A correct price optimisation is challenging to many retailers. In their quest for additional profit, they frequently throw away margin potential. We show you how to optimise product prices and which mistakes you should avoid.
Mistake #1: Products with above average margins are spared from price increases
Online retailers often concentrate on products with low margins when they seek to optimise prices. At first glance, these appear to be the most suited to price increase. Unprofitable business, however, is usually rooted in such product groups. Cause for this could be highly-intense competition for standard products.
Major potential for price increase, on the other hand, is hidden within products of higher margin, as a result, for example, of outstanding competitive position. It is here that retailers often overlook the potentially upward pricing movement, since their target margin has already been achieved. Customers in this case are potentially prepared to pay a higher price. As a retailer, try testing those products with above-average margins for price increase to achieve additional profit.
Mistake #2: Ignoring the market
The price comparison of various online retailers has long since become routine among consumers. 44 percent compare prices on the internet before purchase and, for 80 percent, price plays an important role in the purchasing decision. Observing competitors, for this reason, has become inescapable for online retailers. Always keep prices on the market within view and adjust your price setting rigidly to current developments. An intelligent software for price observation on the Internet creates for you the required transparency and helps you to optimally determine prices. In our article series on the topic of price optimisation, we show you which advantages the employment of such a tool provides.
Mistake #3: Absent data systems and infrastructure for price optimisation
Price optimisation in eCommerce does hold some difficulties in store for retailers. The more competitive a market is, the faster within this setting prices will alter, which then requires a reaction. Also, the seemingly endless number of online shops presents retailers with a huge, non-uniform volume of data, which must then be overcome.
Many retailers in this regard are absent in their companies of the essential infrastructure. The processes for price setting and alteration of prices are often not clearly defined, so that a systematic price observation does not take place. In this case, they should monitor basic pricing metrics on a regular basis in order to remain competitive. Additionally, retailers are often missing a valid data system, which automatically collects and analyses the required information about competitors. Innovative technologies are required in this context, which can efficiently process competitor data.
With clearly defined responsibilities and processes for pricing, together with an intelligent, competitive analysis tool like blackbee, you will be establishing the essentials for perfect price optimisation.
Effective price setting is the cornerstone of a profitable business. Inform yourself from our white paper, Price optimisation for online retailers, how you can arrive at a perfect pricing strategy on the Internet with the aid of price optimisation software.