Price is not easy to grasp whether in a traditional marketing environment or e-commerce. In terms of economics price is set based upon supply-and-demand. If no one wants our product then we are forced to either reduce the price, eliminate the product or redefine the product’s purpose. No one wants to reduce their prices; however, there are methods we can use online to obtain a good pricing structure.
Search engines are one method for determining price. We can look for our product online and see what others are charging for similar items. The search query will need to encompass several aspects pertaining to our product. Examining the number of query returns can be a good indication whether the product is in demand or not in demand. If the query results are low you will need to consider that your product might be unique, which will effect your pricing.
Auction web sites are another good place to examine prices. Auction sites enable us to see exactly what people are willing to pay for our product. If your product is only selling on an auction site for $5, do not expect people to pay more than that amount through your web store. Remember, the overall price of an item is what customers are willing to pay for the item.
Do not forget one very important aspect of pricing: a break-even analysis. You need to associate all costs of the item to pricing. This is where e-commerce has a slight edge in regard to pricing. The pricing edge occurs due to the lack of overhead associated with e-commerce as opposed to traditional store front environments. You will need to know your break-even point not only for pricing, but for marketing activities.
Pricing is not easy to grasp, but is a major component of the marketing model. Examine the prices your competition is selling the product for through search engines and online auctions. Knowing the basic supply-and-demand as well as conduction a break-even analysis will aid in determining your price. The next area we will examine will be promotion and how you can manipulate the price through various methods of promotion.
Mike Kniaziewicz, MIS