Mastering Online Retail Pricing Strategies: Finding the Sweet Spot Between Profit and Market Appeal

Product pricing is about more than just your costs and earnings.

It’s how you position your products to be competitive while helping you profit as much as possible from each sale. It’s about finding that sweet spot in your pricing strategies where you offer just enough value to justify the price while also maintaining profitability.

Sounds easy enough, right? Only if you have the right action plan in place. 

These retail pricing strategies. 

4 Online Retail Pricing Strategies to Help Squeeze Out the Most Profit with Each Product 

Strategy #1. Factor Perception into Your Pricing Models 

Market perception plays a huge role in a customer's willingness to pay for a product and should definitely be factored into your calculations. This means assessing:

1. How customers see your brand compared to your competitors
2. The general perceived value of the type of product you are selling

Start by calculating the total cost of your product and setting your ideal margins. Then, adjust these prices for market value — which you could get by running competitor analyses, sending out customer surveys, or engaging directly with potential shoppers through social media.

For instance, let’s say your market research proves that your customers view your shop as a more premium brand than your competitors’. In that case, you could adjust pricing for new products to align with the perceived value.

Apple does this by pricing its products well above production costs due to how customers perceive the brand and their high loyalty.

On the other hand, if your audience sees you as the budget-friendly alternative, you may need to price down or get creative with bundling and other promotions to improve perceived value or implement strategies for improving your brand’s overall market perception.

The Bottom Line: Regularly assess how your brand and products are perceived, then adjust your pricing or refine your messaging to align with or improve market perception.

Strategy #2. Segment Your Customers by Their Spending Appetite

While some shoppers may be willing to pay more for something they feel offers more value and benefits, others may not. This doesn’t mean you need to cater to only one group. Instead, you can balance profits with product appeal by segmenting your shoppers by their likely spending levels and price sensitivity — and then create targeted pricing strategies for each segment to ensure you are getting the most profit possible.

Here’s how to approach it:

1. Riffle Through the Spending Data for Segments

Start by reviewing your customers' spending habits by looking at past purchases, responses to surveys, or even feedback through social media. Then, segment them into groups based on their shared typical spending behavior.

2. Set Your Prices to Match Spending Habits

Now, get more specific about which products to market to which groups — connecting a product and price to the spending comfort of the segment you will target. Products aimed at your more budget-conscious shoppers should be priced to show maximum value. Your higher-end items could instead reflect exclusivity, quality, or benefits to help justify the heftier price tag.

3. Push Home the Value with the Right Messaging

Now, tie it all together with the right promotional and marketing messaging and CTAs. Your thriftier shoppers will appreciate good value discounts and deals, while those in the higher-end segment will want to hear about unique value, quality, and exclusivity.

However, you want to blend pricing and messaging in a way that doesn’t alienate one segment or another. This is something that fashion retailers are great at. Next, for instance, offers budget-friendly items under their own brand name as well as designer collaborations, top-tier labels, and premium products.

The Bottom Line: To really bolster your profits, you want to segment your customers as much as possible while keeping a close eye on their spending habits. This means that the products you market, their pricing, and how you position them match each group's perceived value and spending appetite for this value.

Strategy #3: Go Head-to-Head with Your Competitors in Value, Not Price 

Your closest competitor just dropped their price on a very similar product. Do you throw your hands in the air and decrease your margins to meet them where they are? The very short answer is, for the most part, no. 

Instead, you want to first look at how your pricing strategy works with your marketing to ooze value. If you outperform your competitors in value and quality perception, then you should be able to price higher regardless of how low they go. But, of course, it depends on your specific product, niche, and market value. 

This is something Thousand Fell did very well. They were able to successfully carve out a good chunk of the market by emphasizing circularity and sustainability — something their environmentally conscious target shoppers not only value but are willing to pay for. 

They also include more value by offering a $20 credit for recycling shoes, which actually brings their pricing down a little below their competitor VEJA’s (generally priced between $120 and $150 a pair).

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The Bottom Line: To balance your price with market appeal, you want to really sell your product and brand's unique value propositions. It's these benefits and features that catch the eye of new and existing customers first, before they look at price, and sets you apart from competing online stores.

Strategy #4: Use Your Product Sorting to Make More Money 

Your profit sorting techniques can be a great way to make market appeal to your financial advantage. 

How? 

By implementing a multi-parameter product sorting strategy that shows in-demand products with the highest margins first. This will help you subtly guide shoppers to the more profitable products they are actively searching for (real-time appeal). You just need the right tools (like ours — Kimonix!) to do it. 

Strategic product sorting is something online retailers like Alembika, Yellow, Summum, and Swarovski have had a ton of success with — considerably increasing not only their conversion rates but long-term profitability and reducing non-moving inventory, as well. 

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The Bottom Line: Product sorting definitely helps you find that balance between profit and appeal. By pointing shoppers to higher-margin things within your high-demand lists, you can use their desire to buy the type of product you are selling to increase not just your sales, but your profits. 

That’s All, Folks 

You should definitely experiment with these four online retail pricing strategies if you are going to balance between making your products attractive to customers and optimizing the profit you make when they buy them. 

But remember to test every strategy on a smaller scale before you jump in, and use Kimonix’s multi-parameter automated sorting features to help you adapt to changing market and brand conditions as they happen. 

Not using Kimonix yet? Let's make those margins work for you by getting in touch or installing our Shopify app to set you up in just minutes. 

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