How to implement an eCommerce friendly pricing structure

Picture of Laura Dean

Laura Dean

There’s lots to think about when launching an eCommerce website. Fortunately, we’ve got an experienced team who have built over 200 websites to date, so it’s not often we get a question that we don’t know the answer to.

In this blog we want to tackle the importance of eCommerce pricing structures, and explain how you can future-proof your website pricing to make sure that you can easily update it as needed.

Before we delve deeper, let’s highlight some top tips for eCommerce friendly pricing:

  • Start with tiered pricing or category pricing to make it easy to update as needed
  • Keep an eye on your competitors and be responsive to stay competitive
  • Use psychological pricing to attract more buyers
  • Don’t hide any costs, be transparent

Now, onto the blog…

Firstly, we wanted to explain the difference between a pricing strategy and what we’re discussing here – eCommerce specific pricing structures.

A pricing structure is the framework or model used to determine the prices of your products or services. Your pricing structure should outline the guidelines and strategies that determine how your prices are set and how they might vary depending on factors such as production costs, distribution costs, material costs, market demand, customer behaviour, etc.

When you decide to sell online, you add a new layer to your pricing model, as this will play a crucial role in your success in the digital world. It’s important to understand the dynamics of the online market, tailoring your pricing strategy to the unique challenges and opportunities presented by your specific eCommerce environment.

There are a few ways in which your eCommerce pricing strategy should differ from traditional retail or service-based pricing.

Real-Time and Dynamic Pricing:

eCommerce allows you to make real-time changes to your pricing, giving you the ability to operate a dynamic pricing strategy. You can adjust your pricing to accommodate material cost increases, update in line with demand, stock levels or change in response to competitor pricing.

Transparent Pricing:

Online, your customers expect to see pricing that has no hidden costs. That means clearly displaying products or services that show any taxes or postage and packaging costs, and any add-on charges before the checkout process.

Competitor Analysis:

Selling online is highly competitive, and customers can easily compare prices across different websites (sometimes, they can do all this on one comparison site). eCommerce pricing structures should involve regular monitoring of competitor pricing and strategic adjustments to remain competitive.

Personalisation and Segmentation:

eCommerce platforms offer the opportunity to personalise pricing based on customer segments or individual customer behaviour. Implementing customer-specific pricing or offering segment-specific discounts gives you the flexibility to service new and returning customers directly via your website. You can also use this personalisation and segmentation to encourage customer loyalty and satisfaction.

Promotions and Discounts:

You can use online exclusive promotions, discount codes and special offers to drive sales and create a sense of urgency amongst your customers. In some instances, you may find that your product or service offering has differing popularity online and offline. You can use promotions and discounts to differentiate your offer for your online customers.

Subscription and Membership Pricing:

Subscriptions and Direct to Consumer (D2C) pricing models have grown significantly since the pandemic. If your product or service permits, utilising your eCommerce platform to accommodate subscription or recurring payment models is highly beneficial. Providing incentives for your customers to subscribe will result in recurring revenue to support your business. You can use tiered pricing or discount codes to encourage loyalty.

Global Pricing Considerations:

One of the key benefits of selling online is wider reach, and the ability to target customers in different geographical locations. You can utilise plugins and selling platforms that facilitate payment in different currencies, regional pricing variations (particularly in relation to shipping), and to calculate international shipping costs.

Data-Driven Decision Making:

eCommerce platforms generate vast amounts of data. Analysing this data can provide insights into your customer behaviours and preferences, helping you to make informed pricing decisions and target specific segments individually.

Ease of Management: (and the key focus of this blog)

eCommerce pricing structures should be designed with ease of management in mind. Utilise pricing tools and plugins that enable you to make quick updates, changes, and in some cases, benefit from automation to streamline the process.
Mobile Optimisation:

With the increasing use of mobile devices for online shopping, ensure that your pricing structure is mobile-friendly and displays correctly on various screen sizes.

Testing and Iteration:

eCommerce sellers have a unique capability to take advantage of A/B testing, which enables you to trial different pricing strategies based on the results shown in your data. This will help you to optimise your pricing for better conversions and profitability.

By considering these factors, you can develop a pricing structure that aligns with your business goals, effectively meets customer expectations, and maximises revenue and profitability in the online space that you operate.

Why should you streamline your online pricing?

Simplicity. If you’re a business offering one or two products or services, updating your online catalogue is not likely to be time consuming. However, if you’re selling multiple products or services, you need to be able to quickly and easily update your pricing information to be responsive in the market.

The short answer is that while you can use the same pricing structure that you use offline, you need to add in the extra eCommerce element to make sure you can manage your digital shop with ease.

We work with many clients that have complex pricing strategies, and they initially want to translate that directly to their eCommerce website. The most common scenario that we see is clients who want to have standard eCommerce pricing listed on their website, and an additional option for customers to login to the website to view their preferential pricing. Whilst we certainly advocate having preferred pricing for returning customers (as this promotes value and adds to your recurring revenue), we think it’s important to structure that pricing in a way that is easy to manage.

We recommend you do this in one of two ways:

Tiered pricing structure (our preferred solution) – use your WooCommerce platform to set up a tiered pricing model. In this scenario, all of your customers are assigned a tier, and within that tier, they’re given a specific band of discounted pricing.

Bulk discounts – when you’re selling multiple products, many of your customers will look for volume discounts. You can do this by setting a price within bands. For example, each product may have a set price for 1-9 units, then another for 10-19 units and so on.

The key takeaway from our pricing advice is that, whichever option you choose, you make it easy to update. Whether you do this by implementing set discounts or set pricing across entire categories of products. One scenario saw a client that listed hundreds of highly configurable products on their eCommerce website, each one individually priced. When the time came to update their pricing, it was a time intensive process that could have been prevented had they chosen to use category pricing rather than individual fixed prices per product item.

How can the wrong pricing structure affect you?

We understand that you might have complex pricing and an array of customers who each have their own specific price. Your WooCommerce platform can certainly facilitate this level of complexity, however, with so many fixed prices to manage, you could considerably increase your workload to manage the pricing element of your eCommerce business.

When it comes to setting up your website, it may seem simple to attribute specific prices to specific customers. The real challenge comes when you need to manage those prices, or update them.

Choosing the right pricing structure for your website is integral to your online success. With the wrong model in place, you could face some of the following issues:

Customer confusion – Complex or unclear pricing can confuse customers, making it difficult for them to understand the actual cost of products and services. This confusion can lead to abandoned shopping carts and a negative user experience.

Inconsistent profit margins – Complex pricing may lead to inconsistent profit margins, making it hard to forecast revenue and plan your growth strategy.

Lack of trust – Customers value transparency in pricing. If your pricing strategy is complicated or inconsistent, it can ruin their trust and your credibility, resulting in fewer conversions and less repeat business.

Increased customer service enquiries – Ambiguous pricing can lead to an influx of customer service enquiries seeking clarification on product costs. This can cause extra burden for your sales team and increase operational costs.

Lack of pricing flexibility – In a rapidly changing market, businesses need to be agile in adjusting their prices. A complicated pricing strategy can hinder your ability to react quickly to market conditions and competitors.

Competitive disadvantage – If you have straightforward and transparent pricing you can have a competitive advantage. Customers are more likely to choose a competitor if they find your pricing structure confusing or deceptive.

Reduced conversion rates – Complicated pricing can deter potential customers from completing a purchase, leading to lower conversion rates. Simple and clear pricing encourages impulse buying and customer loyalty.

Compliance and legal issues – When you sell online, you must adhere to pricing regulations and consumer protection laws, so it’s important to be transparent about your costs to avoid any legal issues or fines.

To mitigate these issues, it’s essential to implement a clear and straightforward pricing strategy on your eCommerce website. Transparent pricing builds trust with customers, enhances the shopping experience, and improves your overall brand reputation.

It’s important to remember that getting your online pricing strategy right in the first instance will save you time in the long run. Individually updating your product pricing can be a time-intensive process that will need to be repeated each time you have a price fluctuation. Additionally, this manual process can leave you open to user error.

If you’re not sure how to price your eCommerce product or service before building your online shop, we’re happy to discuss this with you.

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