When was the last time you increased the prices of your products or services? It could be about time to identify your price increase opportunities.
This topic is one of the most challenging product marketing and pricing topics. A common belief of business owners or entrepreneurs is that by increasing prices they make their customers angry or in the worst case scenario, lose them.
We all know however, that it is standard practice that wages, petrol prices or other costs go up in business. The bottom line is, even if you don't want want to increase prices, your costs might push you to do so.
However, it might not be the best idea to blindly increase all of your prices by a fixed amount. In this case you could lose many of your raving customers and fans.
It is better to plan ahead and find price increase opportunities that fit in on the market place and with your product strategies.
Find best ways to discover price increase opportunities
What stage is your product at?
Define the price and possible price increases depending on the products' life cycle. There are four known stages of product growth: introduction, growth, maturity and decline. The introduction stage can be a bit risky for a price increase because you're trying to introduce the product to the market. This is the stage where you should fine-tune your marketing mix. In the growth stage your sales will grow rapidly, so it's the right time to consider increasing your prices with growing demand. In the maturity stage you might fight for your market share and try to achieve cost reductions, as well as look closely into ways on how to keep your product sales stable. Finally, in the decline stage you might consider phasing out the product or relaunching it at a different price point.
How often do you review your pricing?
Do you review your prices weekly, monthly or at another time frequency? Track your growth margin on a regular basis so you can identify when your costs go up and when to introduce a price increase.
Do you compare product conversions?
Another tip from our end is to compare product conversions. Monitor and analyze the statistics of people who browse your e-commerce store versus the people who check-out and buy your product. Is the web pages ‘call to action’ right for your buyers or is the design and user experience good enough?
Product conversions can also be monitored by our conversion analytics software FutureMargin that measures, guides and evaluates your systematic product pricing and increases your e-commerce profits. For example, you can find out that equivalent products differ by price but have similar conversions - number of sales per visitor. Here lies the opportunity to raise the price of the cheaper product.
What's your customer's opinion?
Pricing is one of the main attributes that customers compare, so you want to keep it accurate. However, it's not the only image that they see when making the final purchasing decision. For example, when you're building a strong and sustainable brand, you will be able to position your products or services in a unique way. Premium product quality will make the difference in seeing the product differently. You will then be able to use this advantage from a pricing point of view.
How are your competitors pricing their products?
Did your competitor prices go up? Pay attention to their pricing decisions, price change frequency or pricing communication. You might find out that you're under-pricing your products and your competitors are successfully selling theirs, although they may not offer the same quality. Another tactic is to monitor how your competitors control their costs.
When do you sell the most?
Which days, weeks or seasons influence the sale conversions and make some products sell better or worse than others? Analyze and identify these peaks or lows and increase prices while demand is high or drop prices when demand is low. Work with elasticity of demand in mind, e.g. when it's summer break, ski season or Christmas time.
Pricing is one of the core pillars of a marketing mix. Be analytical, monitor conversions and review your pricing well enough so you don't miss out on higher profits or leave a bad impression on your customers.
FutureMargin is a pricing tool for evaluating and driving pricing strategies for e-commerce stores. Using historical sale, visitor and margin data, FutureMargin can be used to improve your e-shop product pricing and profit. Available integrations: Shopify app and API.