💰 The Art of Pricing: 7 Strategies For Ecommerce Stores

#1: Decoy Pricing: Steering Customers to the Right Choice

Decoy pricing is a clever strategy where stores introduce an extra option, often at a higher price, to make their target product seem more appealing.

Think of a restaurant menu. They might offer a budget-friendly wine for $20, a mid-range bottle for $50, and a top-shelf option for a whopping $100.

That pricier bottle might not be your first choice on its own, but compared to the $100 option, the $50 bottle suddenly seems like a great deal.

In e-commerce, decoy pricing can be just as effective.

Stores might introduce limited-edition versions of a product with a hefty price tag. This makes their standard offering appear more reasonable, even if the usual price wouldn't be considered a bargain on its own.

#2 Charm Pricing: The Power of 9

There's a reason why prices often end in .99.

Known as charm pricing, this tactic plays on the way our brains process numbers. We perceive $19.99 as significantly cheaper than $20, even though the difference is just one cent.

This trick isn't limited to smaller price tags either. If you're selling a more expensive item, consider using a price like $97 instead of a clean $100.

That little nudge can influence customers to perceive it as a better deal.

#3 Price Anchoring: Setting the Right Expectations

Price anchoring involves setting a reference point for your customers. When they see a high initial price, subsequent lower prices seem more attractive.

For example, displaying a product’s original price alongside the discounted price creates a perception of value.

Think of a winter jacket originally priced at $200. Now, imagine seeing it marked down to $120 with the original price clearly displayed next to it.

That initial higher price tag acts as an anchor, making the discounted price seem like a great deal. Suddenly, the jacket seems more affordable, and the customer wants to buy it before the "sale" ends.

This tactic for ecommerce sites has more than one advantage. By using strikethrough pricing with your discounted products, you are eligible for price promotion tags on Google Shopping ads.

These little annotations highlight the original and discounted price on your product listing which boosts your click-through rate compared to ads with just a single price.

#4 Bundling: More Value for Less

I love bundling.

It’s a brilliant way to boost your Average Order Value (AOV) and let customers try complementary products, potentially leading to repeat purchases.

Bundle pricing combines multiple products and sells them at a lower price than if bought individually, increasing perceived value and moving more inventory.

For instance, a hair care brand might bundle shampoo, conditioner, and body wash for $50 instead of $70 if purchased separately.

Tip: If you’re using Shopify, avoid creating a SKU for each bundle as it can confuse stock counts. Instead, use a bundling app to combine multiple products into a temporary bundle.

#5 Psychological Thresholds: Keep It Under Key Numbers

Customers have subconscious thresholds for prices, with $50, $100, and $200 being significant limits for many. Pricing just below these thresholds (e.g., $49.95 instead of $50) can dramatically influence how customers perceive and react to prices.

This phenomenon is linked to the concept of "left-digit bias," where the left-most digit heavily influences our perception of the overall price.

Keeping prices just below these critical points can boost conversion rates without significantly affecting profit margins.

This tactic explains why digital gurus often price their courses at $997 instead of $1,000, leveraging the psychological impact to make the price seem significantly lower and more appealing.

#6 Pay-What-You-Want: Letting Customers Decide

This unconventional method can be surprisingly effective. Allowing customers to pay what they think a product is worth gives ownership to the buyer and can support a brand's messaging.

While it might seem risky, many businesses discover that customers often pay a fair price or even more than expected.

This strategy is particularly useful for selling clearance items that you would have significantly discounted anyway.

It can generate buzz and be promoted through its own dedicated email campaign. However, it should be used sparingly and strategically during key moments in lower sales months to maximize its impact.

#7 Mystery Box: The Excitement of the Unknown

Need to move excess inventory? Try the Mystery Box. Customers pay a set amount for a mystery selection of products, adding an element of surprise to their purchase.

Mystery boxes tap into the psychological appeal of curiosity and the excitement of discovering something new, making them an effective tool to drive revenue outside of hero product SKUs.

Aussie retailer Budgy Smuggler successfully implemented this strategy by launching it through an email campaign. Despite customers not knowing what design of swimwear they would receive, the campaign drove significant revenue for the retailer.

It’s perfectly okay to limit refunds and returns on Mystery Boxes. Customers get a great price in exchange for the risk of receiving items they might not like.

#8 Profit-Based Pricing: Maximizing Sales Volume

At the end of the day, pricing must be attractive to customers but significant enough for you to make a profit.

Profit-based pricing ensures that each product is priced to cover costs and generate a reasonable profit margin.

This strategy involves understanding your cost structure and setting prices that reflect the value provided while ensuring the business remains profitable.

For eCommerce, remember the rule of thirds.

• 1/3 Cost of Goods Sold

• 1/3 Cost Per Customer Acquisition (CPA)

• 1/3 Profit Margin (minus ongoing expenses)

Profit based pricing works best for high turnover businesses, as it allows for maximum efficiency of supply, but it fails to address competition and overall demand.