Setting the right pricing for your products is not as easy as searching for a price calculator online. To develop strong pricing strategies for your online store, you need to analyze your competition and the position that your store has among them. This type of study must take into account certain key elements that directly impact the vision of your e-commerce business and your rivals’. In the following points, we will detail a little more on the factors you need to consider when setting the pricing of your products.
What do you need to take into account when calculating the best price?
There are three very relevant factors that are a clear indicator of whether your pricing works properly for your business or not. We refer to the Price Index (PI), profit margins, as well as the conversion ratio.
The positioning of your e-commerce business against competition or price index
The price index or PI is a KPI that works incredibly well for measuring the positioning of your store with respect to your rivals and serves to observe to what extent you are more or less competitive than them. With it, you can determine if your e-commerce is healthy competitively, or if there is any warning sign.
In cases where the price index is very high, you should try to optimize your pricing as much as possible and try to widen margins, if possible. Just keep in mind that being competitive doesn’t mean losing your profit margins.
On the other hand, a low or very low price index is a clear indicator of lack of competitiveness and this is something that could affect the sales of your business. Surely there are many online stores in your market that offer exactly the same product and that is what makes buyers are influenced greatly by the price. So, if you have a very low price index, analyze if it is really possible to narrow your profit margins to try to improve the competitiveness of your store.
Margins as a clear indicator of your profits
What’s the point of being the most competitive store in the market if there is no profit? Calculating prices does not consist in seeing which competitor is the cheapest and then equating with them, or lowering prices even further than they do. You have to be aware of the consequences that a change in pricing can have on your profit margins.
With the data you have on the state of the market, you must decide whether it is best to match prices, lower them or simply not take any action. It is at this point when competitor price monitoring software becomes really useful, since this type of platforms allow you to have an updated and comprehensive vision of what is going on in the market.
Conversions or sales in your e-commerce business
It is clear that there is no single strategy that works for every business, as every sector and type of store have their own problems and scenarios. In fact, in order to find your perfect strategy you will need a constant market analysis, on the basis of which you will fix and check the effectiveness of your new prices.
The nature of prices is volatile. Some products may have the same price for days, while top-selling items may suffer price changes several times over the course of a day. This further reinforces the theory that the most effective tactic is to modify your repricing rules and measure the impact they have on your e-commerce conversions. An increase in visits to your store accompanied by an improvement in sales is a clear indication that you are employing the right strategy for your business.
If you still have doubts about how to calculate the best price for your products, you can consult our dynamic pricing page, where you can see more about what competitor price monitoring software can do to solve this problem. You can also receive personalized attention from one of our product specialists.
