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Pricing may be the single aspect of strategy where a more precise understanding of demand pays the most immediate, most significant dividends. The Cambridge Group has helped clients across categories optimize their pricing strategies by developing a more precise understanding of the most profitable market demand. For a recent client, a large food manufacturer, for example, TCG's team developed an optimized pricing strategy for a range of product offerings around the respective strategic roles each product would play in the overall portfolio. As discussed in our prior mailings, from the previously completed Demand LandscapeTM and Consumer Demand AnalysisTM, the team had determined that the ideal role for its existing mainstream offer was that of 'protect and maintain'.
In addition, the team plotted the observed Nielsen product price points for the total category (client and competitive products) versus the category dollar market share, which both highlighted the four distinct price tiers in the category and confirmed the validity of the mainstream product pricing as determined through the Consumer Demand AnalysisTM.
The team determined that the existing premium products should be leveraged to 'fuel strategic growth' as they had both strong existing economics and exhibited significant incremental growth potential.
Finally, the team identified an opportunity for a new super-premium product at the fourth price tier identified in the secondary data – a price point where the client did not currently have a product available. In all cases, The Cambridge Group's unique approach to optimizing demand and supply insights enabled the team's decisive action. In addition, this strategy not only provided a clear role and position for each brand in the portfolio, but it simplified it significantly as well. For several years running this brand has enjoyed +20% sales growth CAGRs and has recently surpassed a very strong, entrenched competitor to achieve the #1 share position. Without the benefit of an in-depth understand of your target consumers' demand and the potential opportunity this presents, it is almost impossible to optimize and even simplify your product portfolio and pricing strategy.
I agree to Shutterstock's Website Terms, Privacy Policy, Licensing Terms and to receive emails that I can opt out of at any time. All plans come as a Standard license, and can be upgraded to an Enhanced license at any time. The revenue from customer purchases is just another of many metrics you contend with on a daily basis, along with things like website hits, marketing dollars spent, conversion rates observed, social media followers added… when managing an ecommerce business, the prices that lead to generating this revenue can get lost in the fold.
Take my advice though, price is possibly the most important metric you’ll deal with – so give it the attention it deserves. The relationship between the price of a product and the subsequent demand for it is called price elasticity of demand. If you’re unfamiliar with this concept, be sure to read into it – your ecommerce success might just hinge on your understanding of how this works.
I’ve seen businesses go under for charging too little; I’ve also seen businesses go under for charging too much. A couple of years ago I found a label supplier charging half the price of my existing supplier.
Exact same story: when the bags arrived, half of them were missing a sticky flap, half of them had no seal on the bottom (so items went in the top and fell straight out the other end), and the rest were really weak. I believe low prices are wrong because they undermine the essence of the retail exchange and lead to mutual disappointment on both ends.
Yep, people like cheap stuff. Just because you and I realize being the cheapest leads to long term disappointment (for both parties), the fact is, the masses of customers out there love cheap goods.
Sure, they’ll probably regret buying cheap when it turns out what they’ve purchased is trash, but initially, people love buying low priced products. The majority of people make buying decisions based on price, as evidenced by the price elasticity of demand theory. There are various strategies out there you can use in order to determine how you price your goods. My favorite pricing strategy – it’s basically where you start selling an item really cheap, then as popularity and sales grow, you gradually crank up the price. An unfortunate (though effective) pricing strategy employed by ecommerce business owners is to undercut everyone else. Remember to look at the bigger picture when setting prices – you might be making one or two dollars gross profit per sale, but how much are you actually making when you’ve factored in fixed costs, and variables like PPC advertising?
If you take a look at the ecommerce site in my bio, you’ll see we stock eyelashes from $2 per box right up to $40 per box.
For better insight into pricing a spectrum of goods, make sure you read up on price anchoring!

I know people who pour tens of thousands of dollars into PPC advertising on a monthly basis. You can tweak landing pages and layouts, you can tweak ad copies and keyword bids (more on this very soon in a future post), but if your prices aren’t right, it’ll all be in vain.
That reduction in price lead to a 30% increase in sales, and a 25% increase in average check. The little margin I sacrificed to implement the price decrease was more than made up in the increased sales volume, and gross sales figures, that resulted. Instead of focusing purely on driving more traffic to your website, ensure you’ve laid the foundations for success first by optimizing your ecommerce pricing strategy. I really love your service, it’s allowed my business to expand with little time required.
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The average company can increase its operating profits by an astounding 11% by raising prices just 1%. The starting point is to clearly define the role each offer plays in the portfolio based on the respective economics and growth potential of each offer. Specifically, the team optimized the pricing strategy for the client's mainstream and existing premium products, and even identified an untapped opportunity for a new super-premium product. It was a product platform with significant existing volume, but not projected to grow substantially in the future beyond its existing base. The team determined they should increase the price on these premium products slightly to position them more solidly in the third price tier as determined based on secondary data, and as validated through the Consumer Decision AnalysisTM methodology. Playing its role as a 'build high potential platform' this new product would clearly communicate similar quality ingredient and no filler features, but with additional benefits of superior taste (e.g.
In the premium tier, for example, the team was able to determine that consumers would bear a price premium significantly in excess of the marginal cost to improve the product delivery – the team knew the precise gross margin impact of these choices thanks to The Cambridge Group's deep understanding of the key business cost drivers. The brand went from maintaining at least five different product platforms at upwards of 10 price points to maintaining three product platforms and price points. Everyone who signs up gets full access to our entire library, including our curated collections. Our Standard license allows you to use images for anything, except large print runs over 500,000+ or for merchandising. Once you have downloaded your image, you have life-long rights to use it under the terms of the license purchased. Pricing can make a business, it can break a business, and it can also drive business owners insane.
Put simply, price is the best way in which you can manipulate and control demand for the products or services that your business sells. If you want to be successful in ecommerce, you’ve got to understand ecommerce pricing strategy sooner rather than later. When they compare your item to an item from another ecommerce store, all things being roughly equal, they’ll almost always buy the cheaper of the two. Let’s look at a few of my favorites, as well as some that you may or may not have experimented with in the past. This particular strategy is ideal for launching new product lines or new websites – it’s also good for use on platforms like Amazon and eBay, by selling lots of items cheap initially you can rise right up the best match search listings. That just means to change the price of your products over a fixed period (ideally to an equal number of visitors) so that you can determine which price point yields the best result. As I’ve already mentioned, however, there is always someone out there willing to go lower than you are – it’s a race to the bottom, and nobody wants to see a fire sale. On all of my websites, I like to give users as much choice as possible in terms of style, sizes, colors and so on. I’ve done this for a reason: to offer price sensitive customers an option they can afford, as well as to cater to my customers looking for top end, premium items.

You may find you can use the perceived value of your high-end products to drive significant views and sales to your mid- and low-tier items. They think that the more cash they throw at driving traffic, the better odds of finding that tipping point for profitability. You can execute the very best marketing campaign in the world, but there’s every chance you could make zero sales as a result, purely because your prices are set too high. I thought everyone would adhere to manufacturer MSRP, and I also thought I could say “well, this item cost me $4 to buy, so I’d like to sell it at $8 for a 100% markup”. He sold his first item online at the age of 10 and now runs an ecommerce cosmetics business and a monthly ecommerce subscription service. Its existing margins were average, but the team had already identified opportunities to improve margins by decreasing cost of production by eliminating expensive ingredients that consumers did not value and whose removal did not negatively impact the overall taste and consumer acceptance of the product. In a sense, they recognized they had been investing in 'borrowed volume' and those promotion dollars would be better spent elsewhere.
Had they continued to follow their previous strategy, with little precision around target segments, need states and brand and price strategy, the brand would certainly not have realized the record-breaking growth it has achieved recently. In addition, you may be interested in the article, "Charge What Your Products Are Worth," by Cambridge Group Economist Venkatesh Bala and Principal, Jason Green, published in the Harvard Business Review in September 2007. If at any time you're unsatisfied with your experience with us, you can cancel your subscription.
I can cite 10 or more examples where I’ve found products for less money, bought them, and they’ve turned out to be garbage.
From day one I had nothing but problems – the adhesive on the cheaper labels was weak, most of the labels fell off in the mail, meaning lots of customers never even received their packages! I decided to go with another supplier, because they were 50% cheaper than our existing supplier.
By the time you put your prices up, the idea is to be near the pinnacle of those listings – selling lots of items for top dollar. So for example 10 people hitting your website might see the price of a product at $9, 10 more people might see the price at $5.
Someone will always go lower than you – you simply can’t win (unless your name is Jeff Bezos or Sam Walton). This isn’t a product pricing strategy as much as a merchandising strategy, and I would encourage you to push both ends of the pricing spectrum, particularly the high end.
Through the Consumer Demand AnalysisTM methodology the team was able to quantitatively confirm that holding product pricing constant at current levels was the optimal strategy to maximize both product and portfolio profitability. I can also cite examples where the product quality was decent, but the overall service provided by the seller was poor. The last thing I wanted to do was lower my price, but in the end I bit the bullet and reduced prices by around 10% across the board.
Re-visit your ecommerce pricing strategy on an ongoing basis to ensure you’re not leaving profit on the table. In this deck, we provide more resources on specifically how to implement a value based pricing strategy.
Ultimately, the optimized pricing strategy created a clear portfolio of offers aligned to specific segments of demand with a compelling trade-up logic. Since day one as a business owner, I’ve struggled like crazy to identify the ecommerce pricing strategy that consistently works for me.
You might ship 20% less items at the $9 price point, but you might be making 100% more profit – in which case it makes business sense to charge the higher price. Maintain too many price points across your portfolio and consumers are often too confused to make a decision.
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