How to set the prices of an e-commerce

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One of the most complicated tasks in business is to set a sales value for your products. Monitoring prices of similar items is an important step towards establishing an optimal pricing strategy. There are several factors when determining a price, these can be internal such as the cost of the product or external as the price of rivals. In order to have a better market picture, it is necessary to follow competitors’ prices and study the evolution of prices.

Identify factors that influence price

In order to increase the conversion rate of your products you need to be sure of the type of person you are targeting. Setting a low price can be perceived by the customer in a negative way, by identifying price with quality. Setting a price that is too high can make the user not value our product properly. You need to know the customer well to set a price.

Competition is another factor that influences the price of the product you intend to sell. You have monitoring tools that can provide you with specific market insight. A way you can enter the market quickly is to offer your products below the price of your competitors. However, you must always be careful that the profit margin of your products does not drop too low.

When implementing a pricing strategy, you can be guided by three main factors:


On the cost:

It is the simplest as it takes into consideration the cost of production and the profit margin on it. To increase the margin, you either negotiate a lower price with your suppliers or you increase the final value of your items

On the market

Market will determine the maximum value of the product you put on sale. Pricing through this aspect has a psychological value as the consumer’s perception of the product will determine its price.


The competition

Minimum price is set by the cost of the product. You can track prices and use monitoring tools to get an advantage, or if necessary offer an additional attribute such as product availability, distribution or other services.

Defining a pricing strategy

Once you have identified the life cycle or elasticity of your products, it is time to define a pricing strategy. You have to consider also the competition you are going to face and their prices. Using monitoring tools such as netRivals provides, you can efficiently control your competition while saving time and money.

When entering the market you can apply a strategy of penetration, which consists of lowering prices to enter quickly and then raise prices progressively to the value you wanted to reach in the first place. It is a campaign that offers visibility in the market, but it is risky if the profit margin is not respected.

Focusing prices on emotion over logic can be a useful tool in some cases. These are so-called psychological prices. A good example would be to put an article on sale for 19 euros instead of 20, making the consumer believe that he is saving or that he is buying a product at a discount.

If your e-commerce has a lot of stock another workable method is to offer a price per lot. This technique improves if the products offered in the lot are complementary, for example offering earrings next to a bracelet.

When you want to be perceived by the consumer as a prestigious e-commerce, raising prices can be the solution. However, before taking this step, you should study your products and find out if they have a differential element that could justify a high price

If you plan to have a similar product line in your e-shop, loss-leader is a useful way to stimulate the purchase of a specific article. This method consists of using one or more products with low price, in order to attract new consumers who will end up buying products with higher returns for your store.

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