Online retailers are always looking to grow their businesses, and 2014 will be another big year for retailers to capitalize on new and exciting trends. Staying on top of the number of growth strategies and innovations will be crucial to the survival of all retailers in the coming year. Numerous articles lay out the trend roadmap for 2014, from geolocation targeting to augmented reality technologies; there’s even talk of adding a twist and allowing your customers to name their own price. The possibilities for the coming year are endless, and this series will take those predictions a step further by delving into the nitty gritty of some of the more exciting trends that are creating the most buzz.
Typically, retailers focus their resources on increasing new traffic — or on lifting conversion rates of existing traffic. However, if you are a small or mid-sized retailer, you probably don’t have the budget to turn up the proverbial dial to a traffic or conversion level of Amazon or eBay. If you, like many retailers, have hit the ostensible “traffic wall,” it’s unlikely to be conquered without significant spend and/or diminishing return – perpetual deterrents to innovation and growth. If you can add even a tenth of a percentage point to your conversion rate, your bottom line could be affected in a big way. While gaining traffic is fundamentally important, the purpose of this article is to focus on the crucial element of conversion lift and how new pricing strategies make a difference.
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Price — It Truly Matters To Your Customers
As discussed in my recent Retail TouchPoints blog post, Virtual Showrooming has online shoppers bouncing in and out of e-Commerce stores at a terrifying rate. Virtual showrooming exists when a shopper looks at a product on one site, then visits a number of other sites to compare price. Oftentimes, customers will either not make the purchase at all, or will settle on the lowest possible price they can find (which was most likely not on your site). While there are many ways to combat this growing epidemic of virtual showrooming and boost your conversion rates, I want to drill into one area specifically – pricing. Pricing is often one of the top factors in consumer buying behavior — and none more evident than this holiday season, and into 2014. We are hungry for the best deals — this is not likely to change.
Know Your Limits
Let Algorithms Help You Price
Dynamic Pricing — or changing the price consumers see based on algorithmic decisions — is one of the hottest trends in eCommerce right now. Utilized early on by the travel industry, dynamic pricing has pervaded most ecommerce verticals and is experienced frequently on the web. If set up correctly, dynamic pricing systems can help you milk the most profit out of each and every transaction. Expect a lot of resource usage on the front end, however, because these systems can be expensive and require significant implementation time. Additionally, while dynamic pricing systems may work wonders for retailers, they can be seen by consumers as either positive when they are saving money, or negative when they experience a higher price. In fact, they can create consumer nightmare situations as seen with Orbitz and Amazon.
Copy Your Competitor’s Pricing
They say imitation is the highest form of flattery, and while having your tactics or design copied by your competition doesn’t exactly make you feel good — we see it happen regularly within the e-Commerce world. Taking this a step further, you can offer price matching to your buyers and let them bring you your competitor’s price or promos. Most e-Commerce platforms offer affordable price matching extensions in their app marketplaces.
Minimum Advertised Price
You can’t mention pricing without mentioning the bully on the schoolyard — MAP (Minimum Advertised Price). Manufacturers have the legal ability to set the minimum price that retailers can display on their site (or advertise), therefore tying your hands, even though there might be a lower price that you and the customer would both be happy with. To mitigate the effects of MAP you can require users to add a product to cart to see the “real” price, have them call for “best pricing” or use a name your price tool to let the buyer privately suggest a price as they likely already do over the phone.
Let Your Buyers Start The Price Conversation
The Name Your Price (NYP) model, made famous by PriceLine in the late 90’s, is another e-Commerce trend that has picked up steam in the last 12 months. This generation of connected consumers has come to expect that personable, old-school “haggling” type experience in any and all channels, and retailers are failing to cater to new demands. Headlines and research reveal that consumers will wait — or not buy at all — without the experience of nailing the best deal.
The recent release of data from this year’s Black Friday weekend is the proof in the pudding. Retailers are starting to lose control over this beast they’ve created. Consumers are now waiting for the highest discounts of the year to make their purchases — and it’s your bottom line that suffers as a result. Tactics like an innovative “name your price” platform aim to give that control back to the retailer, while still satisfying the consumer’s need to haggle. The trick here is to cater to new consumer demands without ever losing control — by employing controlled discounts year-round rather than one day or season. “Name Your Price” and price optimization will become common retail nomenclature in the coming year, and NYP platforms can help you down this path.
Choose Your Slingshot And Fight!
And while various pricing tactics exist to lift your conversion rates, there is not a one-size-fits-all solution. As with all conversion tools and tactics mentioned herein, extensive and segmented testing is the only way to make informed decisions about what makes the most sense for your bottom line. Fortunately, some pricing applications require much less effort on the front end than others. With dynamic, algorithmic-based pricing tools, commitment is tough unless you’ve got resources with which to experiment. Other solutions, such as name your price and price matching widgets allow you the flexibility to get up and running quickly without much effort or cost. As with any new initiative, I strongly recommend testing various solutions and tracking your conversion rate, average order value and margin of your orders.
As the Co-Founder and COO at PriceWaiter, Andrew Scarbrough has introduced the “Name Your Price” platform that engages more customers, converts more sales and makes MAP moot. In addition to founding PriceWaiter, Scarbrough is the Co-Founder and COO at Delegator.com. With a background in web analytics, search engine optimization (SEO), social media, and cloud computing, he has played a significant role in the development and execution of successful SEO, e-Commerce and web marketing strategies for companies both large and small.
