5 Paths To Pricing Success For Today’s Online Retailers

Online retailing is a Brave New World being driven by competitor-based pricing, while cost-based pricing and customer-based pricing temporarily take a backseat. "Shopping online is about to explode," writes Laura Heller on Forbes.com. "Retailers of all types are expanding product offerings, adding in-store pickup, free shipping and experimenting with social media... all of them are reinventing how we'll shop online in the future."

Competitor-based pricing means it's imperative for online retailers to know their competitors' prices in order to set their own prices properly – and act on it quickly.

Here are five paths to pricing success for online retailers:

Understand How Consumers Shop Online Today

"For consumers, electronic shopping exists because of the high level of convenience, broader selection, competitive pricing and greater access to information." (Wikipedia).

How do consumers go about online shopping? In most cases, they start their online shopping by using a search engine. Search engines lead the consumer to comparison shopping sites and other related activities. The journey inevitably leads to price comparisons, and price is an extremely important factor in most final decisions.

Know How Comparison Shopping Engines (CSEs) Work

Comparison-shopping engines (CSEs), like Google Product Search, NexTag and Shopzilla amass product data from many merchants, match up the products offered by each retailer, and allow consumers to compare prices across the various stores in seconds, usually showing five to eight lowest price offers, and then tapering off.

So if you don't have the right (i.e. competitive) prices when the consumer is comparing products, you probably won't come into their purview at all. To be competitive you have to know how your competition is pricing at any given time – and price accordingly.

Understand That Big Online Retailers Have Advantages In Economy Of Scale.

Having a huge infrastructure allows a big online retailer like Amazon to not only be highly competitive on price, but also offer a variety of perks that others can't, like free shipping and other consumer enticements.

             Above image: Taken from How Stuff Works about Amazon

The way to fight back is to also offer the consumer lower prices, and then spoil them with your own excellent customer service and support.

Be Aware That Your Competitors are Tracking Your Prices

Online retailers are becoming more sophisticated at tracking competitors' prices and responding quickly with their own information. You have to do the same. Whether tracking manually or with one of the new pricing intelligence tools, it's imperative to know what your competition is charging for the same product(s), getting the information you need when you need it, and acting on it in a very timely way.

Follow Frequently And Change Prices Accordingly

In order to optimize your online business success, you must follow and react to online pricing in an intelligent and timely way. Unlike bricks & mortar, with the transparency and immediacy of online retailing and pricing, you can see what your competitors are doing AT ALL TIMES. And not only can online retailers change price frequently, it's easy to do. In order to remain competitive, you must know what competitors are charging, change your prices frequently, and, most important, price correctly.


Be aware of your competitors' pricing at all times – and act accordingly. Be innovative and bold – it may mean offering an item below cost to get the customer through your virtual door, but once they come, you'll make it up through return business, quality, loyalty, and proven superior customer service and support. The paths I mentioned above are your lifelines to online retailing success.

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Gilon Miller, CMO

About Author

Gilon is a seasoned marketing, sales and business development executive with over 15 years of experience in the software and Internet business. He is the Founder and CEO of GuruShots. Previously, Gilon was the CMO of Upstream Commerce, VP of Marketing at iMDsoft and Director of Global Marketing at SAP. He earned an MBA at the MIT Sloan School of Management and a BS in Electrical Engineering from Tufts University.
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