This is because for your customers, the price you set is far from being a simple number. It can touch on fundamentals like values, status, gratification… or even — don’t laugh — joy.
Everyone loves a good deal, and there are reasons and reactions to a purchase that can dig deep into the emotional side. That's why there's a whole culture around unboxing products and the satisfaction it can bring.
As a retailer, your pricing can evoke a range of emotions in your customers about your store, your product line and your brand.
In this article, we'll dig into the issue of retail pricing with the help of several experts. You'll discover:
How to Price a Product for Retail
9 Retail Pricing Tactics
How to Choose a Retail Pricing Strategy
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Three Ways to Price a Product for Retail
"Pricing is one of the key levers to control profit margins; but on the germany whatsapp number other hand, prices that are too high will drive customers away and push them to the competition," says Josh Pollack, a pricing expert at the Parker Avery Group , a retail and consumer goods consulting firm.
An interesting way to start thinking about your pricing is to ask yourself whether a product is a recurring or one-time purchase, says Abir Syed, a CPA and e-commerce consultant at UpCounting .
“If an item is a one-time purchase (say, a pool table), you’ll want to make your money back based on the customer acquisition cost. On the other hand, if it’s a recurring purchase (say, a protein bar), you can lower the price knowing that you’ll make your money back based on the lifetime value of the customer.”
Additionally, different products require distinct pricing strategies, depending on your customers' attitudes and price sensitivity for the respective product type.
Pricing: Traffic and Margin Improvement Factors
This is where things get more strategic.
Some items can be considered “ traffic creators ,” says Parker Avery’s Josh. “Prices and promotions on these items can be deployed to increase unit sales and traffic. Others are “ margin enhancers .” Customers are much less attentive to the relative prices of these items, so prices can be shifted to improve profitability. Retailers can develop a series of pricing strategies to apply across product categories.”
There are a few broad approaches to pricing. You can:
Setting a price based on your costs . To do this, you need to have a clear idea of how much your product costs and raise the price until it is profitable (we'll talk about profit margins later). To do this properly, you need to have a good idea of your sales and marketing costs, your overhead costs, and how much inventory you can realistically sell.