When you think about it, the success of any retail business comes down to if the price is right. Great prices or deals are necessary to get people through your door and keep them coming back. This is necessary to turn a profit.
Every business needs a mark-up on what they sell to survive. This isn’t possible on everything sold (a good example is pubs, who don’t often make money on food but do on the drinks they sell), but it is on most things because you can adopt clever pricing strategies to drive demand. Here’s a few of those to try.
What does it do? It builds trust.
Vendor pricing requires you to buy in produce with a manufacturer suggested retail price already applied to the product. These can often be found on energy drink cans and consumables you’ll find at supermarkets. The benefit is you can sell the product for what is perceived to be a fair price and still make a profit. It builds trust because your customers will come to expect the price you have set elsewhere.
Psychological or ‘odd’ pricing
What does it do? It triggers an emotional response.
Psychological pricing dangles an odd price in front of your customer that is several pence cheaper than elsewhere. You use figures that end in 5, 7, or 9, such as £9.97, to make your deal sound like a great deal. The reason it sounds like a great deal is because customers tend to round down to the lowest pound so £9.97 would become £9 and not £10. One study found this to be highly effective for lower-priced products.
Time limited pricing
What does it do? It applies pressure to each sale.
Take your stock and set up a ‘while stocks last’ or ‘for a limited time only’ card and you can shift a huge quantity of it in a short space of time. Some of your customers will believe the deal in front of them will be missed if they don’t buy right now, despite you having already ordered another pallet of the stuff. By time limiting pricing, you ramp up demand for what it is you’re selling and create urgency with your customer.
What does it do? It helps you shift large amounts of stock.
If you have a lot of stock to shift you can help it get a move on by adopting a multiple pricing strategy. This is where you sell more than one product for one price, such as two items for £2 or three items for £5. The effect of which is your customers are more likely to purchase in larger amounts. Supermarkets and clothes retailers like Sports Direct are perfect examples of retailers using this strategy to increase sales.
See what works for you
These pricing strategies can be applied to brick and mortar and online retailers alike. Try a few of them and see what works for you. If you found this article useful, you might find our piece on how much stock to order useful too. This article was contributed by B2B lenders Nationwide Corporate Finance. Visit them at https://www.nationwidefinance.co.uk/.
Lee is the Head of Digital at Nationwide Corporate Finance, with a 20+ year background in digital marketing, specifically SEO. He now leads a highly skilled digital team to maximise results and customer experience.