Whether you're thinking about your price policy for the first time or you're changing it in order to make it more effective for your online sales, you need to consider these 5 tips. Moreover these tips will help you to avoid a price battle that would be a lose-lose strategy.

1 - Know your profit margins

Lowering the price of your products will make them more marketable, you will have more visitors and, probably, more sales. "Low price" and "best price" are among the main keywords across Google and the info-commerce – i.e., the online search before purchasing - is the first source of e-commerce traffic.

best price graph

Google searches performances about the sentences "prices" and "best price"

Selling more does not mean earning more, though: the profit margin is the key factor between the success and failure of a store.

If you do not know your profit margin, working on price optimizations can be very risky. First of all, consider all the costs associated with the product (purchase cost, packaging, shipping,...). Second of all, calculate the time it takes to handle and ship the product. These two are the direct expenditures related to the product.

After doing this, please start considering the costs associated with marketing, taxes, employees, supplies and so on. These are costs to be spread all over the products you're going to sell.

Sum up these costs and you'll reach the minimum selling price (please see more information about the Total Cost of Ownership). Of course now you need to charge the product with the margin amount which strongly depends on your target market and your sales volume.

If you don't know how much to charge the product, start with an online search and analyze your competitors. This survey will give you the basic margin percentage with which to start.

2 - Enhance what makes you different from others

Every successful online store has something that sets it apart from the competition. It may be the care they put in customer service, speed of delivery, or a catalogue of exclusive products.

Being different - distinguishing yourself from rest of the market - justifies higher prices and customer loyalty.

Make a list of things that make your business better than your competitors and improve them in your communication and advertising.

3 - Use the Lose-Leader strategy correctly

The Lose-Leader strategy is the ability to put a product on the market at a very low cost (or even free) in order to attract customers and sell other products with high profit margins and maintain total profit.

Think, for example, about coffee machines offered free to stimulate the sale of wafers, shaving razors and their blades, or video games "bundled" with the console.

If you need to enter a new market, this strategy, with due care, allows you to snatch customers away from competition.

Of course be very careful and calculate the results wisely. As a suggestion, you can get huge benefits by using products that have a low CPA (Cost Per Acquisition).

4 - Offer incentives, and often works  on the price

There's nothing more depressing than an e-commerce website with a catalogue that does not vary over time and does not reward its most loyal customers.

A customized offer rather than time-limited offers can convince those who are undecided to complete the purchase and will certainly show that the online store is managed in a careful and professional way. Amazon varies prices even during the same day, forcing the customers to return often on the site and thus gaining return visits.

5- Extend your offer

An e-commerce, usually, doesn't assess a particular geographical area and must be able to reach a wider audience than the traditional store. The most successful e-commerce websites, however, have a clear target audience.

Try to add products or services that may appeal to the same customers who already know you.

If you sell shoes, you can add clothing, but also jewellery, leather goods or accessories. Mr Porter, Luisa Via Roma, Asos and Urban Outfitter lead the way.

Finally the most important piece of advice: always remember you are selling online! Make many tests using the right tools to monitor and optimize the effectiveness of your strategy.

Measuring the results will allow you to find your way to success.