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How Your Pricing Structure May Be Losing You Money

Your pricing structure for your Ecommerce business will determine how profitable your business is. When customers are shopping your website the first thing they will notice after the image is the price. It is very important that you put a lot of thought and effort into developing a pricing strategy for your product that will be beneficial for both you and your customer.

Although it may seem like offering lower prices than your competitors may be the best way to introduce your product to the market, this strategy could make you lose money or be less profitable in the long run. Customers will not appreciate when you decide to raise your prices when business is booming to offset the additional cost you will incur in hiring more people to handle the influx of orders coming in.

What Should Determine Your Product Pricing?

There are two different ways to look at pricing your product—market oriented and consumer oriented. The price of your product will have a lot to do with what your unique selling point is. This is the factor that will make you different than or stand out from your competitors. Your advantage could be having the lowest cost, the highest value or being the very first to offer a particular solution.

When identifying your unique selling point you will want to keep in mind what your products features are, the emotional aspect you can tie to your consumers to draw them in, and how you can convince your customer that your product is the one for them. Many times a slogan will develop from this thinking such as Target’s “Expect more. Pay less.” Or M&M’s “Melts in your mouth not in your hand.”

If you have determined that the USP of your product is going to be price or cost related, you will want to focus on market oriented pricing. In this strategy you will seek out your competition in the market to study what their pricing looks like, who their supplies are and anything else you can learn that influences their price, and determine whether you want to lower, raise or match your price to theirs.

If you are able to buy in flash sales for bulk, you may be able to enter the market offering substantially lower prices than your competition. If you sell non-proprietary items direct from a manufacturer or wholesaler, however, you may be limited in the amount of profit that you can make. You can also talk to your competition’s suppliers about beating the pricing they are offering. If you can convince a manufacturer that you can outsell the competition and order more frequently from them, they may be able to offer you further discounts or sales.


Consumer Oriented pricing strategies focuses on how much a consumer is willing to spend on your product. Having a USP that centers around quality or uniqueness will determine is this is the right strategy for you. You will want to divide your Ecommerce site into sections that are tailored to the target audience for that product. Categories such as men’s wear, women’s wear, children’s and accessories will filter your customers through the sections that will have what they are looking for.

Once you have determined the demand for your product you can set prices based on the value you have to offer. Customers are willing to pay a little more for something they can’t get anywhere else. If your product is similar to someone else’s but you offer a more efficient way, cost effective way, higher quality product etc., there will be many people willing to shop at your business rather than the competition. Consumer oriented pricing always puts the customer and meeting their needs first.




Using Discounts and Sales to Your Advantage

In today’s world, consumers have been trained to love a good sale. Saving money and getting more for less makes us feel like we have won a small battle against capitalism. In the beginning, this strategy may drive more traffic to your site, especially if you have an efficient marketing strategy in place; however, deeply discounting or running frequent sales can often times work against you in your pricing strategy.

If your customer see that you are frequently offering promotional pricing or having sales, two things could happen. The first is that the customer will wait to shop until the next or better sale on your site comes along because you have conditioned them that they can get discounts all the time. Your consumer will also continue to shop competitors to see if their sale is better. You will also loose the perceived value of your product because your customer will no longer believe it is worth its retail price if you are constantly discounting it.

The perceived value of your product or service is what is going to create brand loyalty and brand ambassadors for your site. Having the best, most reliable, most efficient or largest variety will be what people tell their friends and family about. If your product is unique and different you will see more social media engagement than you would have by just offering promotions.


Mix Up Your Promotions

Having a variety of sales at different points in time will increase the traffic to your site. If you have a strong email campaign, this pricing structure can be very important in converting traffic into sales. Just over 55% of consumers prefer money off based coupons and 75% of consumers have said that they search their inbox for coupon codes before making a purchase. Offering different promotions will encourage your customers to keep coming back to your site to see what is new and exciting.

Final Word

Offering free shipping, bundle packs, free or additionally discounted item add-ons, or discounts related to the quantity the customer is purchasing are all effective ways of getting people to browse. Customers will buy more often with a variety of promotions being offered at different times than they will if you just offer percentage or money off coupons. 60% off consumers say that the only reason they sign up for email marketing is to stay on top of the different promotions that customers are being offered at that retailer.

Just remember not to discount too often. Your customer needs to appreciate the value you have to offer and come back because they believe in your brand or service. Use your marketing strategy to drive an increase in traffic so that they will already have an intent to buy and looking for a coupon after their cart is full rather than coming to your site to buy one item just because you offered a sale on it. This will help to increase your profit margin and units per transaction.

Lastly, let me know your thoughts and what other tips for your pricing structure that has helped you. Leave a comment below and I look forward to hearing from you.

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About Sean Donahoe

Sean is one of the most recognized industry leaders in business and marketing. As a popular speaker, author, consultant he has helped over 50,000 students world wide find success in their businesses and has consulted with Fortune 500 companies and businesses of every size grow and thrive...

One comment

  1. This is really good stuff, Sean! I’ve always believed in adding value instead of lowering prices. It’s worked great in my experience, because when I do run promotions and discounts, they always sell out faster than I expect!

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