What is Pricing?

What do you have to take into account when defining your pricing strategy?

- 3 Minutes read

Pricing is the term that comprehends the different methodologies to determine the prices of products used by retailers and brands. It is also commonly known as pricing strategy, and companies can apply many different methods to set their prices according to various factors. In e-commerce markets, the optimization of pricing policies is the key to success.

Pricing aims to achieve several correlated goals:

  • Improve your store’s competitiveness by setting competitive prices in the market.

  • Along with the competitiveness of your company, the primary purpose of establishing a pricing strategy is the increase in the conversion rate; that means, get to improve the number of sales.

  • However, good pricing is not based uniquely on achieving a proper conversion rate. Companies also look after increasing both their conversion rate and profit margin at the same time. Do not consider having a loss of profit only because you want to increase the number of sales.

How can we achieve our pricing strategy goals, though? There are many possible strategies. Depending on the vertical market you are in, or what type of product you sell; there may be a few methodologies that could work for you. However, in terms of e-commerce business, there is one factor that always matters: competition.

Competitor’s price comparison will help you set better prices


Thus, you may ask yourself, what do others have to do with my products? Currently, the number of competitors over the digital space has increased so much that it is impossible to sell online without keeping an eye on them. When selling online, internet users typically choose where to buy, considering mostly the price; that means offering competitive and attractive prices for customers is vital for your store.

Nevertheless, keeping track of all your competitors’ products is a never-ending tiresome task, almost impossible, depending on the industry you are working. Prices are quite volatile and frequently change in the market. A practical yet profitable solution would be introducing price monitoring tools.

By using monitoring tools, you automate the process of continuously searching and updating the pricing database of all your competitors. In addition, you have a much broader and more detailed understanding of the real market situation. Thus, by making a competition’s price comparison, you will be able to set more competitive prices.

Besides, you can boost your competitiveness when you have a better insight into the three main indicators any e-commerce store should be aware of; that is, price index and margin and conversion rate.

By optimizing these three metrics, you will enable your digital store to be truly competitive and also improve its positioning in marketplaces such as Google Shopping or Amazon. The key remains in a price index equal or higher than its reference figure; maintaining or broadening your profit margins, and increasing your conversion rate at the same time.

If it is a product that has a lot of elasticity (that means, its price changes according to the volume of demand), you can visualize its price history chart by using these price monitoring tools. Shortly this data may help you anticipate future sale opportunities, organize your stock and maximize your benefits.

Brands and its pricing policies


Pricing methodologies also has considerable importance for brands. Establishing a proper and well-defined pricing policy is crucial for brands to maintain the image of their company and business plan.

In the case of brands, image and branding are truly indispensable factors that you need to consider when setting recommended listed prices. However, doing market research is helpful to identify what is the competitors’ product’s value in the several distribution channels, and to have a full point of view of the current market status.