Selling Online - Don't Undervalue Competitive Pricing Just Yet

21/06/2020
The Maximum Retail Price or MRP is one of the first things that as customers we notice on the products which draw our interest. This is usually followed by comparing prices from various brands before making a decision and spending our money accordingly.

Also, with the increased availability of multiple, convenient channels and marketplaces to sell goods and services, markets have become even more competitive. This raises a question: Is your product pricing competitive enough for the ever-changing field of business?

Competitive product pricing or optimum pricing, today, is one of the most essential parts of any business marketing strategy. In the age of comparison buying, brands are usually racing against very aggressive and real-time competition – more so in the case of online selling.

When a person is online, it’s very easy to scroll through a page that lists several similar items along with their prices. They are also aware of the actual value of product and can tell quality, make, and size of a product just by its price point.

So, to stand out in a crowded marketplace, it is important for brands to be aware of others pricing strategies. Brands which arrive at a final price point for products by closely monitoring the competition are usually ahead of other sellers.

Today many offline and online dealers are shifting to a competitive pricing model. This pricing model enables brands to price their products based on what other sellers are doing, but ultimately - like any other marketing strategy - it all depends on having a clear picture of your target buyers and your market.
Pricing competitive leads to more orders

What exactly is Competitive Pricing Strategy?

Pricing your product in line with what other brands are charging is competitive pricing. There are other pricing strategies too – like demand pricing, where prices are planned out after determining the price to volume ratio. There is also the cost-plus approach, where a profit percentage is added to the full cost of the product. And there’s mark-up pricing, where a percentage is added to the wholesale prices. But competitive pricing ensures that you’re prepared to compete and have the best product prices to offer.

How are products priced under the competitive pricing strategy?

Pricing for online sales is tricky – on one hand, you must compete with other sellers. At the same time, you don’t want to completely de-value your product. Relying only on competitive pricing can lead to less-than-ideal outcomes as well: you may not sell enough products to make up your earnings from selling at lower prices.

Competition-based pricing doesn’t only cover buying patterns. It considers factors like price sensitivity, costs and yes, even competition! This ensures a continued flow of demand for your product listing, and covers overhead costs, production costs, and profit generation.

To arrive at the right price, first, you need to know about product lifecycle and at what stage a product is in. Also, competition is something you should start considering from the very beginning: the concept phase, and then throughout all the phases of the product’s life cycle.
Here are a few pricing strategies that are commonly practiced in the market today:

Pricing above other sellers/brands – You can price your products higher than that of another seller or brand but it’s not as simple as changing the price tag. Your product could use some new USPs like added features, software improvements, or extra accessories to justify that new price.
Pricing below other sellers/brands – The strategy of pricing your products below other sellers or brands is popularly known as the “loss leader strategy”. It is a great strategy for businesses trying to compete with various brands offering the same product. This may be the best strategy if you are willing to take a potential loss and if you know that your customers will buy additional products along with the considered product.
Levelling with other sellers/brands – You could level up to other sellers/brands by matching the prices they’re offering. With the same price tags, the buyers’ focus goes straight to the product. So, make sure your product stands out amongst the competition! Try using coupons to attract your buyers.

Effective pricing is vital to your business. These strategies mentioned here have their own use cases.
• You can choose price points that boost profitability with each unit that sells.
• Set prices that help you expand your market or help you stay in one.

Why is competitive pricing important for online sales?

The question that arises is this: Is it really that necessary to follow other sellers or brands? Why can’t you simply use your target profits margins and costs as a price determiner? Well yes, you could do that, but have you thought about what might happen if you overlooked other sellers or brands prices?

Online retailers - both newcomers and veterans - know that competitive pricing is the smarter way to meet their needs. Otherwise they risk losing out on sales to other sellers or brands – a point of view that works for both offline and online merchants.

Competitive pricing at Amazon

Tough competition, product substitutes, and finding new buyers are some common issues online sellers face. Smart pricing tactics turn out to be a game changer in such cases. A competitive pricing analysis, has the following benefits:

1. It gives you an in-depth insight on the pricing strategies and models of other sellers or brands.
2. You can use the insight to respond faster to business challenges, new sellers or brands and reach buyers via unique prices.
3. You can keep track of other sellers using the particular website that lists your items.

The Amazon marketplace enables all types of businesses, individuals, and new and established players, to market and sell their products online. You might question the high level of competition here as all the big and small players list and sell products in the same way. So the chances of buyers finding substitutes are very high. While bigger players know how to maintain sales numbers, new or smaller traders might not be able to.

Listing your products on a proven marketplace like Amazon could be a game changer, for several reasons. You can leverage automate pricing and set rules to keep your prices competitve.

• It offers value driven competitive pricing policies.
• It uses a business model where sellers can easily on-board themselves.
• Its huge online customer base surely makes it a popular ecommerce marketplace, hence a lucrative sales channel.
Register with Amazon now and learn more about competitive pricing policies.
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