Selling any product without knowing its worth is like taking a road trip without plotting a course to your destination; you might drive in circles or reach a dead end.
You can’t pluck numbers out of thin air. Setting the manufacturer’s suggested retail price (MSRP) is an excellent place to start, but it often works better for mass-produced items.
You’ll want to consider a more nuanced approach for your small retail business.
Price is a key detail for consumers. More than an arbitrary number, price indicates value and helps customers decide whether to buy your products or shop elsewhere. It’s important to note that many customers compare prices online, sometimes while they’re standing in your store!
This article gives you five retail pricing strategies you can implement today. Before diving in, decide your goals and which strategy will work best for your store.
You can use various methods to set prices for your products or services. The trick is finding the sweet spot between what customers are willing (or expect) to pay and making a profit.
Finding a balance between high and low prices is a challenging task. Price your products too high, and your customers might suffer sticker shock. Yet pricing too low might make customers skeptical about your offer's quality and value.
When deciding on a strategy, consider your target market, business objectives, and the value of your products. Here are a few tips:
Identifying a pricing strategy is easier when you know who you’re trying to reach.
Creating customer profiles is an excellent place to start. You can use your point of sale (POS) system to collect data such as demographics, preferences, and purchasing habits. For example, your customer loyalty program can help identify ideal customers and their buying behavior.
Take seasonality into consideration. We’ll go into more detail later, but as seasons change, so will your pricing. Smart inventory management and business reports can help identify trends and what sells best at specific times of the year.
Lastly, set goals and objectives. Are you looking to increase sales or maximize profits? Maybe you want to establish a luxury boutique. Whatever your objective, make sure your pricing strategy aligns.
How do your customers react to prices? How customers perceive prices usually depends on the product’s ability to meet their needs. For example, people will pay more for a product if they think it offers good value, satisfies their needs, or solves a particular problem.
There are a few popular methods:
Pro tip: Use your POS system to analyze sales data and identify the most effective price points for your products.
Seasons, markets, and consumer demand have one thing in common — they change. Setting your prices and taking a back seat isn’t an option. Dynamic pricing allows you to adapt your prices, maximizing your revenue and staying competitive by optimizing prices in real time.
Pro tip: Advanced POS systems can track real-time sales data, monitor inventory levels, and analyze consumer behavior, providing insights into demand patterns and market trends.
If you’re not keeping an eye on how your competitors price similar products or services, you’re missing opportunities to win customers.
Pro tip: Some POS systems offer features allowing retailers to monitor competitor prices through manual input or integration with online price comparison tools.
Everyone loves a deal, discount, or promotion. You want to attract customers with irresistible offers and incentives so they’re excited about shopping in your store. Promotions are an excellent way to grow sales and build loyalty. But you need to get them right — timing is crucial.
Pro tip: Some POS systems have loyalty programs baked in. You can manage discounts and promotions, analyze sales data to determine the effectiveness of various tactics, record customer data and purchase history, and apply rewards as needed.
It’s a simple tactic, but cost-plus pricing helps maintain a consistent profit margin across your business. You set prices based on production cost plus a markup.
Pro tip: With an advanced point of sale system, you can track product costs, monitor inventory levels, and automate price changes based on cost fluctuations. You can update prices in real time and reduce manual effort.
From psychological to cost-plus pricing strategies, you have five actionable strategies to help find the sweet spot between delighting your customers and maximizing profits. But how do you put these strategies into action?
At POS Nation, we provide a robust POS system that is crucial in implementing and managing these strategies. Features include:
A comprehensive POS system unlocks valuable insights to guide you in making data-driven decisions, so you can easily implement these pricing strategies.
Schedule a demo with our retail experts, and we'll show you how a robust POS system can revolutionize your retail pricing game.