Doesn’t everyone love a good deal? When it comes to increasing sales in e-commerce, most online store owners think that a discount or special promotion is the way to go. After all, lower prices usually mean more buyers, right?
Well, sort of.
Too much of a ‘good’ thing is usually a bad thing. And not only will those spikes in sales be short-lived, discounting can also have some long-term negative effects on the success of your online business.
Though discounts have their place in online retail, things can get really sticky, really quickly if you don’t avoid some common pitfalls that come with the landscape. And frequency plays a huge role in that.
Pricing may indeed be one of the most difficult aspects of starting a business.
There’s always some level of discomfort (am I charging too much?) or disbelief (will someone pay that much?). But having the right pricing strategy is crucial to your success.
If you’re not pricing for profit, it’s like pouring water into a leak bottle: no matter how many sales you get, the math will never add up. If you want to build a business that’ll essentially run on it own, then you have to know how to play the numbers game. And that means thinking about your bottom line first.
We all love a good sale.
But it’s worth considering whether it can help or hurt your business, both in the short- and long-term.
When you price your product, you should always include a healthy margin. That’s one reason there is a major focus from an investor standpoint to keep costs down.
When you factor in materials, labor, packaging and shipping, you should include enough profit to take a reasonable hit based on factors outside of your control (economic downturns, acts of God and the like).