brand or store. That’s why these websites attract thousands of people every day, and they’re among the highest ranking sites.
Alright, price is a top priority for the modern shopper. How do you deal with that?
First, you start monitoring your competitors’ prices.
Using your pricing intelligence, you’ll make sure you’re not charging a lot more for the identical item, like this store below.
Why would anyone pay an extra £400?
So in other words, your pricing intelligence will help you set competitive prices—prices that seem “fair” to your customers.
Now, if you have a small number of products to track on several competitor websites, manual tracking is for you. But tracking 20 products on 15 online stores takes nearly 4 hours a day. So if your assortment is not exactly small, you need at least some level of automation.
Building an in-house price tracking system is an option, using a price tracking tool is another. An in-house engine would be customizable, but the software is much more affordable, and doesn’t require technical expertise.
Once you start tracking some way or another, you’ll be able to set attractive prices. What’s next?
Offer good deals on popular products
One proven strategy that’s been working well for traditional retailers is using popular products to attract customers. Once shoppers step inside the shop, the aim is to make them buy more.
Interestingly, the same strategy helped Amazon dominate the online retail market. The company invested in a dynamic pricing engine way before anyone else, and it paid. Amazon learned how to use best-seller items: set competitive prices and lure customers in. Sell more profitable products while they’re on your website.
And of course, one reason they’re so successful is that they nailed up-selling and cross-selling. That includes bundling the right products, recommending the most relevant products on product pages, etc.
How do you do the same?
Amazon has enormous customer data, which gives them a pretty good idea about what’s hot and what’s not. Even if you don’t possess such insightful data, you can use several methods to learn which products are popular at a certain time.
One is looking at Google Trends. For instance, air purifiers gained insane popularity after 2020, and it was reflected in the search trends.
Another way to understand shopping trends is looking at retail giants’ best-sellers. If your niche doesn’t allow you to do that, you can filter your category and look at what’s popular in it.
You can also conduct keyword research, which’ll give you an idea about what your competitors want to rank for.
So offering good deals on popular products is especially convenient when you’re expanding your reach and attracting first-time shoppers. What about their lifetime value, though?
How do you make customers return to your store?
By offering a personalized customer experience, of course.
Send personalized discount emails
A useful strategy that combines competitive pricing and personalization is sending personalized discount emails.
Email personalization is incredibly effective, especially in an environment where an average person sees 5,000 ads and tens of promotional emails a day.
It’s really important to stand out from the crowd and personalized discounts help you do that.
If you’re not collecting already, start collecting customer data:
- What they bought
- When do they shop
- How frequently do they shop
- What’s their average basket size
- What discounts they’ve used previously (amount, type, etc.)
- Which products are added to their wish lists
- Which products are abandoned in their carts
- Which products do they browse
These are just basic information. The more detailed your knowledge is, the more effective your campaign will be.
Put yourself in your customers’ shoes. What happens when you receive a generic discount email?
If the deal is superb, perhaps it can encourage you to buy. But if that deal is so good for you, the seller is not making much profit. So in most cases, you get a generic 15-20% discount code that’s not enough to entice you.
But when you receive a personal discount code that you can use on what you want, that’s a different story.
Apart from their effectiveness, personalized discounts are also saving you money. Because it saves you from offering blanket discounts, which are not only ineffective but also really costly.
Data-driven pricing can help you increase profit margins, expand your reach, and have happy customers. And it’s necessary in such a competitive environment.
Invest a little time and money in developing your own data-driven pricing strategies. Let us know how it went!
Name: Basak Saricayir
Author Bio: Basak Saricayir is a content marketer at Prisync. She’s interested in politics and cinema, and she loves pilates and spending time in nature.
E-mail address: firstname.lastname@example.org