Pricing Your Products for Your Market Position in eCommerce

Product pricing is extremely important if your company expects to compete with the wide market in eCommerce. Choosing to ignore this key data point in eCommerce will dramatically impact your online sales. It is now easier than ever to build an eCommerce business inexpensively. Because of this, competition for your products has never been higher.

Three eCommerce Market Positions

Within each niche there are three main market positions that your business model can follow.

They are:

  • Position X – Cheapest Price, Cheapest Products, Bread & Butter Items: Aims to gain a high volume of sales in order to reach large profits
  • Position Y – Diverse Product Selection, Competitive Pricing: Aims to bring customers in for the obscure niche items. Those items that may have less competition, but also offer the main items at a competitive but not cheapest price.
  • Position Z – High Quality, High Pricing, (Usually) Limited Selection: Aims to go after the upper echelon of the niche. They offer only the best to customers who want only the best and are willing to pay for it. Price point is only marginally important to their buyers

Pricing Factors By Market Position

Each of these market positions have different thought processes when it comes to pricing.

Position X from above is interested in one thing and one thing only – to offer the bread and butter items for the lowest price possible while still making money. Consumers who shop at places in position x are very price conscious and therefore if you want to position yourself here you’ll need to invest in some price monitoring software. I’ve personally used Mozenda before and their software is quite good for a multitude of reasons.

Position Y offers obscure niche items that probably don’t have much competition for them. The hope is to bring in consumers for these products and offer the bread and butter items at competitive prices as well in a cross-selling manner. For the obscure items with little competition, you won’t have to worry about pricing as much. However, for the cross-sell items you will need to be at least competitive with the rest of the market. That doesn’t mean the cheapest price but certainly within range of those prices. Another unique way to package these and cross sell is through unique bundling options.

Position Z is interested in only carrying the highest quality items and offering them at higher prices. When you position yourself in this market you’ll want to identify the others in your niche who are targeting these same shoppers and find some way to offer more value than they are. That doesn’t always mean price. You can play around with shipping promotions or even add in some additional informational resources about the product that your competition doesn’t offer. Pricing isn’t as much of an issue with this market but perceived value is.

Summary

Each market position holds a unique type of value. There really is no “right answer” as to which position you choose to go with. It really all depends on your personal long term business goals. Each has their advantages and disadvantages as well. If you haven’t started your company yet I’d challenge you to think about these factors before you get started.

Optional Helpful Homework

  1. Determine which market position your company is currently in or where you’d like to be if you haven’t started
  2. Write down a list of your top 5-7 competitors in that space
  3. For each competitor, write a list of the 3 key value points that they offer to their shoppers
  4. Cross check these value points with your businesses own value points
  5. Come up with 5-7 ways that you can improve upon your competitions value points or differentiate yourself from them

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