How do you adjust to e-commerce price changes?

Using cost-plus pricing as your only pricing strategy may limit your ability to compete with other businesses. However, incorporating it as part of a dynamic pricing strategy allows you to establish product prices with greater flexibility and without taking on unnecessary risks.

Knowing your costs might sound easy at first , yet still most retail & ecommerce companies lack that. This is due to different IT systems that were gradually implemented in each company (ERPs, CRMs, CPQs etc) that were not integrated with each other. Implementing a pricing software can close that gap by being a unified system of both internal data like sales, costs, margins & stock as also external data like competitive pricing data.

Knowing your costs is foundational, but don't mistake it for your ultimate goal. Costs give you a floor price; they don't indicate your ceiling, the maximum your market will bear. Being cost-aware is good; being value-aware is better. The floor is about survival; the ceiling is about aspiration. Costs are your compass, but value is your North Star KPI. Understand not just what it takes to produce your product, but also what it brings to your customer. That’s how you price for value. Constantly refine this understanding as market dynamics shift. The aim isn't just to cover your costs and turn a profit; it's to maximize the value you bring to the market and, in turn, the value you extract from it.

Knowing COGS and setting prices based on them is foundational. Here's the next-level insight: it's not just about reacting to market prices or understanding your costs; it's about understanding the price elasticity of your specific offerings. Many e-commerce businesses operate under the mistaken belief that price changes will linearly affect demand. It rarely does. You could potentially lower prices and increase total profit, or raise prices and increase both profit and ranking position on Amazon. Brands often underuse dynamic pricing. Tools like Profasee, which offers surge pricing mechanisms akin to Uber help you optimize pricing in real-time based on supply and demand, making the system more efficient for both sellers and buyers.

Cost-based pricing is a commonly adopted strategy by many companies worldwide as it provides a solid foundation. However, determining the specific costs to consider in pricing can be challenging. Should only direct costs like Cost of Goods Sold (COGS) be factored in, or are there additional elements to account for? Drawing from my experience, it is crucial to periodically review and validate cost allocation keys to ensure a dependable cost foundation at a product level for accurate price calculations. This practice helps maintain pricing integrity and supports informed decision-making processes within the business framework.

Analyzing competitors is a starting point, not the final destination. Many fall into the trap of copying rivals, especially in pricing, but that's a shortcut to the bottom. Merely replicating a competitor's pricing strategy won't secure their market share for you. Competing solely on price is often unwise, especially if you're not the cost leader. Remember, competitors are not benchmarks; they provide valuable data points. True insights stem from understanding why customers prefer your offering over competitors'. Sometimes, the most impactful move is to venture where they aren't—be it with a unique feature, a niche market, or a pricing approach that resonates better with your customer's willingness to pay.

E-commerce is a highly competitive area where you must keep track of your competitors because their actions can affect your sales and conversions most of the day. You need to know who your competitors are and what action they take. For example, special retail days such as Black Friday or Cyber Monday are significant events to improve conversions and drive sales. In those days, ensure you're tracking competitor prices to offer better prices. That way, you can increase sales and compete with your rivals. "

Analysing your competitors is indeed crusial though a previous step is to identify your sales channel, as that will autoamatically show you what you need to be monitoring. If your most performing sales channel is a spesific marketplace or price comparison website, then that is where your "competitors" are, else if direct sales are your greatest channel, then the competitive webshops with most Product Coverage (having most common products) are the ones to keep a close eye on.

While it's valuable to know the playing field, remember your pricing goal isn't to just adapt to the market; it's to influence the market. The market isn't just something that happens to you; it's something you can impact. Competitive analysis is essential is a tactical move, not a strategic endgame. Your competitors can offer clues, but they're not the blueprint. If you're constantly chasing them, you're running their race, not yours. In essence, competitive analysis is a mirror. It shows you where you are, but it doesn't show you where you could go. Use it as a reality check, not a roadmap. Know the landscape, but also know yourself, your unique strengths, and your pricing power. That's how you turn pricing into profit leadership.

Competitor analysis is surface-level awareness, a beginning but not an end. Many commit the error of emulating competitors, but that's a race to the bottom, especially in pricing. There's an illusion that copying a competitor's pricing strategy will give you their market share. It won't. Competing on price is usually a bad idea, especially if you're not the cost leader. Remember, competitors are not benchmarks; they're datapoints. Real insights come from understanding why customers choose you over competitors. Sometimes the highest leverage action is to go where they aren't—whether that's a unique feature, a niche market, or a pricing strategy that better aligns with your customer's willingness to pay.

Team , team & again TEAM. Be carefull to select an experienced team from your commercial / sales departments or if possible even hire an experienced Pricing Manager, as pricing strategies need to be organized by people that know youw own company , products and struggles.

Pricing depends on multiple factors: 1. Cost of manufacturing 2. Other costs (includes advertising, fee) 3. Competition 4. Return rates 5. Desired margins Pricing cannot and should not be a static number. Brands should continuously experiment with pricing options and make sure they are not leaving money on the table.

Choosing the right pricing strategy is the most critical part. Finding the ideal plan might take some of your time and effort. Ensure that the strategy aligns with your customer segments, allows you to improve your profit margins and aligns with your branding. Observe how your target audience reacts to your strategy and test different strategies to see if there is room for improvement in your pricing.

Your pricing strategy shouldn't be static; it must evolve with market conditions, competitors and business goals and intentions. Don't just chase short-term gains; align your pricing with your broader vision. E-commerce is a fast game, but it’s also a long one. Test, learn, adapt, iterate. Pricing your products is a living, evolving strategy that demands your attention and acumen. In the fast-paced world of e-commerce, there's no "set and forget." Your pricing is a dynamic lever—understand its impact, use it wisely, and keep refining.

Your pricing strategy is extremely important. It can dictate your content strategy, including graphics and messaging, as well as your ad strategy. If you have a premium price, you need premium content. You likely have more margin for ads as well. If you’re cheap, you likely are going after a volume play and need to be more cost efficient with your content and ads. Make sure you figure out your pricing strategy initially

Pricing your products with automation is critical to saving time and effort. You can monitor your competitors' prices by automatically tracking their price moves with competitor price tracking software. They send you automatic alerts when a competitor changes their pricing, and you can set your prices automatically. You can also get smart price recommendations from pricing tools, which can give you an idea if you are unsure of your pricing.

In the era of GenAI and quantum computing unfortunatelly there are still companies stuck in spreadsheets and manual data tasks. Automation not only will give you a competitive advantage but will also help you scale your pricing as at some point even taking actions with ready to go data wont be feasible if you need to take dozen of pricing actions every hour.

Automation in pricing has entered a new era with tools like Profasee, which bring the dynamic pricing models akin to Uber's surge pricing to the e-commerce landscape. Competing on Amazon and other e-commerce channels are reaching unprecedented levels as brands search for any edge they can get. Price remains the most underutilized lever for profitability and innovation. Dynamic pricing is not new; it's disrupted major industries from airlines to ride-sharing. Yet, its absence in e-commerce, especially for Amazon brands, has been a glaring omission. Profasee fills this gap, enabling real-time pricing adjustments based on complex algorithms that consider demand, supply, seasonality, and competitor activity.

Price transparency is one way to do that, after having all the data and automations in place you should feel safe about your prices and the market you stand in, thus you can clearly show your customers how you compare to your competitors in pricing.

E-commerce is a highly dynamic area where you must review your strategy and adapt it to the changing circumstances. It's crucial for your pricing, where online retailers often offer competitive and dynamic pricing. Observe the market and customers' reactions and change your pricing model if necessary. You can test pricing models that align best with your business and drive sales.

Price isn't merely a number; it's a multi-dimensional signal that communicates value, defines your market position, and shapes your brand identity. The art of pricing is akin to writing or coding—it's an iterative process, constantly evolving. Static pricing in the dynamic world of e-commerce is a path to irrelevance. As new competitors arise, technology advances, and consumer tastes change, so should your pricing. Set your pricing intention optimizing for key variables—profit, revenue, ranking position. Iterate smartly, navigating towards that elusive sweet spot where value and cost intersect. This is not a set-and-forget game; it's a strategic, ever-adapting journey. Pricing isn't a one-time decision.

When it comes to e-commerce pricing, it's vital to think beyond the immediate market conditions. Instead, focus on developing a thoughtful and sustainable long-term pricing strategy that takes into account multiple factors. These include market trends, seasonal fluctuations, and your business growth objectives. By taking a big-picture approach to pricing, you'll be better equipped to make informed decisions that drive long-term success and help your business thrive in the competitive online marketplace.