So, how do you set prices so you can attract the right customers as well as drive revenue?
1. Cover your costs
A good place to start is to work out how much it costs to run your business. This will help you see how much you need to make to cover your outgoings so your business breaks even (when your costs are outweighed by sales income and your business makes a profit).
2. Understand customers’ buying decisions
Different customers respond in different ways to pricing, so getting to know your market is quite important. Why are your customers shopping with you?
Some customers might be highly price sensitive, while others value quality and service, so they’re willing to pay more. Think about the ‘value’ you’re offering customers through convenience, service, customer experience and product quality.
Also, if you want your customers to know your brand is ‘premium and aspirational’, your pricing should reinforce this.
Retail insight: Almost 7 out of 10 shoppers say quality is more important than price and 5 out of 10 say they will pay more for products and services tailored to their needs.
3. Keep searching and comparing
Digital has changed the way customers shop, which means searching and comparing the price of products immediately across the world is easy. This adds importance to pricing competitively and also aligning your pricing across channels (website, social media, and in-store) for consistency.
Retail insight: 57% of people compare prices online before they buy, with a similar number spending a great deal of time researching to find the best value.
4. Have clear objectives
A plan that sets out your short-term and long-term pricing objectives can help your business work towards its goals. Common goals include driving revenue, increasing profit margins or building market share. Document your business goals and check in regularly to make sure you’re on track.
While setting prices in line with the market can be straightforward, it can also mean letting your competitors effectively decide your pricing strategy for you, according to Jerry Macey, CommBank National Manager, Retail Industry. By setting clear goals and measuring them, you take back some control over your pricing.
5. Discount the right way
If you constantly discount, there's a risk customers will think there’s always a sale on. This has two potential outcomes: shoppers will wait and only shop with you during sale times or they may question the quality and value of your product or brand – perhaps now seen as cheap. The impact of mispricing your product or service could be damaging to your business’ brand reputation.
Retail insight: Any sales and promotion strategy needs to first and foremost align with the long-term strategic objectives of your business, its brand positioning and an understanding of your core target markets.
Our Retail Insights report looks into customer behaviour, pricing, sales and promotions and trends. With a focus on leading retail sectors, it gives you insights that you can put into practice in your own business.