Determining the “appropriate” prices for ones’ products is a challenge every online merchant has to face. Since badly set pricing concepts can be devastating for the marketing the pressure is even more increased. Misplaced anchor price, decreasing margins and sales are nightmare scenarios of each retailer. However, what is the “appropriate” price? On the one hand, it has to suit the product as well as the market and make maximal profit – on the other hand the customers must be willing to pay it. The price image is majorly important here since it specifically thematises the unconscious role and impact the price has before it is actually compared consciously.
Having read the first part of our price image series you know about the importance of price image in eCommerce for merchants and customers. The second part, however, does focus on three crucial factors that are essential for a good price image:
1. Key value items as basis
2. Target-aimed price communication
3. Loyalty to the merchant
The proper basis
A good price image’s basis consists of key value items. Those are products a customer adduces in order to conceive an idea of the entire range of goods’ price level. They are regarded by the customers intensely and do consequently characterize a retailer’s price image. These products are greatly popular and are being bought very often what makes their advertisement extremely important. In supermarkets products such as milk and butter can be named key value items, in pharmacies it is for instance Aspirin and Voltaren. Using classical information sources such as tops/flops lists, customer demands as well as turnover and contribution margins one can detect their own assortment’s key items. In her article, Nicole Steinmetz speaks up for the extension of the classical mines of information by digital sources such as search requests, reviews, blogs and social media activities. She stated that those who adjusted their assortment regarding customer demands based on high quality information would soon prevail against their competitors. Here, the success does also depend on intelligent data analysis and interpretation.
Communicate the strategy accurately
Communication via the price can also influence the customers’ perception. Thus, large signs should be used sparely and well-aimed since they signalize a special offer. This is being explained in Dr. Kai-Markus Müllers book “NeuroPricing”. Once a customer matches a certain special price with a product this price becomes the basis for all further price perceptions of similar products. These anchor prices need to be fielded pointedly. Speaking of products that are made-to-last solid prices make more sense anyway because in the long term, stable prices result in steady price experiences and create the basis for price reliance. In general, price changes should always be applied carefully to the price-value-structure and most of all it has to be comprehensible to the customers. Price communication can also be implemented by using a certain retail brand such as “Walmart – Save money. Live better.” what already signalises a certain price image with the name.
The price image’s gist is the loyalty of customers. Increasing the number of repurchasers should always be aimed because customer acquisition is about 4-5 times as expensive as customer retention. Besides, 20 percent of the regular customers generate 40 percent of an online store’s turnover. However, the price image is and will remain an important factor when attempting to increase the share of repurchasing people. Due to the price transparency on the Internet it is getting more and more difficult to achieve an image advantage by only implementing pricing campaigns. Nevertheless, the price image is able to partly lever out the price transparency what makes customers visit the store without having compared the prices sensibly.
Eventually, a good price image arises from different factors each of which has to be treated and implemented elaborately. Key items and accurate communication provide an optimal basis for the price image strategy. They can be amended by adding a lot more marketing operations that are more or less classical.
Any information given about products, competitors or customers has to be gathered and analysed profitably. Only if that is given a consistent and complex price image can cause success in eCommerce. Market analysis by use of intelligent software such as blackbee monitor is an outstanding option for online merchants.