Pricing management is one of the most ignored processes for an ecommerce site. Most sites set the prices once and then largely forget about them. Though, the fact is that effective management of pricing can result in significant increase in profits. One way to do that is to increase prices by using one or more of the following techniques.
1. Review and Refine Prices Periodically
Prices need to be reviewed periodically based on a variety of factors, such as cost of manufacturing or procuring the product, comparison with what your competitors charge for the same or similar product, and cost of packaging the product. If the review leads to a price change, be transparent about it with your customers. The increase should never be explained as merely increasing margins for your business. Be prepared to lose some customers. But you should be able to win them back by continuing to sell quality products without sacrificing customer service. If price increases are not a common occurrence for your business, train your team to handle questions related to the price increase. Everyone needs to understand why this is being done and how to handle customer queries. Some retailers also run surveys to determine customer preferences before making the price change.
The periodic price reviews will also help verify that you are not losing money on a subset of your products by keeping the price static.
2. Sell Upgraded Versions of Products
Sometimes it is not possible to increase prices without alienating customers. An option is to offer an upgraded version of the product at a higher price. The upgrade can be a small change (e.g., bigger packaging or different color) or a significant change (e.g., better material) depending on your product set. As an example, Amazon frequently sells GelPro floor mats with different colors at different prices.
The important thing is to create the perception that the customer is getting something better than the previous version of the product. If you can do that, this is an easy way to increase prices for your products.
If you sell one-of-a-kind niche products, you can likely increase prices with little resistance from your customers as your products are not available elsewhere. Though, the price increase still needs to be transparent to the customers to avoid losing credibility.
3. Sell Product Bundles
If selling product upgrades is not a viable option, then combine one or more products and sell them as a single unit in a product bundle. This option works best if you introduce a new product as part of the bundle. But it can also be used with an existing product set. The best way to merchandise this bundle is to show it as an up-sell option on the related product pages.
4. Offer Value Added Services
Offering a new service — such as gift wrapping, warranty, and subscription-based scheduled delivery — is another way to increase prices by adding a markup on the new service. The price of the product can stay the same and customers who opt for this service only pay the additional dollars. This will minimize resistance from customers as you are not increasing the product price. The value-added services could prove to be a welcome addition and act as a differentiator for your site, resulting in increase in traffic and profits.
5. Use Pricing Software
Larger sites use pricing software from companies like Vendavo and PROS to manage product pricing. These software solutions enable automated change in prices based on a variety of factors like competitor’s price, type of product, and minimum margin. There are several smaller software companies like PriceIntelligently and DataLizards that offer similar functionality to automate the management and optimization of prices based on defined criteria. These solutions are important if price changes frequently or if you sell thousands of products that makes manually managing prices cumbersome. If you can afford these software solutions, I recommend using them.
6. Segment Customers
Segmentation allows you to manage multiple price points for a single product. An increase in price can be limited to a single segment without impacting all the customers. This can be a good strategy to gather customer feedback related to the price increase before rolling out the increase across all customers. The segmentation can be done using criteria like shipping distance from the warehouse (especially if you offer free shipping), A/B testing to find the right price point for the product or any other criteria. If you mostly sell to other businesses then you can setup business-specific price lists that reflect their contracted price.