How many times have you visited a store online, looked at an item you really liked, only to find it’s well beyond what you’d be willing to pay.
You end up looking a little like this…
But then there are other times where something might seem very expensive to one person, but you think it’s actually pretty reasonable.
You see different products have different price points that work at different times. If you keep your product’s prices the same and never change them you never get to benefit from this fact.
In this post, we’re going to look at why you should continually experiment with the prices on your Magento store and just how to do that.
- How to alter your prices in Magento 1 and Magento 2
- Why it’s important to experiment with your product prices
- How to consider location-specific pricing
- Why you should implement price discrimination to your pricing strategy
How to start Magento
Depending on whether you’re running your store on Magento 1 or Magento 2, we have you covered.
If you’re running your store on Magento 1 then try the following steps:
- Log into your admin panel within Magento
- Click ‘catalog’ and then manage products
- Find the product you want to alter and click ‘edit’
- On the left-hand side, you’ll see it says “price
- You’ll have a number of options to change the price
- Once you’ve made those changes, click save.
If you’re running your store on Magento 2 try the following steps:
- Once you’re in the admin panel, go to products and then catalog.
- Find the product you want to alter and click edit.
- Then, at the top of the page, there should be the option to change the price.
- Once you’re done click save.
But now that you know how to change your prices, it’s time to look at the reasons when you should change them.
It’s important to note that although we think pricing should be an ongoing experiment, it’s crucial to have a hypothesis behind all your ideas. This way you’ll be able to see what worked, what didn’t work but more importantly, the reasons behind this.
Why it’s important to experiment with your product prices
Keeping a close eye on not only your prices but your competitors’ prices too will help you stay on top of the goings-on within your own market and industry.
Imagine you tried to sell your products for $10 but didn’t realize all your competitors were selling theirs for $5. There’s a much lower chance of someone purchasing from you.
You can see this clearly by looking at Google’s own Shopping engine. They collate the various stores that sell the products you’re looking for, as well as providing you with an idea of pricing for each store.
As you can see there is a huge disparity between the costs. Some stores offer the product for as low at £20.00 with free delivery whereas others charge £26.99.
Without keeping track of what everyone else is charging, you’ll struggle to make intelligent decisions backed by real data and competitor behavior.
But more so than that, if you don’t alter your product’s prices you’ll never know whether or not you could’ve charged more money.
You’ll never know if you’re under or overcharging. Or whether your prices are just right but your customers would be happy to pay more.
There are also instances where online retailers might want to different prices across various store views. For example, if you’re running your store internationally. If there are currency conversion and tax rates you have to deal with by selling internationally then you should think about showcasing different prices on different versions of your site.
But do remember, customers have the option to research the prices too.
In some countries, where the cost of acquiring the raw materials is much lower, people accept and support lower prices, but make sure you’re only altering the prices by location to support the running costs of international commerce.
Beating competition with price
We advocate for beating your competition on products or service. Selling an experience more than you sell products.
But there are often times where you do need to compete with your competitors and in those instances, we advocate for switching up your prices in order to gain a significant competitive advantage.
For example, if you have a range of seasonal products, and you know you’ll be fighting for attention against your competitors, it can be worthwhile to lower your prices at this stage to attract a wider customer base.
Don’t make the mistake of lowering your prices too far that you don’t make any money or you actually end up losing money.
But if you do it right you can make a healthy profit this way.
Let’s see an example.
You sell your products for $10
During one season you have 100 customers. You make $1000
Now suppose you lower your costs to $8. Your competitors keep their price at $10 and so now you’re the market leader.
This season you have 300 customers and make $2400 even though you’ve lowered your prices.
That also doesn’t take into consideration customer who might upsell.
And when it comes to profit, are you any better off? Say you buy your product for $5. When you sell 100, you make $500 profit But when you sell them for $8 you make $900 profit.
Keeping your prices the same on your Magento store can often be a reason for reduced sales and lower profits.
Being comfortable to experiment with your pricing involves understanding what your customers’ ideal price point is as well as how far they’d be willing to stretch.
Be sure to make sure you don’t try to deceive your customers. If one customer feels like they’re getting a much worse deal by paying lots more than their fellow consumers, you’ll alienate your customers very quickly.
Instead, experiment with your prices with an air of transparency. Most people expect small price increases or decreases but a rapid change from $10 to $40 should be explained to your customers, whatever the reason.
Maybe you’ve decided to improve the materials used to manufacture the products. A simple email letting your customers know is a great start.
So which prices will you change first? Tell us about your experience in Magento price experimentation.