Pricing a product is a tricky job for an online retailer. I was looking at the ecommerce landscape, trying to understand the pricing methodologies that retailers follow when pricing a product. I had so many questions; a few of them are still unanswered.
The Bottom line Pressure: Competition is just a click away and retailers have very less room for error when it comes to pricing a product. The price hunter goes away to the competitor if the product is a tad overpriced. Retailers face bottom line pressure if the product is under-priced and that kick starts the pressure to drive volumes to offset the hit. Manufacturers are breathing down the neck the whole time to make sure that retailers are not quoting below the MSRP. Recession is slowly changing the buying behavior and shoppers are becoming more price sensitive than earlier.
Fixing the Right Price: With 1000s of products in the product mix,
Do retailers spend time on each product when fixing the price?
Is the product pricing exercise a scientific one or still intuitive?
Do the retailers look at pricing a product as a positioning exercise?
It is not the promotions strategy that I am talking about. You might have the lowest price displayed but offset it with higher shipping or moderate pricing with no shipping cost etc. What I am talking about is about fixing the “bottom line price” – the total cost of ownership of the product to the buyer.
2 comments:
It's either lowest price for a given item, or low prices in general (saves a visitor the time of "checking around" )
Just like we are moving away from traditional media to social media, retailers are motivated to move away from traditional pricing/discount pricing formulas to ones that are more relevant to the impact of social influence. Look for lots of testing of nex†-generation "group-pricing"
and community-linked buying...Nice post..
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