10 Best Ecommerce Pricing Strategies for Your Website [2024]

“Price is what you pay. Value is what you get.” – Warren Buffett (Wizard of Pricing)

Right pricing for the right product is the key factor in maximizing your eCommerce store’s revenue. You may often be stuck setting the right prices for your store’s products. You may face confusion and questions like — “Do I have to set the prices higher to have profit?” Or “Do I have to set lower prices to attract more customers?”

Using the best eCommerce pricing strategies for your website is the key to all. In this article, you will find all your answers related to eCommerce pricing strategies for your website.

Quick Overview: 🧐

• What Are Pricing Strategies in eCommerce?
• Plan a Pricing Strategy Best Suited For Your Business And Customers
• The 10 Best eCommerce Pricing Strategies
  1. Cost-based Pricing
  2. Tier Pricing
  3. Competition-based Pricing
  4. Value-based Pricing
  5. Price Skimming
  6. Penetration Pricing
  7. Loss-leader Pricing
  8. Dynamic Pricing
  9. Premium Pricing
  10. Psychological Pricing
• How To Select a Pricing Strategy
• Final Words
• Frequently Asked Questions (FAQ)

Without taking more time, let’s get started.

What Are Pricing Strategies in eCommerce?

Every store owner should determine the optimum price of the products or services, adding manufacturing costs and estimated profit without affecting the quality of the product and customer value. You shouldn’t set too high or too low prices, or you will face abandoned carts and suffer loss. The method to set the best prices for the products is to use the eCommerce pricing strategy.

The eCommerce pricing strategies help the store owners to determine and set an optimum price of the products considering various factors.

Plan a Pricing Strategy Best Suited For Your Business And Customers

Quite often, the store owners may need to consider several factors while planning the right pricing strategy for their eCommerce store, such as:

• Demographics of the end customers
• Market demand
• Competitor’s pricing
• The actual cost of the product and its marketing

The factors mentioned above may vary from business to business, and therefore, eCommerce store owners may need to create a bespoke pricing strategy for their online store.

The 10 Best eCommerce Pricing Strategies

Stay no more confused using the best eCommerce pricing strategies provided here.

1. Cost-based Pricing
2. Tier Pricing
3. Competition-based Pricing
4. Value-based Pricing
5. Price Skimming
6. Penetration Pricing
7. Loss-leader Pricing
8. Dynamic Pricing
9. Premium Pricing
10. Psychological Pricing

1. Cost-based Pricing

Cost-based pricing helps you gain profit by adding a fixed amount margin to the total cost of the product. Cost-based pricing is a simple and basic pricing strategy for all new and small eCommerce businesses. Due to its simple, straightforward, and easy-to-calculate formula, it has become a widely used pricing strategy.

Let’s understand this better using an example. Suppose you are selling watches. The total cost price of which is $7, which includes $5 for its material and $2 for labor charges. In such a case, you can add your $3 and sell it for $10 on your online store. In reality, there are other costs as well that add to the actual cost price of the product, such as marketing, tax, etc.

A majority of eCommerce businesses set their profit margin between 50 to 100%. You have to charge fair for your product so you can avail profit from your product while maintaining your position in the competition.

2. Tier Pricing

The tier price strategy focuses on offering more discounts with more purchasing of products. With this strategy, you can increase the average order value by attracting customers to buy more of your products for higher discounts. For example, buy 1 get 5%, buy 2 get 20% and buy 4 at 50% discount attracts users to buy more. For instance, if you are a Magento 2 online store owner, you should try Meetanshi’s The Magento 2 Tier Price extension. It can help you implement the strategy in your Magento 2 store.

3. Competition-based Pricing

Consumers usually review their desired products and compare their prices on different websites before purchasing. You must compare your product’s price to your competitors’ similar product prices across the market and adjust your price accordingly. Don’t make the mistake of selling your products at the lowest of all the competitors as it may lead to losses. Also, don’t forget to consider marketing expenses and shipping costs while defining the product prices.

4. Value-based Pricing

The value-based pricing method focuses on the customer’s willingness to buy your product at its maximum price. This type of customer focuses on product quality. You must convince your customers that the product you are offering them is of the best quality and worth every penny.

Many pricing analysts prefer using this method. Moreover, this pricing method is more profitable than competitive and cost-based pricing, which applies long-term strategies. It’s proven that more than 34% of the population is willing to pay for sustainable products, and those payers would accept a 25% premium on average, based on the Global Sustainability Study, 2021.

5. Price Skimming

Suppose you are selling a one-of-a-kind product, then you can apply the price skimming strategy to your product. It consists of setting up a higher price for your product, and after more competitors offer the same product, you can lower your product’s price. This can generate more revenue for your business when there is less competition and make your business stand out from the competition with a lower price tag.

This pricing strategy is widely used for tech products like computers, TVs, smartphones, etc. Generally, the companies set higher prices during the product announcement to create hype, which subsides later on, to lure the customers with heavy discounts.

6. Penetration Pricing

Penetration pricing strategy works completely opposite of price skimming strategy. You can take assistance from this strategy when you are entering a competition-based market with your product. For instance, set your product’s price to the lowest to win new customers’ hearts and trust, and raise the product’s price accordingly after some time.

This is called a penetration pricing strategy. Works best to put your brand’s name on the leaderboard. It may be dangerous to your brand image as some customers assume your product is underrated or delivers poor quality. So you have to be careful using this pricing strategy.

7. Loss-leader Pricing

Loss-leader is pricing strategy practices on selling products with loss to lure the customers into purchasing a higher price product. You can adjust the loss when the customer buys the extra essential products to make the original product functional. For example, a printer and printer ink, a video game console and a video game, a razor and razor blades, etc.

8. Dynamic Pricing

A dynamic pricing strategy focuses on changing the prices based on the demand for the service or products. You can increase the price of a particular product when its demand surges and decrease its price when it subsides. Many service-based companies mostly use this pricing strategy.

9. Premium Pricing

The amount to be set for the product will determine its value. A premium pricing strategy sets the price for high-valued and luxury products. It would help if you used the premium pricing strategy to communicate that your brand strictly signifies status.

It is obvious that the customers who are buying these lavish products would also expect premium services. If you fail to do that, you will have a hard time with positive sales. In the case of this pricing strategy, you may also require to add a partial payment facility for your customers to purchase the products. See here what experts think about the partial payment facility in eCommerce.

10. Psychological Pricing

The psychological pricing strategy itself has several tricks in its sleeves. One of them is an odd-even pricing strategy that offers to trick customers’ brains by setting odd prices for the products. Most websites set their product’s prices in odd figures like $7.99 rather than $8.00. An experiment conducted by Robert Schindler and Thomas Kibarian in the year 1996, and result shows that products with a .99 ending figure have increased sales by 8%.

Anchor pricing strategy is another neat trick of psychological pricing strategy. In this method, the customer sees the reference price along with the original price of the product. For instance, suppose you run a discount in your store for particular products on a particular day or time, when a customer visits that product, they can see two prices, before and after discount as ‘$15 $10’ to show customers how much money they can save, even if $10 is the actual price of the product. This pricing strategy can help lure your customers to your products.

How To Select a Pricing Strategy

• Outline Your Objectives: You should consider some essential things while outlining your objectives, such as revenue goals, current customer base, targeted customers, and more, for determining the best pricing strategy for your store.
• Know Your Customers: You should analyze your customer base and their demand, what they want, and how much they are willing to pay for the products are crucial points to consider to set the prices and select the pricing strategies.
• Be Ready To Hire a Pricing Analyst: Hiring a dedicated pricing analyst can do all the research stuff for you and help you craft the best possible pricing strategy for your online store.

Final Words

You can consider many things while choosing the best eCommerce pricing strategy for your online store. It includes your business type, current market competition, product usability, and many more. You can choose any pricing strategy based on your business type to make your eCommerce business profitable. I hope this blog will help you find the appropriate eCommerce price strategy for your website. 🙂

Frequently Asked Questions (FAQs)

What is The Pricing Strategy in eCommerce?

The pricing strategies in the eCommerce business are unique techniques to help you set the prices of your products to lure the customers to purchase your products more to gain profit. Different strategies are applied for different types of eCommerce businesses. You must choose the best eCommerce pricing models for your website among them.

What Are The 5 Levels For Pricing Strategies in eCommerce?

Choosing the right strategic pricing method to set the appropriate price for your eCommerce business is not like having a cup of tea. First, you need to understand where your eCommerce business or company stands. There are five levels forged. Your company may fit in one of them, and based on that level; you can choose a pricing strategy for your company. They are as follows:

• Level 1: The Firefighter
• Level 2: The Policeman
• Level 3: The Partner
• Level 4: The Scientist
• Level 5: The Master