How to improve your pricing policy and increase revenues and profit margins.

For those who sell online, deciding the sale price is one of the most important and complex decisions to take.

Some of the traditional methods, like the mark-up pricing adds a profit margin to the costs (goods, depreciation, client acquisition, tax, etc...), are not enough for the online market, where the flexibility of demand and the competitiveness are very high.

8 out of 10 people compare prices on 4 different websites before purchasing goods, and a difference - however small – in the price can be decisive for the sale.

Build a pricing policy without considering your target market is useless and a preliminary analysis is not enough. We suggest that the monitoring process must be continuous and accurate because prices online are dynamic and might change all the time.

A dynamic price varies over time according to an algorithm that takes into account different factors, such as time of day, available stock, number of visitors on the web page, and of course the price of the main online competitors.

The price of the product therefore is not set by the seller but it varies depending on who is watching the product.

Amazon, thanks to price optimization and to the automation of logistics, holds 20% of the world market. It corrects 2.5 million prices per day, and a single price can change up to 8 times a day.

Therefore, just as it makes no sense to define a price only according to your own costs, even the concept of building an effective pricing policy by manually monitoring your target market is an utopia. To succeed on the Internet you need the assistance of professional tools capable of monitoring thousands of products automatically and warn you promptly when you lose competitiveness.

But there is also good news. Only 5% of online shops now use dynamic pricing (we estimate that, by next year, this percentage will raise to between 15 and 20% of online shops) and automatic monitoring of competitors, thanks to Competitoor, can be done at reasonable costs.

The Competitoor’s Starter plan costs only € 59 per month, doesn’t require any computer skills to use and is perfect to monitor between 50 and 100 products on 4-5 competing sites as well as on Amazon and Ebay.

By using Competitoor’s Starter plan intelligently, i.e. choosing to monitor products that are significant, you can maintain a competitive catalogue of hundreds of products and increase sales and profit margins.

What is the maximum difference between two prices for them to be considered similar?

What other factors influence customers’ choices? Is it possible to increase sales if you don’t have the lowest price in the market?

We’ll talk about it next week.

dynamic-priceUsers that view Amazon’s pages at different times of the day or from different physical locations see different prices. This way, Amazon increases the probability of selling the product and maximizes profit.