- First off, its key for small businesses to understand that they are “price takers“, not “price makers”. At the end of the day, the consumers are the final decision makers with regards whether or not a product is worth purchasing at any given price. Businesses must make educated decisions based on anticipated consumer demand and therefore, the consumers are actually the ones set the product prices.
- Make sure you know your competition. If other companies are offering similar products, it’s crucial to have information with regards to their pricing decisions. A good way to begin is to take a look at your competitions pricing by doing a quick search on “Google Shopping” for the products your company offers. If you want customers to buy your products (especially online) you must make sure your pricing is in line, if not better, than your competitions.
- Don’t make rash price reduction decisions. If you decide to lower your product prices without understanding the possible repercussions, you may be faced with profit losses, and even a customer revolt when you elect to raise them again in the future. Therefore, when making price cuts (especially substantial ones), it can be helpful to label products at “promotional pricing”. That way you can get a feel for consumer demand without being fearful of upsetting your buyer base if you decide there is a need to raise the price again.
- Consider testing a dynamic pricing model. This last point is a bit specific to Pricefalls, but relates directly point one (that consumers really the set prices). Many of the listings on Pricefalls are Dutch or (Descending Price) auctions. In this type of setting, product prices fall over a period of time until they reach a level that a customer is willing to pay. Utilizing this type of model allows businesses to look at the price decisions made shoppers in order to come to an appropriate “fixed” price.
It’s clear that these four points are not the end all to pricing inventory. Dependent upon the industry and the size of the business their are a number of other strategies that a company can utilize to efficiently price their products. However, through some well seasoned advice, along with a bit of trial and error, the strategies above have certainly helped Pricefalls. If you have any other perspective on how to set prices for inventory please leave your thoughts in the comment section below.