Whether you have experience in online sales or not, you probably know that pricing is often one of the most important criteria for the customer. Of course, we all like a good deal, but pricing also affects our perception of a product. We previously talked about low-cost pricing and premium pricing strategies. But pricing is more complex than that, and getting the price right is one of the most important things in maximizing sales and profits. Different businesses have different products, customers, and competitive environments, so they need the best strategy for their business. Let’s talk about the seven main pricing strategies that apply to Ecommerce and online sales.
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I have met many aspiring entrepreneurs over the years. While some were quick to start their first business, most were struggling to get started. I have heard many reasons (some would say excuses) why they wanted to start a business but could not: lack of funds, not enough education or experience, or too busy with their job. But the one reason that comes up the most is finding the right idea. It is easy to convince someone that they can start a business without a Harvard MBA or a million dollars in the bank. But getting them to acknowledge they can find a good business idea is more difficult.
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Starting a business is always an exciting adventure. But after some time, entrepreneurs will begin to wonder, “What’s next?”. The Ansoff Matrix is an easy framework to figure out growth strategies, even though it was created in the 1950s! With the expansion of ecommerce, are these strategies still valid today? Let’s find out!
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Behind this provocative title, I want to highlight a grim reality in the ecommerce world: too many unsuccessful entrepreneurs are actually trying to trade commodities on Amazon. You probably know that commodities are products like steel, sand, or oil. But if you think about it, many products sold to online consumers are close to being commodities. And being a commodity seller isn’t where you want to be as an ecommerce entrepreneur. Let’s see why.
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How many competitors do you think you have? Are you sure your environment isn’t more competitive than that? It is easy to underestimate how many competitors a company has. While finding out about direct competitors is easy, the threat of indirect competitors (or threat of substitutes) can be more difficult to evaluate. Ultimately, when does this competition matter, and when is it less of a problem? Let’s find out!
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Even with a great idea in mind, starting a business is tough. It may require resources, knowledge, capital, and even a permit or license – and existing competitors won’t make your life any easier. Entrepreneurship is an exciting adventure, and we are all attracted by potential profit. But we must consider how tough the barriers to entry are to see if entering a market is technically possible. Even when it is technically possible, entering a new market does not guarantee success. That is why I like to differentiate the two types of barriers to entry: those that prevent access to a market and those that prevent new entrants from having a fighting chance at making a profit.
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People will buy products that solve their problems and/or make their life better.
That is for me the main idea on what’s an attractive value proposition and I could stop writing here. But as the basketball coach John Wooden said, “It’s the little details that are vital. Little things make big things happen.” Let’s see how the customers evaluate a value proposition, make their decisions, and why this isn’t easy for them.
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Premium means more than just good quality.
I remember going out with this girl a couple of years ago. She was really into fashion and always wore a stylish outfit. In a conversation, she was very excited to tell me that she was carrying her rare Louis Vuitton purse that day and the story behind that purchase. I know absolutely nothing about fashion, but I know these are not cheap. Sure, her purse looked good. But why was she so excited about it? Was it because of a unique design? Or extremely high-quality materials? What justifies the four-figure price tag?
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“Metaverse”, “Cloud Computing”, “Datafication”; these days, it feels like every other news article about business is trying to use as many technology keywords as possible. We hear about innovation and disruption in the entertainment, medicine, and transportation fields everyday. I’d say that half of the people using these buzzwords have no idea what they are talking about, but they feel they have to use them to sound smart. It is easy to get a sense of technology being important for businesses and entrepreneurs, including those operating online. A huge part of top companies are tech for certain reasons. Technologies and technical processes can create opportunities and improve operations. After all, the internet is the reason ecommerce exists in the first place. But technology can also kill businesses unwilling to adapt to the ever-changing environment. Let’s see how.
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At the beginning of 2022, we all realized how crazy inflation is. It hit me hard when I saw the price of my favorite brisket sandwiches increase by $1.50. Everything becomes so much more expensive : our favorite foods, plane tickets, housing, gas, etc. Many of us changed our shopping habits in response to the high inflation rates (I still buy the brisket sandwiches but sadly travel less often). Businesses had to adapt to maintain their profitability but also to keep customers interested. Let’s see how inflation impacts ecommerce and businesses in general.
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My name is François, I’m the author of this blog. I love writing and talking about business and ecommerce. I hope you enjoy my work, feel free to contact me for any suggestion!