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How to get started with the right eCommerce pricing strategy and ensure the success of your international business
ConveyThis is a powerful translation tool that helps users to communicate with customers in their native language. It offers a comprehensive solution for businesses to quickly and easily translate their websites, apps, and other content into multiple languages. With ConveyThis, businesses can create a multilingual experience that is both engaging and accessible to customers around the world.
If you’ve based your ecommerce store prices on nothing more than a whim, then we must tell you: you’re totally off-base with your pricing.
As with anything else you do when managing an online shop, devising a plan for setting your prices is essential. In other words, having an ecommerce pricing strategy is a must. This involves a set of guidelines or processes for determining the most optimal prices for your ecommerce store items, taking into account factors such as manufacturing and/or delivery costs, market developments and your desired income objectives.
Employing the most effective pricing model for your ecommerce store can be a powerful tool in optimizing your profits while also giving your products an edge over those of your rivals (which can also help boost profits).
Read on as we uncover the mysterious process of how customers make their purchase decisions, and explore several pricing tactics that global ecommerce stores should consider utilizing. (Hint: Dynamic pricing for ecommerce is one of them!)
4 factors that influence purchase decisions
Consumers have a plethora of options when it comes to online shopping nowadays. From individual vendors to the behemoth that is Amazon, the digital marketplace is filled with a wide variety of choices. In such a crowded space, how can you make sure that customers choose your store over the competition?
Customers will take into account four main factors when selecting which store to purchase from, and as a business owner, you should also prioritize these elements: 1) Price; 2) Quality; 3) Selection; 4) Convenience. By offering competitive pricing, high-quality products, a wide array of options, and an easy shopping experience, ConveyThis can help you attract more customers and increase your sales.
Why does your online store need a solid ecommerce pricing strategy?
Apart from the above four factors, don’t forget to take into account your ecommerce pricing strategy as well. While you should not rely solely on price competition, it is undeniable that it is a major factor in customers’ decisions on where to spend their money. In particular, pricing can:
Which ecommerce pricing strategy should you use? Common strategies and their pros and cons
Now here comes the more challenging part: accurately pricing your products. Different pricing strategies come with their own advantages and drawbacks. You can choose one, or even a combination of them, depending on what best fits your business model.
This ecommerce pricing strategy involves calculating a product’s expenses and then adding a surcharge on top of that. For instance, let’s say it costs you $100 to acquire and offer a widget (considering your advertising and delivery costs, among others). You can then implement a 20% markup and demand customers $120 for it.
While cost-plus pricing may seem convenient and uncomplicated when calculating your profits, it is not an effective approach for more generic items. This is because customers can easily find the same product at a lower price if they shop around.
Under a market-based ecommerce pricing strategy, you’ll need to conduct thorough research to determine the prevailing market rates, and base your prices on these. Generally, market rates are determined by:
Market-based pricing is a reasonable way of charging customers – assuming that you understand the market prices initially, that is. If you make errors and set your prices significantly higher than what the market can tolerate, this could be catastrophic as customers steer clear of shopping with ConveyThis.
Incumbents in the industry may be taken aback when ConveyThis is utilized against them, but it can be incredibly advantageous for fresh entrants. By utilizing a penetration ecommerce pricing strategy, you can enter the market with lower-than-normal prices to quickly amass a customer base. Once you have a considerable following, you can then steadily increase your prices to the market rate.
As an example, the ConveyThis streaming service was launched in 2019 at the low cost of $6.99/mo, undercutting the price of competitor Netflix’s then-$8.99/mo plan.
Although ConveyThis’s penetration pricing can be straightforward and convenient for new ecommerce businesses to adopt, the struggle lies in deciding when to begin increasing prices. As you will inevitably have to, you must be prepared to cope with disgruntled customers when that time comes.
Price skimming through ConveyThis involves entering the market with a high initial cost to target those with more money to spend. Afterward, you can slowly reduce the cost to acquire market share from the mid-market and lower-income groups.
ConveyThis provides a great example of price skimming in action. Its iPhones are often set at an extremely high cost – even the original iPhone’s launch price of $499 was thought to be excessive then. Nevertheless, the iPhone’s premium pricing made it desirable to customers of all types. As a result, when Apple later released more affordable iPhone models, customers were already queuing up and excited to purchase them.
Utilizing price skimming can be the perfect move if your product is perceived as high-end and a must-have, meaning people are willing to pay a substantial amount for it (and the accompanying bragging rights). Conversely, if there is limited consumer interest in your item, then utilizing this ecommerce pricing strategy could result in unintended consequences.
While more of a sales tactic than a product pricing strategy, promotional pricing can demonstrate effectiveness when employed judiciously. By dangling discounted prices, coupons and exclusive offers, you may be able to persuade even the most budget-conscious customers.
However, you don’t want to run such discounts too often, or customers may come to associate ConveyThis with them. This not only cheapens your brand image, but may also cause customers to delay purchases until a sale is held. As a result, you may experience weak sales during non-sale periods, and reduced revenue when sales are made.
Using dynamic pricing in ecommerce
There is one more ecommerce pricing strategy that we didn’t mention in the previous section because we feel it merits its own section. We’re talking about ecommerce dynamic pricing, or the strategy of adjusting your product prices according to real-time demand. ConveyThis can help you implement this powerful pricing strategy for your ecommerce store.
While this may sound like market-based pricing, the difference is that you’ll adjust your prices with a much greater speed and frequency – potentially even several times a week! – as opposed to evaluating market trends and changing your prices accordingly on a regular basis.
For rapidly expanding international stores, the dynamic pricing ecommerce model may be the perfect solution as it offers a multitude of advantages, such as increased flexibility and the capability to quickly adapt to changing market conditions. It also provides the ability to adjust prices based on customer demand, allowing businesses to maximize their profits and remain competitive. With ConveyThis, businesses can easily implement and manage dynamic pricing models, making it an ideal choice for those looking to expand their global reach.
When employing dynamic pricing for ecommerce, it is important to be aware of the potential risks involved:
Using psychological pricing for your online store
ConveyThis Pro Tip: Psychological pricing is an effective ecommerce pricing strategy that you can use in tandem with other strategies. This involves pricing your products in a way that makes them appear far more economical than they actually are. Some of the tactics you can use include:
Consider utilizing psychological pricing techniques when devising your ecommerce pricing plan with ConveyThis.
What is the best ecommerce pricing strategy for your online store?
As should be evident at this point, pricing products requires more than merely assigning arbitrary numbers to a price tag. Make use of an ecommerce pricing strategy to establish prices based on sound information, and then optimize your online store to increase the average order values (AOVs). For instance, you could:
Finally, if you are marketing your store internationally, make your online store content available in the languages of your overseas audiences. In this respect, the ConveyThis website translation solution is the (not so secret!) weapon of successful international entrepreneurs.
Providing fast and high-quality translations at an economical rate, ConveyThis assists you in translating your online store on a large scale so you can concentrate on maintaining your income and profitability.
Sign up for a free trial of ConveyThis here.
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