Seasonal Pricing Strategy: A Comprehensive Guide
By Thomas Bennett Financial expert at Priceva
Published on October 24, 2022
Since the e-commerce industry is highly competitive and prices keep changing every day, seasonal pricing is one of the best ways to stay flexible and yet manage your profits efficiently all year round. This guide explains what seasonal pricing is, how to develop a strategy that fits your business, and which models are used by retailers.
What Is a Seasonal Pricing Strategy?
As its name suggests, seasonal pricing implies changing a product’s or service’s price during a certain period of the year. This strategy can be very efficient when demand noticeably fluctuates depending on the season For example, people buy more swimwear during summer, and down coats during winter. With the help of seasonal pricing it becomes possible to maximize profit and boost sales.
Having the right pricing during high season also means delivering better customer experience because that’s when consumers become even more price-sensitive. It is much easier to sell much-needed products at this point when you set prices low and customers can purchase additional items.
Having the right pricing during high season also means delivering better customer experience because that’s when consumers become even more price-sensitive. It is much easier to sell much-needed products at this point when you set prices low and customers can purchase additional items.
How to Set Seasonal Pricing
Now that you know what seasonal pricing is, it’s time to figure out how this strategy should be used. Selecting a season pricing model is only half the trouble – you will need to calculate optimal prices for both high and low demand periods. Besides, if you have a well-established e-commerce business with a large amount of products sold, having price tracking tools is a must.
Here are five steps that you should follow if you want to set efficient seasonal rates; this approach can be applied to different markets and niches.
Here are five steps that you should follow if you want to set efficient seasonal rates; this approach can be applied to different markets and niches.
Step 1: Define your minimum and maximum prices
Step 1: Define your minimum and maximum prices
For your seasonal pricing strategy to work correctly, you need to understand lower and upper thresholds. Think about the minimum price that will draw sales and yet allow you to cover expenses. Then plan what the maximum price you can charge is without averting potential customers.
How to figure out these numbers? First, ask yourself “What is a fair price to pay for my goods?” This will be a starting point, but you also need to take an unbiased look. Conduct surveys among potential customers, study your competitors’ quotes and simply analyze your previous sales volumes (if you’re dealing with a well-established product).
How to figure out these numbers? First, ask yourself “What is a fair price to pay for my goods?” This will be a starting point, but you also need to take an unbiased look. Conduct surveys among potential customers, study your competitors’ quotes and simply analyze your previous sales volumes (if you’re dealing with a well-established product).
Step 2: Map out your key seasons
Step 2: Map out your key seasons
Traditionally, seasons are divided into Winter, Spring, Summer and Fall, or more roughly – cold and warm ones. But from the point of view of e-commerce’s, the following periods can be distinguished:
You need to analyze your sales history (ideally, at least the last three years) and outline these periods for your e-commerce business. This can lead you to surprising conclusions, for example, reveal that your peak season in the summer is in May-June, not July. Understanding these timelines is crucial because it will help you predict consumer behavior.
- Peak season – when demand is at its highest.
- Off-season (or low season) – when demand is at its lowest.
- Shoulder season – periods before and after the peak season.
You need to analyze your sales history (ideally, at least the last three years) and outline these periods for your e-commerce business. This can lead you to surprising conclusions, for example, reveal that your peak season in the summer is in May-June, not July. Understanding these timelines is crucial because it will help you predict consumer behavior.
Step 3: Search for additional seasons
Step 3: Search for additional seasons
After defining the key seasons you can look for particular periods within them. These are the most suitable dates for price adjusting based on demand. Good examples are Christmas, New Year, Black Friday, public holidays and so on. Depending on the location of your target audience, there may be different events to “celebrate”.
You do not have to look for big holidays – even minor occasions can be used to organize sales events and offer discounts. For example, clothing stores can sell sports apparel during football championships (which implies targeting only a minor segment out of the entire audience). Aside from giving your sales volume a little boost, such discounts contribute to building better relationships with your buyers.
You do not have to look for big holidays – even minor occasions can be used to organize sales events and offer discounts. For example, clothing stores can sell sports apparel during football championships (which implies targeting only a minor segment out of the entire audience). Aside from giving your sales volume a little boost, such discounts contribute to building better relationships with your buyers.
Step 4: Work out your base price
Step 4: Work out your base price
At Step 1 you needed to figure out the lowest and the highest possible prices for your items. But when there is no distinct seasonality, you need to keep the rates somewhere in the middle – this is what we would call the “base price”. Simply put, this is the starting point from which all your adjustments are made. Such a price is charged when there is no reason to increase or decrease your rates.
How to work this out?
Once you find the base price, keep flexing it in order to stay competitive on ever-changing online markets.
How to work this out?
- Study your competitors a little and see how much they charge for similar products during shoulder seasons.
- If you sell on marketplaces, you know that some of them show historical price performance for certain items – compare the highest and the lowest rates to calculate the average.
- Don’t forget to calculate the optimal price point that allows you to generate enough profit while keeping the product attractive for consumers.
Once you find the base price, keep flexing it in order to stay competitive on ever-changing online markets.
Step 5: Adapt your seasonal pricing strategy
Step 5: Adapt your seasonal pricing strategy
No season is the same as the previous one – consumer buying patterns change together with their buying power, and you should be able to adjust your prices accordingly. It requires a lot of market research, you need to keep tabs on your competitors, too. However, all this work is rewarding because market knowledge enables you to offer better deals.
If you do not have a seasonal pricing strategy in place yet, try two commonly used approaches:
Do not forget about additional seasons that we mentioned in Step 3. Keep your fingers on the pulse of demand and flex rates during low-profile events, too.
If you do not have a seasonal pricing strategy in place yet, try two commonly used approaches:
- Keeping off-season pricing at 25% of the peak pricing.
- Setting shoulder season pricing no higher than75% of your peak season pricing.
Do not forget about additional seasons that we mentioned in Step 3. Keep your fingers on the pulse of demand and flex rates during low-profile events, too.
Popular Seasonal Pricing Strategies
At first glance, the logic of seasonal pricing is simple: you charge more during peak seasons and make discounts during low seasons to maintain a stable cash flow with bigger sales volume. However, there can be several approaches to seasonal pricing - let’s go over them briefly.
Real-time pricing
Real-time pricing
Typically, having pricing strategy requires planning ahead, but if you do not have a pronounced and well-established seasonality factor in your niche, you can simply follow the supply and demand metrics. It will allow you to capitalize on specific events by offering the most competitive prices. Yet, this model is highly unpredictable and risky – you should be prepared to face long-lasting low seasons.
Flash sales
Flash sales
Online buyers got used to ever-changing prices on marketplaces and webstores, so organizing flash sales (discounts valid within a few hours) is a nice idea. Just make sure to notify people about the sales event via emails or advertisements. Otherwise, your generous offer will pass unnoticed. Urgency is still very much a factor that drives purchase decisions.
Serve best prices based on location
Serve best prices based on location
If you are chasing the goal of outperforming your local competitors, use the geolocation of your customers to come up with better bargains. See how buyers engage with your products when you make discounts. This strategy will also help you better understand customer personas.
Seasonal discounts
Seasonal discounts
This is a common practice among clothing stores: they offer new models of apparel at the highest prices. It allows retailers to skim upper market segments who can afford buying expensive items from new collections. Be careful with seasonal discounts because people might be disappointed if you slash prices right after they make purchases having paid 30-50% more.
Using only peak times
Using only peak times
Some companies charge normal prices all year round but don’t lose their chance to capitalize on event-specific products during peak times. This strategy can be suitable if you do not have two polar seasons in your niche – high and low. For example, sellers of school supplies can generate bigger profits in July and August and keep their rates around average from September to June.
Also, if you operate in a niche that does not depend on seasonality, you can try holiday-based strategies. For example, webstores make 50% discounts during Christmas, Thanksgiving and New Year – this is when customers buy gifts, so the skyrocketing sales volumes compensate for all losses.
Also, if you operate in a niche that does not depend on seasonality, you can try holiday-based strategies. For example, webstores make 50% discounts during Christmas, Thanksgiving and New Year – this is when customers buy gifts, so the skyrocketing sales volumes compensate for all losses.
Pro Tips for Implementing Seasonal Pricing Strategy
Know Your Market
Know Your Market
Before implementing seasonal pricing, you need to find out what motivates customers to make purchases during certain periods of the year (factoring in variables other than just the cost). To better understand their preferences, you can explore your competitors’ products performance or conduct surveys or split tests. Market research can provide you with surprising insights. For example, you can reveal that:
Note that the lowest prices do not guarantee more sales – they still depend on the perceived value of the product.
- Consumers are more likely to buy from stores that offer free shipping or free gifts;
- Minor changing of prices (color, language, decimals) has an impact on purchase decisions;
- Certain percentages of discounts work better than others.
Note that the lowest prices do not guarantee more sales – they still depend on the perceived value of the product.
Know your Customers
Know your Customers
Pay attention to how customers behave during sales events, what they are likely to buy during holidays, and what sort of discounts they expect. Once you discover those things, you need to set a pricing calendar that motivates people to purchase more frequently and more expensive items. It will also remind you of organizing sales at the times of the year when certain products are more likely to be in demand.
Focus your Seasonal Pricing Calendar Around Key Events
Focus your Seasonal Pricing Calendar Around Key Events
The previous point mentioned that you need to set a discount calendar featuring all major shopping events. Once you create it, make all the preparations – do not postpone it to the last day. Make sure that:
- You have correctly defined which products will be in demand during peak season.
- You have these items in enough supply.
- You have enough space for pricing maneuvers in case something goes off script.
- Customers are aware of your sales events – they should be notified at least 3-7 days in advance.
Do Not Race to The Bottom
Do Not Race to The Bottom
We have already mentioned that the winner of seasonal pricing events is NOT the retailer that charges less. Playing with low margins is risky for both you and other competitors, and, let’s face it — giants like Amazon always come out on top in offering cheap deals. Instead, focus on brand image and product value, and make sure that your seasonal pricing model will be profitable in the long haul.
Do Not Underestimate Pricing Knowledge
Do Not Underestimate Pricing Knowledge
You should always be aware of your competitors’ prices when setting seasonal prices, and here is why:
Keeping an eye on the competition is not that hard in the e-commerce industry if you use advanced software, such as Priceva’s dynamic pricing solution. It provides real-time price updates and generated formula-based pricing recommendations, enabling webstores to make timely adjustments.
- Market references will help you adjust rates accordingly and make better offers than your rivals. Industry price benchmarking is the best way to stay competitive.
- By monitoring prices on a continual basis you can see how your competitors’ prices change throughout the year – that will help you see which strategies are utilized and what works best.
- Being aware of the market context means you will be able to deliver reasonable prices that meet customer expectations.
Keeping an eye on the competition is not that hard in the e-commerce industry if you use advanced software, such as Priceva’s dynamic pricing solution. It provides real-time price updates and generated formula-based pricing recommendations, enabling webstores to make timely adjustments.
Conclusion
Seasonal pricing strategies have been used for decades and have proven to be super-efficient in the e-commerce industry. This model can be very effective if you want to increase your sales and create stronger relationships with your customers. However, you need to carefully plan this strategy for your brand because the context and buyer profiles are different – seasonal pricing is not equally suitable for all products and niches.
FAQ
Why is seasonal pricing important?
Why is seasonal pricing important?
It allows you to deliver the best deals for consumers exactly at the moment when they expect it, which improves your profit margin and customer loyalty. Being a sort of dynamic pricing approach, seasonal prices help you stay competitive.
How does seasonality affect prices?
How does seasonality affect prices?
As a rule, the highest prices are observed during the peak season when the demand for a product is at its maximum. Vice versa, retailers make big discounts and charge less during a low season, so as to motivate customers to buy cheaper and compensate for losses with a higher sales volume.
Why do companies offer seasonal discounts?
Why do companies offer seasonal discounts?
Seasonal discounts allow retailers to penetrate lower market segments and capitalize on consumers who cannot afford paying the full price. Also, discounts during low season help businesses to maintain sales volume – lower prices motivate people to buy.
Are seasonal products more expensive?
Are seasonal products more expensive?
Typically, seasonal products are more expensive during the peak season, when the demand is high and retailers capitalize on that. During shoulder season and low seasons prices tend to get much lower.
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