The variety and transparency in eCommerce give customers a lot of advantages. Manufacturers, products and prices – everything can be compared to each other easily. Almost every product is available everywhere and at any time. The only problem: One has to decide – for the right article, the best brand and the fairest price. This is a rather hard decision facing a steadily growing number of stores and market places.
The online trading is and will remain a market that is being driven by pricing. Thus, the price is often the decisive criterion when deciding to purchase. Price comparison portals still enjoy great popularity. 40 percent of the customers stated that Internet price comparison portals were worth being used. Another survey ran by Statista” shows that price comparison portals rank among the most important Internet sources that influence purchase decisions. The price is not only an important pointer for customers but also for the brand manufacturers and online merchants. They are able to monitor their competitors’ prices much easier than they are in stationary trade. Consequently, price changes can be implemented faster and at short notice. In eCommerce the price is given an even higher relevance as criterion for purchase decisions but its significance to distribution strategies is greater as well.
Why is the price that important to the online trade?
The pricing expert Hermann Simon gives a simple and punchy answer in his book Preisheiten. Alles was Sie über Preise wissen müssen: The price simply is the strongest profit booster. According to him, no other marketing tool works as well as the price to fast and effectively control the sales. Pricing projects have elementary advantages over other marketing strategies: While they can be performed fast employing only small investments they directly influence the profit. The advantages are perfectly obvious but yet their practical implementation is often difficult. Georg Tacke who is CEO at the business consultancy Simon-Kucher & Partners expounded during an interview by “Wirtschaftswoche” that so far only about a third of the companies are aware of how a good pricing is done and that all the others were missing 25 percent profit.
What makes a good pricing?
In our article “Pricing strategies for online retailers” we have already discussed the pros and cons of high- and low price strategies. However, no matter which path a provider chooses one thing is always in the focus: the price image. “The price image consists of the subjective perception and the awareness of certain price features that each customer has towards a certain company.” says Dr. Gesa Crockford, CEO of Conomic Marketing & Strategy Consultants.
Since the variety of offers is huge the customer can only face up to the particular product prices certain manufacturers’ and articles’ price images receives high significance to the decision process. A potential customer does not always regard the concrete price but does often orientate himself towards the price image that is being communicated by the respective company. The first lead is being created by the company’s name or slogan, such as Expert – inexpensive and competent or Loréal – Because I’m worth it. That way, the communicated price image simplifies the purchase of lots of different products because it is being projected on the entire assortment by the customer. For instance, those who shop at a discount store assume all offered products to be cheaper and do not compare the products to others carefully. At this point, the price image has a guidance function.
It is a highly complex and multidimensional construct that arises from different dimensions such as quality, brand, trust and service interacting. It must not me reduced to the classic cost-benefit ratio. The second part of our series will tell you more about the factors and methods that need to be employed in order to found a sustainable price image as an eCommerce strategy.
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