Last holiday season, Amazon updated pricing on its website nearly 10 million times, ensuring the best sales beat out competitors. Now, smaller retailers have similar enterprise-pricing tools that enable creative pricing strategies across all sales channels.
Kara Egan, Director of Product Marketing, Stitch Labs, shares her insight in this guest blog post.
As a business, it’s important to manage prices across sales channels directly in an single command system for complete accuracy. With that ability, you can set prices across your products and push those prices up to your sales channels. This is a great feature for both multichannel control and creating effective pricing strategies.
Specifically, the multichannel pricing strategy part of the business is where it gets interesting. If you aren’t already thinking about pricing strategies, you should be. The idea of pricing strategy and promotions are all around us – just look to Amazon’s Prime Day. An effective pricing strategy was implemented for the highly anticipated “Prime Day,” when Amazon succeeded by increasing sales for July 15th by over 266 percent over the same day last year, and 18 percent more than last year’s Black Friday numbers. The key to being successful with a pricing promotion is ensuring you have the right strategy for each sales channel.
So, what do you need to know to run an effective pricing promotion?
Which products do you want to discount?
When thinking about your sale, you can either go with a discount across the whole site, or a more targeted approach of discounting only certain items. This is similar to the idea of door busters. Are there certain items that your customers just LOVE and you know you will catch their attention if they go on sale? Consider selecting some of your more popular items and discounting those as a start.
How low can you go?
When it comes to a sale, you want to not only attract customers, but also make money from them! It is important when thinking about your discounts to make sure you aren’t going into the red. Be sure to factor in your cost of goods sold, including shipping, fees or other marketing spend you might be considering. This could be different across each of your channels, and you should consider the flexibility that you might have on your own branded shopping cart versus a marketplace where you have to pay a percentage in fees.
Some inventory management solutions include an Amazon Competitive Price report to help with some of these decisions. Amazon is often where customers go to find the lowest price option. This report will tell you the price that is currently winning Amazon’s buy box, as well as your Amazon price, and your cost. Now might be a good time to win a few of those lowest spots! Additionally, you can take this information and price more competitively on your other channels.
Ideally you want to price at a point where you believe the increase in order volume during the sale will outweigh the decrease in margins.
Once you’ve determined prices, you can set a new sale pricing tier. When you are ready to flip the promotion on, you can just switch to that pricing tier for any and all channels and they will update automatically! When the sale is over, you can quickly go back to your old pricing tier.
Spread the word
If you think a sale is going to motivate people to buy, you need to tell them about it! Send out an email to all your past customers. Highlight not only the sale, but the popular products that are discounting to drive them back to your site. Same goes for social; post it on Facebook, Twitter & Instagram. Beautiful imagery of your bestseller or a creative sale tagline are sure to capture their attention. On your site, you might want to put a sale banner at the top or even a new header image.
Make the most of your traffic
Now that you have driven your customers to your site with the promise of a sale, you need to fill those shopping carts! Consider placing profitable items alongside sale items,or take it one step further and bundle some products together. This can increase order sizes and improve margins.
Manage the volume
If all goes well you should see an increase in order volume. So that means two things: first, that you have the inventory on hand and are properly updating stock levels to your channel, and second, that you have the capacity to fulfill within the expected time frame. The last thing you want is unhappy customers because you can’t ship their orders! If you are just getting started with pricing promotions, don’t worry about forecasting increased demand, just use this first one as a test to give yourself a benchmark for future forecasting. But, do make sure you and your team are ready to move into turbo if all goes well!
Measure the results
At the end of the day, you want to know did this work? Did you increase the number of orders, your revenue, and your profits? So how do you do this? Reporting, my dear friend, reporting! You will want to look at your sales and profits during this period compared to a comparable period,say the week before the sale. Was the sale successful at growing your business? Hopefully the answer is yes! But if not, refine your strategy. Were the discounts too steep? What could you do to increase the total order size? Like all things in business, its an evolution, where you are constantly learning and refining every day.