Pricing strategies in the online store
Posted: Wed Dec 04, 2024 9:49 am
An integral part of an online store is the website through which buyers can make transactions.
Due to the fact that an online store operates slightly differently than a traditional store, it is worth learning more about such issues related to this form of activity as the type of pricing strategies used in the online store, calculating its revenues, or possible forms of payment.
Pricing strategies are methods of action and reasoning that emphasize the extremely important importance of prices. They are a very common method of competing with competitors on the Polish market. In the case of online stores, these strategies will be related to issues related to managing product prices in the store. Among the basic types of pricing strategies, following Wojciech Kyciak and Karol Przeliorz (" How to set up an effective and profitable online store
") , we can list:
Market penetration strategy - in this case, the store focuses on low prices, while at the same time hoping for large sales. Fast sales in a short time focus on reaching a wide group of recipients, i.e. mass sales.
Acquiring a large target group interested in low prices can take two forms:
fast - here the company allocates a large algeria b2b leads budget for marketing and advertising
free - the financial resources allocated for advertising and disseminating information about the company are not significant here.
This strategy aims to attract many customers, but companies are also aware that most of them will not be very profitable customers. Nevertheless, consumers can become regular customers and in this case it is possible to build lasting relationships with them. Regular customers will not likely notice a possible small price increase, they can use the company's services not only because of the financial advantages, but also because of habit, loyalty or trust in the company.
Prestige strategy - this strategy is based on the pursuit of reaching a selected group of customers. It is not about mass sales, but individualization of orders. The main profits do not concern gaining the largest possible market share, but acquiring customers who will be able to pay large sums for selected, luxury goods. Each individual order significantly increases the company's income and each customer is important for the company. The loss of a profitable customer is therefore felt by the company. Stores using the prestige strategy set relatively high prices for products that find their customers willing to spend a larger amount in exchange for goods characterized by features that are important to them (e.g. good quality).
Dominance strategy - this strategy focuses on reducing prices combined with reducing order fulfillment costs and other costs. This results in the online store reducing prices for its products, but not reducing the margin on them. Such cost reductions are usually only possible in the case of large companies that become dominant on the market and gain a competitive advantage over others.
These are the basic strategies that can be used in an online store. The specific choice depends of course on many factors, such as the size of the store, the type of industry it operates in, the number of companies with a similar profile, i.e. potential competitors. An important aspect influencing the choice of strategy will certainly also be determining whether we care about profit in the shortest possible time or whether we have long-term goals.
Online store profits and costs
More and more companies decide to have an e-shop next to a brick-and-mortar store, or even operate solely on the Internet. The convenience of shopping and often lower prices attract buyers, and sellers have many opportunities to reach potential customers. A wide range of products and their availability practically 24 hours a day affects the financial profits of the company. The financial aspects of running an online store are:
the possibility of reducing fixed costs, e.g. for renting premises or employing staff
the possibility of conducting activities promoting the store on the Internet, which translates into acquiring a wide group of recipients of products or services, and subsequently into financial profits
reducing customer service costs
saving time - customers usually make purchases themselves. Thanks to this, there is no need to, among other things, employ many salespeople who advise and sell the assortment.
An online store is of course associated with certain costs, but they are not as significant as in the case of a brick-and-mortar store. These expenses certainly include: a computer with an operating system, online store software, office equipment, creating a customer-attracting, professional website, e-marketing activities. In addition, there are also costs related to the purchase of a server and domain, aspects related to accounting and ZUS, as well as fixed fees - including telephone and fast Internet access.
When discussing issues related to calculating profits and incurring costs in e-shops, it is worth learning certain terms related to this issue, such as: CTR, initial cost, fixed cost, unit cost, online store software.
CTR (Click Through Rate) - this is the click-through rate. It determines the relationship between the ad's display and the number of clicks on the ad. In the e-shop aspect, CTR will mean the relationship between orders and all user visits to the online shop.
Fixed costs - these are expenses that must be incurred systematically each month of business operation.
Initial cost - these are the expenses that must be incurred before activating the e-shop.
Unit cost - this is the expense incurred in connection with the fulfillment of a single order.
Online store software - it provides tools that help you run an e-business and control issues related to it.
Due to the fact that an online store operates slightly differently than a traditional store, it is worth learning more about such issues related to this form of activity as the type of pricing strategies used in the online store, calculating its revenues, or possible forms of payment.
Pricing strategies are methods of action and reasoning that emphasize the extremely important importance of prices. They are a very common method of competing with competitors on the Polish market. In the case of online stores, these strategies will be related to issues related to managing product prices in the store. Among the basic types of pricing strategies, following Wojciech Kyciak and Karol Przeliorz (" How to set up an effective and profitable online store
") , we can list:
Market penetration strategy - in this case, the store focuses on low prices, while at the same time hoping for large sales. Fast sales in a short time focus on reaching a wide group of recipients, i.e. mass sales.
Acquiring a large target group interested in low prices can take two forms:
fast - here the company allocates a large algeria b2b leads budget for marketing and advertising
free - the financial resources allocated for advertising and disseminating information about the company are not significant here.
This strategy aims to attract many customers, but companies are also aware that most of them will not be very profitable customers. Nevertheless, consumers can become regular customers and in this case it is possible to build lasting relationships with them. Regular customers will not likely notice a possible small price increase, they can use the company's services not only because of the financial advantages, but also because of habit, loyalty or trust in the company.
Prestige strategy - this strategy is based on the pursuit of reaching a selected group of customers. It is not about mass sales, but individualization of orders. The main profits do not concern gaining the largest possible market share, but acquiring customers who will be able to pay large sums for selected, luxury goods. Each individual order significantly increases the company's income and each customer is important for the company. The loss of a profitable customer is therefore felt by the company. Stores using the prestige strategy set relatively high prices for products that find their customers willing to spend a larger amount in exchange for goods characterized by features that are important to them (e.g. good quality).
Dominance strategy - this strategy focuses on reducing prices combined with reducing order fulfillment costs and other costs. This results in the online store reducing prices for its products, but not reducing the margin on them. Such cost reductions are usually only possible in the case of large companies that become dominant on the market and gain a competitive advantage over others.
These are the basic strategies that can be used in an online store. The specific choice depends of course on many factors, such as the size of the store, the type of industry it operates in, the number of companies with a similar profile, i.e. potential competitors. An important aspect influencing the choice of strategy will certainly also be determining whether we care about profit in the shortest possible time or whether we have long-term goals.
Online store profits and costs
More and more companies decide to have an e-shop next to a brick-and-mortar store, or even operate solely on the Internet. The convenience of shopping and often lower prices attract buyers, and sellers have many opportunities to reach potential customers. A wide range of products and their availability practically 24 hours a day affects the financial profits of the company. The financial aspects of running an online store are:
the possibility of reducing fixed costs, e.g. for renting premises or employing staff
the possibility of conducting activities promoting the store on the Internet, which translates into acquiring a wide group of recipients of products or services, and subsequently into financial profits
reducing customer service costs
saving time - customers usually make purchases themselves. Thanks to this, there is no need to, among other things, employ many salespeople who advise and sell the assortment.
An online store is of course associated with certain costs, but they are not as significant as in the case of a brick-and-mortar store. These expenses certainly include: a computer with an operating system, online store software, office equipment, creating a customer-attracting, professional website, e-marketing activities. In addition, there are also costs related to the purchase of a server and domain, aspects related to accounting and ZUS, as well as fixed fees - including telephone and fast Internet access.
When discussing issues related to calculating profits and incurring costs in e-shops, it is worth learning certain terms related to this issue, such as: CTR, initial cost, fixed cost, unit cost, online store software.
CTR (Click Through Rate) - this is the click-through rate. It determines the relationship between the ad's display and the number of clicks on the ad. In the e-shop aspect, CTR will mean the relationship between orders and all user visits to the online shop.
Fixed costs - these are expenses that must be incurred systematically each month of business operation.
Initial cost - these are the expenses that must be incurred before activating the e-shop.
Unit cost - this is the expense incurred in connection with the fulfillment of a single order.
Online store software - it provides tools that help you run an e-business and control issues related to it.