Wise Startup Blog

Pricing a product is a tricky job for an online retailer. I was looking at the ecommerce landscape, trying to understand the pricing methodologies that retailers follow when pricing a product. I had so many questions; a few of them are still unanswered.

Appeasing The Click-Hunter

Competition is just a click away and retailers have very less room for error when it comes to pricing a product. The price hunter goes away to the competitor if the product is a tad overpriced. Retailers face bottom line pressure if the product is under-priced and that kick starts the pressure to drive volumes to offset the hit. Manufacturers are breathing down the neck the whole time to make sure that retailers are not quoting below the MSRP. Recession is slowly changing the buying behavior and shoppers are becoming more price sensitive than earlier.

Fixing The Bottom-Line Pricing

With 1000s of products in the product mix, do retailers spend time on each product when fixing the price? Is the product pricing exercise a scientific one or still intuitive? Do the retailers look at pricing a product as a positioning exercise? It is not the promotions strategy that I am talking about. You might have the lowest price displayed but offset it with higher shipping or moderate pricing with no shipping cost etc. What I am talking about is about fixing the “bottom line price” – the total cost of ownership of the product to the buyer.

One of the successful online retailers I know was saying that the below thumb rule worked for his pricing strategy.

(Cost + desired margin) a deep look at inventory level, traffic data, competition analysis = product price

Do you have any such thumb rules to share?

I thank Andrew Wise for giving me an opportunity to guest blog at WiseStartupblog.com. My name is Idris, an Internet Marketing professional. I blog @ Retail-eCommerce.com, an official ecommerce blog owned by Mobius Knowledge Services.