 Welcome to The Journey. Today we'll be talking about seven competitive pricing strategies to make a profit. Make that money. Choo-choo. So when it comes to pricing a product, there's a lot more to it than just slapping on a price tag, right? So there are about 1.3 million e-commerce websites in North America alone, and then in the world, excluding China, there's two to three million. So that's some stiff competition. So pricing your products is not an exact science. It's not even an art form. It is dynamic, it's gonna change, and it's gonna depend on a few things like your niche, your goals, your product, or even your industry. So here are seven competitive pricing strategies for your products. So number one is know your local competition. So whether you're a new business or a really well-established business, that competition research is really invaluable to know your competitor's prices. And not only even if you are an e-commerce website, people love to shop local, so you need to see those local prices so you know how to price accordingly. Exactly. 50% of consumers say they would rather buy in person, and of those that buy in person, 80% still go online to compare those online prices to make sure they get in the best deal. And that brings us to our next point. Understand the online market. So not only do you need to know your local competition, but it's just as important to know what else is out there because people can go online nowadays and buy anything. So the next thing to consider is what do you wanna be known for? Do you wanna be known for the lowest price or the best quality, but maybe at a more higher price point? Yeah, actually only 2.4% of online consumer visits actually converted into a sale. So I know for me, whenever I'm online shopping, right, I'll add all of these items into my shopping cart and then I get preoccupied with something and I end up leaving all of that and I don't end up buying it most of the time. And I totally forget about it. So it's really important to know what sets you apart and then really use that to develop your pricing strategy. Next is to assess your costs. Now there's two major types of costs you have fixed and you have variable. Now fixed are those things that are not gonna change no matter what you do with pricing your product. You have to pay a certain amount for your employees or you have to pay for hosting fees or your lease to your building. You need to figure out what those are and then you'll be able to afterwards know how much you need to price your product. And your variable costs are your costs that change based on different production or sales value. So you also have some things that vary by season. Say you're an ice cream store and in the summer of course you're going to be selling like crazy but in the winter in your area you may not sell too much. So you may have to adjust your pricing depending on that time of year. So bottom line, you need to know how much it's gonna cost to run your business and price your products accordingly. That way you can definitely make sure you're sustaining and maximizing your profits. So the next strategy is to determine your profit margin. So your profit margin is the percent of revenue you make on each unit after deducting those fixed and variable costs for each product. Say your product costs $80 to your consumer. After you deduct how much it costs you to make it, let's say $60, then that means that you've netted $20 which is a 25% profit margin. Now keep in mind these profit margins definitely vary based on different industries. Exactly, everyone's not gonna have a 25% profit margin. That will be ideal. However, for instance, the clothing industry, it can range from four to 13% based on the data that's out there. The next strategy is A-B testing. So if you wanna try out a few different pricing strategies and see which one works best, you can actually test them out both at the same time. And there are many pricing models that you can choose from and we're gonna give you some examples. First, pricing at a premium. Pricing your product higher than all of your competitors and seeing if you're actually able to justify that in comparison to what's out there in the market. Yeah, and with those higher prices, you have to create a perception of value for your customers. So I like to think of this with like high quality makeup lines, right? So not only does your makeup have to be high quality but the packaging, you're gonna get a glass bottle rather than a plastic one. So really creating that illusion of a high quality product. And opposed to that, it's penetration pricing. Say you have a hot new item that is just new to the marketplace, you can see if you could price it a little bit lower and get a lot of attention around that product. So that's really good for introductory specials, right? For grand openings, for a limited time, we're gonna be giving 20% off. The next thing you could try is economy pricing. So this is typically kind of difficult for smaller businesses, but essentially it's lowering your prices to really attract and appeal to that budget conscious shopper. Like me, you could think of this as if you're going to Walmart, you see a lot of the deals, but if you go to Whole Foods, it's a higher quality at the same time, you might wanna think of it as spending your whole check. Next is price skimming. It's a new unique product and you initially set your price high. However, when you have either competitors coming in with the same type of product or interest isn't there where it used to be, you start to slowly decrease the price. Yeah, this happened with paper straws, right? So once everyone wanted to start saving the turtles, first there was a company that only sold the paper straws. They could really dominate that market and set that price. But then once all these other competitors started entering the market, you can buy a metal straw now. You can buy all these different types of straws. So no longer do they have that control and you have to kind of lower your price to work with your competitors. Another option is psychology pricing. So this is when you're really appealing to the emotions of a shopper by creating this illusion of a really great deal. So instead of paying for something, say $100, they'll price it at 99. You save a dollar and it doesn't really seem that much, but when my emotions are involved, a dollar is a lot. And last is bundle pricing. You set your prices lower when people buy more things. So this would be like buy two, get one free. So if you were originally just planning on buying one, all of a sudden now you're buying two so you can get that third one for free. And it makes people think that they're saving some money. However, they are paying a little bit more and you are getting the benefit for selling it as a bundle. And it's a really great opportunity for if a product isn't selling well to sell more of it. So if jelly's not selling well, hey, buy this peanut butter, get jelly for free. There you go. Peanut butter jelly time. Now it's important to recognize the downfalls of underpricing. So when you set the lowest possible price, you're really diminishing the profit margin that you're able to make. Yeah, for instance, movie pass. It was awesome when it came out. You could see unlimited movies one a day. And then unfortunately when they priced it so low that they couldn't keep up with it, certain people couldn't use it anymore. This one really cuts Samdeep. This also doesn't leave any room for possible discounts or adjustments. So think about if you wanna run a Black Friday special, right, but you're already offering the lowest possible price and you can't offer that discount. So the last strategy is consistently review your pricing. You can't just set it and forget it. You have to make sure that you're staying on top of this. Yeah, you can actually set scheduled times for you to review and update your pricing strategies like once every quarter. And there's also some unscheduled times when you wanna review your prices. For example, if your costs change. And also what if the economy changes? Or if your competitors change their prices. Another, if you're launching a new product. Or if you're entering a new market or vertical. And demand is up. For instance, back when Popeyes came out with that chicken sandwich and they sold out, whenever they thought to bring it back in, they could potentially increase their price. Because so many people wanted it. So there you have it. There's seven competitive pricing strategies that you can use to make that money. And be sure to like, comment and subscribe to our channel. And ring the bell so you're notified when we have fresh new content. Thanks for watching. This is The Journey. See you next time.