Is it Better to Increase or Decrease Your Prices? | eCommerce Matters Ep. 010
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In this episode, we tackle the age-old pricing question around increasing or decreasing prices and how it can impact your ecommerce business.
Hosts: Philip Huthwaite (CEO & Founder of BlackCurve) and Rob Horton (Product Director at BlackCurve).
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Full Episode
Podcast Summary
Introduction
The importance of price optimisation and its impact on business profitability is discussed. The participants explore the question of whether it is better to increase or decrease prices and delve into the factors that influence pricing decisions.
Business Objectives and Product Type
The participants emphasise the significance of understanding the specific business objectives and the nature of the products being sold. They highlight that different industries, target markets, and brand positions require distinct pricing strategies to achieve desired outcomes.
Maturity of Pricing Operation
The maturity of a company's pricing operation plays a crucial role in determining the appropriate pricing strategy. The participants discuss the challenges of managing large inventories and the need for efficient pricing practices. They note that if a business has not historically changed prices frequently or lacks comprehensive data on price elasticity, starting with price decreases can be a viable option to gather information and optimise pricing.
Balancing Volume and Margin
The participants explore the delicate balance between volume and margin. They discuss the potential impact of price increases on maintaining margins while striving to retain customer volume. Alternatively, they highlight how price decreases can stimulate volume and lead to increased sales. The importance of considering both short-term gains and long-term sustainability in pricing decisions is emphasised.
Test and Learn Approach
The participants stress the importance of adopting a test and learn approach to pricing. They highlight that price decreases do not necessarily entail heavy discounting but can involve small adjustments to gauge customer response and gather valuable data. Testing different price points and analyzing the results allows businesses to make informed pricing decisions and optimize performance.
Brand and Market Considerations
The impact of price adjustments on brand perception and market competition is explored. The participants discuss how luxury goods may be more sensitive to price decreases as they can devalue the brand image and compromise exclusivity. On the other hand, non-branded goods may have more flexibility in terms of price adjustments. Understanding market dynamics, competitor pricing strategies, and customer behavior is essential in making informed pricing decisions.
Continuous Learning and Adaptation
The participants emphasize the need for continuous learning, adaptation, and optimization in pricing strategies. They stress the importance of monitoring key performance indicators (KPIs) and leveraging data analytics tools to assess the impact of price adjustments. The participants emphasise that pricing decisions should align with business objectives, market conditions, and customer preferences.
Conclusion
The participants conclude that there is no definitive answer to whether it is better to increase or decrease prices. The optimal pricing strategy depends on various factors specific to each business, product, and market. They emphasize the importance of a thoughtful, data-driven approach to pricing decisions, along with ongoing monitoring and adjustment, to achieve the right balance and optimize profitability.