In America, studies by the Stanford Institute of Economic Policy Research and Minnesota University have demonstrated that the new easy price-comparison environment created by ecommerce means that pricing for all products is now more ‘elastic’.

So, whether you’re selling luxury goods or life’s necessities online, your customers are likely to be very sensitive to price.

Does this mean that, as an online retailer, you should always aim for the lowest possible price?

Data is at the heart of successful ecommerce pricing

While the major players, such as Amazon, take full advantage of competitive pricing, they also carefully monitor customer and competitor behaviour to decide when to dynamically raise or reduce prices. You won’t always find the cheapest prices on Amazon.

To create a successful ecommerce pricing strategy you need to understand your strengths and be able to access reliable information to achieve the right balance between sales, revenue and profitability. However, Forrester Research recently reported that many businesses only use a third of the data they collect and few have in-house expertise to translate data and analytics into measurable business outcomes.

Understanding your whole business

When you use an integration-ready ecommerce platform like Magento for retail, you have access to information about customers’ behaviour, the performance of your online channels and your back office processes and costs too.

Now that Cloud-based analytics from RJMetrics have been integrated into Magento Analytics, non-technical users can quickly and easily combine and analyse data from multiple sources. When you take full advantage of the power of analytics, you can be a step ahead of the game and take a strategic approach to pricing.

Here are some ideas to think about:

The value of standing out from the crowd

Taking a strategic approach to your business’s ‘added value’ will make your customers less sensitive to price. Excellent customer service is essential, but you might also have a unique product range, make a charitable donation for every purchase or provide a discount or free delivery for higher value or volume orders. Test your messages and offers to see what makes a difference.

Pricing to sell, not to lose

Chasing the lowest online price to gain volume sales can reduce profit margins to unsustainable levels. When prices increase, customers can easily disappear. Take a structured approach; use real-time sales data to check the results of price cuts or increases and be ready to demonstrate your overall return with some tightly targeted performance indicators.


Capture all the data you need to accurately understand the margins across your complete supply chain, and you can use incentives as a powerful approach to achieve higher sales. As an alternative to general price cuts, offer a time-limited discount, or a reduced price for an associated product bought at the same time.

This approach can help you to build a reputation for great deals, without costing too much, but measurements need to be carefully planned and monitored. You can also use it to test what customers like to buy together to improve your recommendations.

Test and prove

Start out with an objective and then check if your ‘Summer Sale’, for example, increased conversions as you expected. Monitor new products lines to see if they outperform your older products. Look out for trends by checking whether seasons, or even the time of day, affect your sales. Pay close attention to the point where visitors to your site drop off before check out to see if you can improve their experience, before you cut prices.

You will quickly build up a reliable source of data specific to your business. You can use it to inform your decisions about how to make the most of Black Friday or Cyber Monday, with pricing being just one consideration.

Contact us to find our more about creating a successful pricing strategy for your online retail business.