Low Pricing Strategy for Online Retail Business in Australia
It doesn’t take much time from an observant eye to notice the continual every day low prices one sees online.
Some prices are below profit points and only serve the purpose to obtain customer life value through email collection or social media connection.
This can to some extent justify this pricing maneuver however problems may arise when a business is placing a low price on a product which would actually bring in the profits.
It is difficult not to partake in this common strategy as few industries are not apart of this low growth economic environment.
Is there an overall rule for low pricing strategy?
No. There is no one-size-fits-all approach. However, the answer for all cases is in the analytical numbers.
Some products can perform well with a low pricing strategy and some products best suit a high pricing strategy.
The information an online business needs to gather is an audit of the relevant products or services over a significant period of time and uncover the exact impact the pricing variation strategy has had on those particular items.
What your business will find is certain characteristics associated with different products achieved different results.
Some results will reveal a successful growing baseline.
But it is almost impossible to maintain across the board low prices on all items, every day. This system will not financially work.
What online products are okay for a short or continued low price war?
Some of the characteristics in the metrics you will find for successful low priced items are:
- . products or services that are well known by users. They are mature products and users are familiar with them and repeatedly purchase them.
- .Staple products which are frequently purchased and have a consistent demand
- Seasonal products. Such as Christmas items, Easter items, valentines day items where users see a sense of urgency to buy then and there.
- Once a product has already reached market penetration and there is very little room for growth it can be ok for the price to be brought down and sellers should also expect this.
- Products that often experience every price movement from competitors and experience very little additional profit from online promotions.
When shouldn’t you participate in a price war?
- If your brand has low recognition a low price strategy is a risky exercise.
- Products that are not regularly sold should not be placed on an everyday low price sale.
- Products that cannot be