The way your merchandise is priced affects more than just your profit margins. Of course, if you’re missing the ideal price points, your revenue stream will suffer, but that isn’t where the potential harm to your business stops. From brand image to being smothered by competition, there are many factors to consider before you break out the pricing tags and equipment.
The importance of proper pricing
It’s easy for stores and consumers alike to research and compare pricing from different retailers, which adds another dimension to your pricing strategy. As a result, it’s important to pay attention to sales and markdowns being promoted by your competitors.
Even if the return you make on each product isn’t your focus as a business owner, it’s still a relevant topic. According to 360pi, a company that strives to draw insights regarding product pricing, price is the primary factor to be considered in a marketing strategy, regardless of your company’s mission statement and priorities.
The source stated that finding your niche in the market is the ultimate defense when it comes to competing against big companies with notable names. In the same vein, your pricing practices have an influence on the reputation of your brand. Brand perception is tied to the general cost of your merchandise, whether you’re considered an upscale retailer or a budget-friendly shop. If you choose to price outside of your typical realm, consumer loyalty may suffer, 360pi pointed out.
Types of pricing strategies
The most traditional way to price your products is by drawing comparisons with the local and direct competition, or market-based pricing. However, that isn’t the only option when you’re armed with a tagging gun.
The concept of customers bartering the price of merchandise based on the competitors is ever-increasing in popularity, from big names like Wal-Mart to mom-and-pop shops in small towns. Often shoppers can bring in some form of proof that the same product is being sold elsewhere at a better price to receive the same price in your store. This practice strives to eliminate the need for customers to peruse other stores while building consumer loyalty and trust, according to 360pi. However, the source warns against accepting price quotes without verification. The key to avoid getting duped is to establish solid and transparent rules about price matching.
Customer-centric pricing requires the ability to gather and analyze information about your loyal shoppers beyond the merchandise they find on your display fixtures. According to the American Marketing Association, this is done by considering whether customers have an allegiance with a particular product versus dedication to shopping in a geographical zone. If there are customers who research the least expensive place to buy a certain brand, they may be comparing your prices with businesses you hadn’t considered direct competition because they aren’t located nearby.
Changing up your pricing to reflect your customer’s spending habits begins by identifying your best and most loyal customers. The AMA explained that this can be done by finding your top shoppers based on the amount of sales they generate or determining the best customers based on how profitable each is.
Promoting prices in a customer-centric format is also a bit different than a strategy that focuses on competition in the market. You must tailor your advertising efforts to your findings and publicize seasonal price changes heavily, the source determined. Additionally, data collection can allow you to monitor price elasticity. To do so, it’s important to track how prices change, the resulting profit margins and more details that provide a better understanding of the big picture.