The five biggest pricing errors
Pricing is a more complicated process than it seems. Therefore, if someone tries to get this job done in an easier way, or ignores important aspects due to lack of experience, they may lose significant revenue. Let’s check what are the most common errors on this field!
Leaning on instincts
Among all, the worst might be when someone is pricing based on instincts. In other words, ignoring the data coming from the own business and from the market. In practice, this means that the trader relies on bare luck: even if in some cases profit maximization happens, it is a matter of mere chance.
It is a fact that monitoring the market, the prices of the competitors, pricing is much more demanding but fortunately, there are software solutions that support this process.
Not prioritizing
Going through the whole product portfolio from A to Z when pricing is not useful either. Using this method more than once the trader will realize that it is impossible to check all products several times. In most cases, this leads to rushed decisions: the trader will pick up some product categories randomly (also based on instincts) that are believed to be important.
Instead of this, before starting the pricing process it is necessary to realize that usually, the revenue’s 80% comes from the products’ 20% so it is useful to concentrate on this 20%. Even in this group of products, it is worth it to define a pricing strategy and make decisions based on it.
Ignoring the stock
Ignoring the stock when pricing also belongs to the list of errors. Pricing can be influenced by the product’s stock, if there are some on stock, how much, and if there is no stock at all. Not to mention that the price has an important impact on optimizing the stocks.
Lack of strategy
It is also possible that a trader won’t fall into the traps of pricing that we have mentioned, and even monitoring the market changes but at the same time still feels lost as not knowing how to react to those changes. Reacting appropriately commands a proper pricing strategy, executed perfectly. The strategy can be diverse: for example, based on cost, value, competitor, and package. About this, you can read more in our article about pricing strategies.
Always aiming discounts
Perhaps the most important lesson is that changing prices is not the same as reducing prices. It is a fact that there is great pressure on the traders to reduce them as the customers are demanding better prices on the web stores than from the physical stores. This does not mean that the only way is to give discounts. The scenario when a price of a product moves up for some reason, yet it can be the cheapest on the market compared to the competitors, even with a price rise.
For all these reasons, pricing processes can be supported efficiently with software solutions that are monitoring the prices and stock of the competition for the one hand, on the other hand, knows exactly what the pricing strategy is for the trader so it can change the prices accordingly and automatically. Thanks to this method a trader can optimize revenues and benefits instead of reducing prices all the time.
