I reflected on how pricing affects sales, attitudes, and buying behaviour.
Drawing from my experience in pricing strategy, below are some key tips for you.
eCommerce
Pencil in a modest price increase, whenever possible, especially amidst such turbulent times. Run A/B tests to determine which price level yields better results, then schedule periodic reviews. Protect your margins and remember that your competitors may respond.
*Sales of the smaller brands tend to be more responsive to price adjustments.
*In contrast, industry whales display less volatility surrounding price cuts/increases.
The sweet spot? Position your pricing slightly below that of the largest competitors.
Services
Alongside the fundamental considerations such as covering costs, setting up a target profit margin, and conducting a competitive analysis, consider the value your service delivers to your clients. Price accordingly.
Manufacturers
While you do have the luxury of setting the stage, oftentimes it's your distributors cueing the orchestra. As you need to focus on maintaining good relationships with your customers, you might feel pressured to offer price drops. Discount (mainly) to advertise.
What about price promotions?
Offers tend to re-engage previous buyers rather than increase market penetration, reaching new customers at scale (apart from the fortunate few who stumbled upon your sale by chance). Lower penetration = smaller market share. Carefully evaluate your "why" before you carelessly cheapen the brand. Regularly launching price promotions establishes a lower price reference for your offering. Train your customers how to shop.
Messaging & Margins
If you do need a short-term revenue boost while building an above-average or premium brand, consider reframing the message. Try branding your sale as an "event". Make it engaging and unique. Use it to further emphasise your values, for example, by planting 1 tree per order. Provide value. Always make efforts to offset the impact on margins (e.g., negotiate with suppliers or request a customer’s email address to reveal the offer → improve LTV). Leave a lasting impact beyond here and now.
