Retailer Web Services Digital Advisor Fall 2017 | Page 13

Think about your cost
last. Many retailers begin
thinking about their pricing
strategy by looking at
their cost and marking
it up from there. While this exercise is
interesting and important to you as a
business owner, it’s not interesting or
important to your customers. They don’t
care how much you paid for that washing
machine. They only care how much you
are charging for it, and what value they
will get in return for spending their hard-
earned money.
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So instead, start with considering how
the market is pricing each product. Track
your competitors’ online prices. Know
the vendors’ Online Pricing Policies to
understand what variation in the market
is allowed. Consider what unique value
you can provide within, or separate
from, each product’s price like delivery
services, exclusive rebates, satisfaction
guarantees, warranties and installation.
After all of that is done, then you
can consider your cost. If you can’t
confidently ask for a price that brings
you an acceptable margin, don’t sell it. Or,
go ahead and mark it up blindly above
your cost—you won’t sell it either way.
Price by brand, not by
category. Think about your
online pricing strategy
brand by brand. There is no
one formula that will work
equally well for every brand you carry.
Each brand has its own Online Pricing
Policies that can differ significantly.
Sometimes you can discount 10 percent
from the minimum advertised price
(MAP). Sometimes you can’t deviate
from MAP by even one cent. Some
brands will be unique to you in your
marketplace; others will be found at
every single competitor. These variations
should be reflected in the strategy you
choose for each.
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If this sounds overwhelming, start by
making a list of your top five brands
ordered by importance to your business.
Think about only one at a time and move
down the list as you complete each. You
will likely be able to re-use your work
and set the same formula for more than
one brand, but you’ll make significantly
faster progress than trying to devise one
formula that will work for everything at
once.
Reference more than one
type of guide price. Just like
there is no one silver bullet
strategy that will work for
every brand you sell, there
often isn’t just one guide price—like
MAP or what a competitor is advertising
online—that works best for all items in an
individual brand. Seek out opportunities
to use more than one pricing guide
whenever possible. Layering multiple
sources of pricing information together
results in more products displaying
prices—and more intelligent prices to
boot. Here’s an example of how layering
formulas that reference more than one
type of guide price can take your digital
pricing strategy to a whole new level:
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Let’s say you want to price a certain
brand of appliance at 10 percent
below MAP.
But, not every model number in that
brand has a MAP at every moment in
time.
So, layer on another condition: If
there’s no MAP, display something
based off a different guide price,
perhaps the lowest online price from
your three biggest competitors.
Now every model in this brand with a
MAP displays a smart price. And so
do the models without a MAP.
Make a conscience
decision about how you
display rebates. If you sell
appliances, you deal with
mail-in rebates. They can
be excellent tools to help close sales,
differentiate your store from competitors,
and drive up ticket sizes. But they can
also be quite complex and difficult to
understand. How your website displays
rebates along with each product’s price
will have a major impact on both your
competitiveness and your profit margin.
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Clearly identify products that qualify
for mail-in rebates and make it easy
for consumers to navigate by brand,
category and specific rebate program. If
you’re going to show a price after mail-in
rebate on your site, make sure deducting
that amount doesn’t violate the
manufacturer’s Online Pricing Policies
or local laws. Whenever modifying a
price for a mail-in rebate, make sure your
website passes the price before rebate
through to the shopping cart. And while
this can sound circular, it’s often best to
add a rebate amount to your online price
before you then subtract it. For example:
Let’s say you would normally sell a range
for $899.
Simply subtract the rebate amount
from the price you’ve set. This is a very
common strategy:
$899 (You pay) -$50 (Mail-in rebate: ) =
$849
Or you could make a subtle change that
significantly affects your bottom line by
adding the mail-in rebate amount to the
price you have set,
and subtracting it to
show a price after
rebate. You Pay:
$949
Rebate: -$50
After Rebate: $899
With the second
example, your
store still looks
competitive (your price of $899 after
rebate matches the price of $899 your
competitor is advertising), but you’re not
giving away the $50 rebate. Instead, that
rebate goes straight to your bottom line.
No matter what pricing strategy you
develop, make sure you have great tools
that can help you automate it. Appliance
pricing is volatile; promotional periods
can last just a few days and your online
competitors could be adjusting their
prices many times throughout the day.
There is no way to keep up by hand, but
great software can keep your store one
step ahead even while you’re sleeping.
When it comes to crafting a smart
online pricing strategy, the options are
only outnumbered by the opportunities.
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