How to use price variation to boost your eCommerce sales
The Internet has drastically transformed the world. It gave birth to one of the most popular industries today - eCommerce, which has undoubtedly become the most preferred mode of shopping today thanks to the convenience it offers to shoppers.
An important factor that determines the success and failure of an eCommerce business is its pricing strategy. Gone are the days when you couldn’t keep altering the prices due to the complexities involved in it. Today, the Internet has not only reduced the effort and cost involved in updating prices but also eased the process of tracking the response of customers to it.
But let us start from where it all began - the traditional brick-and-mortar stores.
Price Variations in the physical stores
In conventional brick-and-mortar shops, the variations in the cost are a long-settled practice. It was done predominantly to identify the "sweet spot" for the price at which an item can be sold.
Usually, supermarkets are the best place for this pricing practice. Right from planning the layout to where the products must be placed, everything is conceived, tested, and evaluated beforehand, to gain the highest profits. When smart pricing strategies such as price variation are used while selling products, these supermarkets tend to succeed in the competitive marketplace.
A price variation strategy not only helps to improve the footfall but also in attracting high-volume customers. This is because the price is one of the first things that the consumer notices about a product. When they see prices that are reasonable and well within their accepted range, they end up buying the product.
Price variations in eCommerce stores
Just like physical stores, price variation also has an important role to play in your eCommerce store. Varying your price is crucial in reaching high conversion. In fact, managing price variation is a piece of cake in an online store. Not only can you update the price instantly, you can also use the abundance of buyer's data and patterns to select the right price. The Internet has dramatically cut short the experimental cost for eCommerce players.
Moreover, it has also paved the way to identify the buyer's response on the price and product. If the response is good, you can continue with it, or else, you can keep varying it till you reach the desired outcome.
Some online marketplaces, such as Amazon or Flipkart, are not appropriate for these pricing experiments. However, platforms like eBay offer you price variations.
How does price variation work?
Let us consider eBay as our target platform. Usually, the sellers on eBay have the flexibility to design their own sales strategy. The sellers can select the listing title and image of their product with the product description, shipping fee, and the sales mechanism.
Unlike the traditional method, nowadays, the sellers can easily change the sales parameters for every product to increasing sales. In other words, you can implement different sales strategies to test the hypotheses about consumer behavior and find the best approach to improve sales.
Let's get deep into this with an example of how variational price listing on eBay works.
A seller ‘XYZRetail" listed the same product 15 times under different prices and sales strategies. Out of this, 10 of the listings had a fixed price of about Rs.100, while the others were sent directly to auctions scheduled the following week.
In addition, the seller varied the shipping fees between Rs.5 and Rs.10 for each listing. The seller's listing was listed out on multiple pages based on eBay's algorithm and unlikely to compete with each other.
This is considered an excellent price variation strategy that can increase visitor numbers.
Consumers usually do not pay a lot of attention to the shipping fees when compared to the regular prices of the products. A small experiment was conducted to analyze this behavior.
The experiment and its subsequent results showed that an increase in the shipping fee by Rs. 1 was compensated on the auction price by decreasing Rs. 0.82. And it was also suggested to the customers that the shipping cost would not be included with the cost of the product. The customer never noticed that there was actually an Rs.1 price increase in the total cost.
How to run a price variation experiment in your business?
As a first step, you need to set your own hypothesis. Try multiple prices on multiple listings simultaneously to find out which one suits you perfectly. The price should not only benefit your business it should also be welcomed by the customers. In other words, vary your product's price to analyze its impact on your customers.
Segment your analysis to different product categories and maintain a record of your experiments in an excel sheet to analyze your sales in each of the product categories. Try running the experiments for several weeks and note down what factors it brings to the table. If you can do that, then you can also run these experiments across different marketplaces to analyze them.
In the end, you can understand whether your hypothesis has been proven or not and act based on it. By doing so, you can come up with a clear conclusion about how to price your product correctly.
Building a price variation strategy is never easy and takes time, effort, and money to run the experiments around it. But when you do it perfectly, the results can be useful to boost your sales and expand quickly.
However, there are several business owners who are unable to expand their business because their present business is eating away their daily hours. This is where you need to partner with an expert like Powerhouse91. We acquire and operate eCommerce brands on Amazon and scale it up to the next level. To know more, contact us now.