Online Store Pricing Strategies

How to price your products (as an e-retailer)

Product pricing is a key factor for any online retail business, and should not be taken lightly. Online stores can have various pricing approaches and strategies, depending on the market positioning and interests, but if they are implemented in the right way, any of them can generate great results.

A study performed by the recognized consulting company “PWC”1, showed that 60% of respondents visited websites to compare prices and considered it as a very important factor that affected their online buying decisions. It is vital for an ecommerce business to have a effective pricing strategy that suits their products, and can remain competitive.

If you don't follow or take into consideration any pricing strategy, chances are that you will probably set your prices too low or too high. Sadly this can make you lose customers if you price your products too high, or ir you price them too low your profit margins will be affected. It is very important to implement effectively a pricing approach that fits your online store, that can have a positive impact on your sales.

When it comes to product pricing, there are three types of approaches and strategies that are the most commonly used and have proven to deliver better results.

  • Cost based pricing: It is a pricing method which a fixed quantity or percentage of the overall cost is added to the cost of the product to establish the selling price. After determining the total costs of a product you just have to apply the profit margin your desire to achieve. Cost based pricing has the advantage of simplicity, as it allows you to set your prices without deep market research or customer analysis, but it still guarantees a minimum return on each product sold. A common question is, how much margin should I have when i sell the product? Well, every online store is different from each other, but margins usually are between 20% and 50% in most online stores. You can get help from pricing intelligence software, to receive smart pricing recommendations through the analysis of your competitors while setting your target profit margins.


  • Market oriented pricing: This pricing strategy is based on the market conditions and competition, meaning you compare your prices with similar products offered on other online stores. There are several price tracking tools that can help you compare and gather data about your competitors, without the need to visit all their websites. When you understand what your competitors are offering and their pricing, you can have a better understanding which will make it easier to determine your own pricing. This strategy can be combined with cost based pricing, taking your costs in consideration and knowing your competition.


  • Consumer oriented pricing: It is a strategy in which the prices are set according to the perceived estimated value of the products to the customers. To apply this strategy you need to have a deep understanding of your customers which can take a lot of time and resources to determine. The correct use of this approach if utilized correctly can affect positively on your brand’s recognition  and customer loyalty. It is possible to implement more than one pricing approach at the same time, mixing them can produce even better results. The important thing here is to take the time to select and develop your pricing strategy that suits your online store in the best possible way.


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To PWC study (2013) E-commerce and consumer goods