A pricing strategy should not be selected randomly and evolve around profit raising only. The choice of price formation method should be based on the desired brand positioning, your niche, type of product and even competitors’ approaches – all these factors matter.
First and foremost, you start with defining your business’s goals and needs: settle on what you want your company to contribute to the world and what your mission is. It will help you with brand positioning and developing an overall retail strategy (which, in turn, defines how you will develop relationships with customers).
Next, research the niche and market and identify your 3-5 major competitors in the industry. You should analyze their approaches to price formation, define their weak and strong sides. Exploring your rivals’ strategies can help you differentiate your brand. A thoroughly developed pricing strategy can be particularly useful for standing out from the crowd of online retailers.
Finally, you should organize surveys with your potential customers to see how they perceive your brand, value and products. They can give you useful insights into how much you should charge for goods and help you figure out psychological price thresholds. You can even start the research by just talking to your friends and family before moving on to formal surveys with potential consumers.
Remember: the more information you gather, the more likely you are to successfully test prices and experiment with pricing strategies.