Running an online store is all about providing convenience to the customers. You save them the effort of going out to browse and buy a product while also saving them the cost of doing so. If a product can be ordered and delivered at your doorstep, why would you take the effort of going to a store? While convenience is the biggest factor for the success of online stores, the next important factor is the pricing of the product.
Running an online store is comparatively cheaper than running an actual store. Costs on premises, maintenance and displays can be saved. That’s why most online stores are able to provide unbelievable discounts on the MRP.
Online buyers are an educated lot. When they know you are saving costs by running a store online, they expect you to pass on certain benefits to them.
While the percentage of discount you give to buyers depends a lot on that particular product, you can pass on benefits in different ways. Say you can afford to give a discount of 15% on a product; you can either choose to give the discount directly, or give a discount of 10% and provide free shipping for that particular item
Pricing has as much to do with the actual price as it has to do with perceived value. Display the MRP and strike it off to show a new discounted price and you already have your customer’s attention.
How to price your products
1. Know your costs
The basics of any good business are that you need to cover your costs and then factor in for a profit before arriving upon a final price. You need to know how much your product costs and by adding a profit margin, you need to also know how many units you need to sell to turn a profit. While factoring in costs, don’t forget to add in overhead costs along with actual costs.
2. Know your customers
It is very important to know your customers. Depending on what product you are selling, a discount may be helpful or harmful to your product. You will be surprised, but asking your customer what they think of your product pricing can give you some great insights.
3. Know your competition
Don’t ape your competition, but know their public moves. Don’t spend too much energy on them, but following your competition can give you great ideas, tips, hints and in some cases customer insights too.
At the end of the day, Function + Benefit derived = Value. As far you can create value for the customer, she will happily pay for it.