Retail pricing strategies: Location Pricing Power

It's not just the time of the encounter with your product that matters. The place creates pricing power too, (or destroys it) and align...

It's not just the time of the encounter with your product that matters. The place creates pricing power too, (or destroys it) and aligns pricing with marketing and business. You want the process to be like this:

  1. Prospect has a need, problem, or project.
  2. Prospect gets all hyped up and into a buying mood.
  3. Prospect goes looking for an item or solution.
  4. Prospect encounters your item.
  5. Prospect likes and trusts you.
  6. Prospect buys.
  7. Prospect comes back to you again and again.

Retail pricing strategies

Three Great Places To Sell Online

Some places online seem to make it easy to sell. Other places make it very difficult.

Your job is to identify the easy places and expand your operation there, while avoiding the hard places. Three great places to sell online include,

  • Your Prospects Inbox. Email marketing allows you to put your message in your prospects inbox. That is a location they are very familiar with and understand. Having your message read in that location is the goal of good email marketing. And it opens the door for suitable pricing strategies in marketing
  • Your Website. On your website you control all the messages, policies, and offers. You can set the site up to focus on your goals and selling strategies. That location is ideal for selling your product. The challenge is knowing how best to do it in a way that truly works. Sadly, many websites don't work well in support of selling goals.
  • Healthy Marketplaces. Marketplaces are healthy when there is a good balance between supply and demand. When that occurs pricing power is fairly stable. In an unhealthy marketplace supply outpaces demand and prices drop quickly.

The Hardest Place To Maintain Pricing Power

If your prospect is in a buying mood - and they go looking for a solution and they find your item as just one option amongst many similar options - then you've lost your pricing power.

So the hardest place to maintain pricing power is in a crowded & undifferentiated marketplace. Especially a marketplace that doesn't have any pricing controls in place for sellers.

In that location your item becomes a commodity and commodities don't maintain pricing power. This situation can occur both online or offline and you need to avoid it.

Department Store Retail Pricing Strategies

Some websites, like Amazon's Kindle platform, and Apple's itunes, give sellers guide rails they must stay within. This marketplace pricing strategy helps prevent a "race to the bottom". We call this a department store model.

We use this strategy on our pixie faire site. By giving sellers guide rails we act as a safeguard to all the designers there. This helps stabilize customer expectations too. It is not an open marketplace like Etsy or eBay, where prices are set at the seller's discretion. It is more like a department store, where prices are carefully managed at the store level.

Smart marketplace owners like to assert this level of pricing control because they commit to being the market leader and establishing price points. Steve Jobs did this for the music industry when he established 99 cents as the acceptable price for a single music track. These strategic pricing create a "safe harbor" for sellers and set buyers expectations. If a seller wants to deviate from these guidelines - they cannot do it.

The Challenge With eBay & Etsy

EBay and Etsy can both be problematic if you're selling popular items because there is no "safe harbor" in terms of pricing power. I'm not saying you can't do well on these sites, but a lack of stable pricing is the downside of selling in those places. The benefit of being on those sites is that they have tons of customers that show up in a buying mood.

Three Ways To Maintain Pricing Power In Turbulent Marketplaces
There are three ways to maintain sales volume and pricing power in a crowded marketplace where pricing isn't managed.

  1. Branding. You win by being unique, memorable, and different. This is a product and branding focused approach.
  2. Completeness. You win by having the most complete set of options, (that's our strategy in our Etsy shop). This is a merchandiser's approach.
  3. Relationship. You win by bonding with the prospect in a really powerful way - so they truly know, like and trust you more than the competition. This is a relational approach.

So if you're going to sell in a marketplace online, try to find options that include a "department store" pricing strategy, rather than an un-managed marketplace strategy. A department store strategy gives you protection from brutal price wars.

Your most important task in a crowded and unmanaged marketplace is to find ways to get the customer to connect directly with you and your brand.

Retail pricing strategies Action Steps

Make a list of the places that your prospects encounter your products. Are you controlling those encounters and ensuring that your brand and product is presented in an effective way? Consider eliminating sales channels that have too many downsides. If you sell in a marketplace online, look for one that has a department store pricing strategy rather than a "free-for-all" pricing strategy.



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Thought Leadership Zen: Retail pricing strategies: Location Pricing Power
Retail pricing strategies: Location Pricing Power
Thought Leadership Zen
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