The days of customers being gullible and buying products at whatever cost are over. In this day and age, customers understand their position and their power in the market. They’ll find whatever they like and they’ll go out, do a little bit of research, compare the prices and eventually buy the product they feel is the best deal. Essentially, they’re out there looking for the best bang for their buck.
This is only one of the reasons price optimization is essential to any successful retailer or seller. It is arguably one of the most important aspects of growing your business. However, not many agree and they still follow the old trend and pricing practices, thinking that the customers will have to buy their products or services at whatever cost they seem fit. We wouldn’t want to be the ones to burst your bubble, but, those days are over.
What you need to understand is that setting the right price for the product you’re selling is detrimental to whether that product is going to get sold or not. The pricing optimization software has come a really long way in recent years and frankly, it’s all you need to make sure you’re pricing your items just right. But, if you’re still not sold, here’s a couple of extra reasons as to why you should use pricing optimization software.
1. Optimize Your Starting Price
Starting, or base price, however you want to call it, is arguably the most important sales contributing factor. That tag is what lets the buyers know if they should pay attention to the product or not. It’s the one that represents the value of the product. Now, the base fees must be optimized in a certain way.
What we mean by that is, the base fee should be set based on the market standard, product demand and in such a way so you don’t lose money once the discounts or promotions come into play. A good base price plays a large role for products that tend not to fluctuate over time, like groceries, for instance.
2. Discount & Promotional Prices
Just slapping on a sticker that says “SALE” or just discounting items by 10% might seem like just enough, but it really isn’t. You have to know when and you need to know how to lower the prices, create discounts and promotions. Let’s say you’re looking to bring in a new product and you want a promotional price. How will the customers know it’s discounted? They’ve never seen the base price.
Do you go 2 for 1 or do you offer freemiums? It is things like these that are crucial and are better left to analytics, rather than guessing.
3. Avoiding Mistakes
Like we’ve said, it’s better to use analytics and metrics provided by customer’s habits, than to guess where to set the price. However, according to intelligencenode.com, a lot of people do quite the opposite. Guessing is the root of all evil. Well, to be fair, that’s too harsh. You can get a pretty good estimate by guessing, but ultimately, you’re still leaving money on the table, which is bad business.
Another common mistake retailers and sellers make is going too broad or too narrow with their pricing tiers. While it is true that you can benefit from having multiple pricing tiers within your stores, you do have to do it right. Contrary to popular belief, more tiers do not necessarily mean more sales and vice versa. You need consistency. Apple is a great example of that. They won’t sell anything without a premium price tag because that’s who they are. They do have tiers, but all of them are premium.
Additionally, many retailers rely too heavily on discounts. While it is true that discounts increase sales, but at what cost? In the short run, it works, sure. In the long run, however, you’re risking ruining your brand and reputation, not to mention effectively losing money. Pricing optimization software can help you tremendously by making sure you never discount too much or too often, but just right.
4. Leveraging The Price Tag
According to various researches, price is the main reason people buy something. That’s something you as a seller can leverage. However, without the proper tools, that can be harder than it looks. You could make mistakes that damage your return on investment because you’re not leveraging your price the way you should. With pricing optimization software, you can easily analyze the necessary data that will help you focus on the important factors in pricing, so you can see the ROI almost instantly.
5. Analysing Your Customer’s Behaviour
If you could accurately guess just how to set the prices so both you and your customers make the most out of it, that would be amazing, right? Well, as we’ve said before, guessing is not good, but analytics are pretty solid. With the help of optimization software, you can ‘guess’ as precisely as humanly possible.
Now, you could call that an educated guess, but in reality, it’s nothing more than analyzing customer behavior, tracking and monitoring market trends and pricing and so on. You have all this data at your disposal, you just have to know what to do with it. Luckily, pricing optimization software uses the power of advanced algorithms to comb through all that data and all you have to do it follow the lead.
6. Stay On Top Of The Market Changes
The fact of the matter is – market changes. The trends change and people act accordingly. With the help of optimization software, you can easily stay on top of those changes and never get caught behind. Having a good strategy is what sets apart successful businesses from those less successful ones and the best strategy is staying ahead of everyone else at all times.
As you can tell, there are a lot of different factors in play here, but at the end of the day, analyzing all the data that’s in front of you is what will set you apart from everyone else and pricing optimization software does exactly that.