Pricing models

How to develop a pricing strategy in order to price products of the online store.

Pricing models like cost-plus pricing, value-based pricing, fixed pricing and performance-based pricing are commonly used in the ecommerce sphere as basic pricing models.

Cost-Plus Pricing model counts the costs associated with offering a product or a service delivering and adding on a percentage for a profit.

Value-Based Pricing allows to set the price in concordants with the perceived value to the customers. That means that price to one customer may be different than the price offered to another one.

Fixed Pricing propose to set fixed price for offered service regardless of the unexpected expenses. Of course fixed pricing model should estimate the complexity of services and calculate all the resources included to the service in order to protect the revenue.

Performance-Based Pricing is based on product or service perfomance your online store delivers. This model could be used for certain clients and in specific situations. After the particular agreement signing with the client, very clear and unambiguous metrics should be developed for achievement of the objectives. In case if you feel time or clients pressure it is not recommended to implement this pricing model.

Different pricing models may be used in order to maximize profits within the business.

The best components of pricing models can be selected to establish the basis for perfect pricing strategy for your online store.

Rules of perfect pricing strategy, Pricing models

Rules of perfect pricing strategy

Perfect ecommerce pricing strategies should contain two following understandings about the price according to the shape of the demand curve.

The first understanding is: the higher price leads to the lowering of the readiness to buy among the customers.

The second understanding is: the lower price injures the online store margin and leads to missing of the possible revenue.

The perfect pricing solutions and the best pricing practices intend the price setting based on customers price perception.

What is product pricing strategy?

Every buyer intuitively determines an optimal price, which he or she is ready to pay for the certain product at the moment.

Pricing models, Optimal retail strategies, Develop a pricing strategy

Competera suggests such benefits as:

  • Price monitoring on SKU level
  • Timely data delivery is guaranteed - if one needs data at 9 a.m. — Competera delivers it at 9 a.m.
  • Notification on price changings
  • Price history analytics

When pricing manager is searching for optimal pricing strategy he or she has to be ruled by the understanding of customers price perception, namely by their view of price optimality.

Optimal retail strategies

How to define customers price optimality and build the optimal pricing strategy for the online store?

Customers view of optimal prices is highly affected by stable and unstable factors.

Unstable factors like the time of the day usually determine the spontaneous purchases.

Pricing manager should turn the attention on stable factors like customers habits.

There is the fact in witness - 8 of 10 customers compare the prices at least of two stores making an online purchase.

Efficient pricing managers always try to be in advance and for that very reason they track competitors pricing before the customers do it.

Retail leaders prefer to implement competitive pricing strategy because it is based on timely and competitive data.

Ecommerce price monitoring tools

Competitor benchmarking is a great price tracking tool, which collects all the information on competitors price changes for all the time.

Competera helps to make the analysis of the competitors price changes and provides with an access to the changelog within each separate product for the clients.

Providing competitive benchmarking Competera compares the product categories and highlights the products that need attention and recommends actions that need to be taken.

The process of developing and implementing a proper pricing strategy is easier and more efficient with Competera

because of benefits suggestions which are price monitoring on SKU level, timely data delivery (if one needs data at 9 am - Competera delivers it at 9 am), notifications on competitors price changings and price history analytics.

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Pricing resources