Here are some steps to follow to develop a profitable yet appropriate pricing strategy:
Research the Competition: Scope out what your competitors are charging for similar products. Consider the materials used to create your product relative to your competitors. Determine where your product stands in terms of quality, features, convenience, and brand positioning.
Consider Your Audience: As stated, pricing isn’t just about quality and materials, but also customer perception. Think about who your target customer is, what they need, and what they’re willing to spend. Consider their income level, spending habits, location, and desire/necessity for the product.
Count the Costs: Figure out how much it costs for you to acquire, market, and sell the product. How many products do you need to sell to turn a profit? Make sure all the associated costs are covered by the price, plus a healthy margin.
Edit and Adjust: Over time, you might need to test different pricing models to determine what resonates with your customers and still turns a profit. When you apply discounts or bundled pricing, observe how these changes impact sales. Monitor your sales data and customer behavior to adjust your pricing strategy accordingly.
Simple Retail Pricing Formula
Here’s a simple retail pricing formula to help you:
Retail Price = Cost of Goods Sold (COGS) / (1 − Desired Profit Margin )
Where:
Cost of Goods Sold (COGS): The total cost of producing or purchasing the product, including materials, labor, shipping, marketing, etc.
Desired Profit Margin: The percentage of profit you want to make on the product, expressed as a decimal.
Your prices aren’t set in stone. Prices often fluctuate due to market conditions, operational costs, customer behavior, and many other factors.
The key is to effectively communicate the value behind your pricing – and train your team to understand your product’s offerings – so your customers feel confident that the product is worth the price.
3. Place: Where You Sell The Product
The third pillar of retail marketing, place, refers to the channels through which you advertise and sell your product. This might include your physical storefront, but also includes online marketplaces, an ecommerce website, digital marketing channels, pop-up events, partnerships, and more.
When considering a place, think about where prospective customers are most likely to look for products like yours. Are they scrolling social media? Window shopping while on vacation? Searching blogs for product reviews? Put yourself in their shoes when it comes to searching for products.
For example:
If you sell luxury handbags, your place might be a high-end boutique located in the prime shopping district.
If you sell fresh produce, your place could be a local farmers’ market on the weekends.
If you sell handmade gifts, your place could be a mix of local craft fairs, pop-up shops, and online marketplaces like Etsy.
The Place(s) To Sell For Retail
When it comes to place, the key is to ensure that your products are available where your customers are looking for them. This might include several different channels, in fact.
While you don’t need to (and probably shouldn’t) attempt to sell in all of these places, here are the most common sales channels for retail:
Brick-and-mortar stores.
Ecommerce website.
Online marketplaces (like Amazon, eBay, Etsy, or Faire).
Social media (Instagram, Facebook, Pinterest, etc.).
Pop-up shops.
Mobile apps (e.g., Shopify App, Etsy App, InstaCart, etc.).
Wholesale (selling products in bulk to other retailers).
Direct sales (via parties, door-to-door sales, etc.).
It’s best to focus on one to three channels where your target customers will most likely spend their time. This helps ensure that your marketing budget is allocated to those channels most likely to yield the best return.
4. Promotion: How You Advertise The Product
The fourth pillar, promotion, is all about connecting with your target customers and making them more aware of your brand and products.
Making sales isn’t just about being visible, but also about using marketing strategically to draw customers in and convince them to buy from you!
Rarely do people stumble upon a retail store online and immediately make a purchase. They might require multiple touchpoints to discover, research, compare, and finally purchase your product.
The length of this sales cycle can look different for different types of retail businesses, but the idea is the same: Make sure customers have the experience and information they need to make their purchase decision.
For example:
If you run a clothing store, a customer might first discover your brand through a social media ad, and then visit your website to browse your products. They might sign up for your newsletter to receive a discount code, check out reviews on your blog, and finally make a purchase.
If you sell electronics, your customers may initially see your new gadget on YouTube, visit your online store to compare specs, read customer reviews, and then make a purchase.
If you sell home decor, your potential buyers might find your post on Pinterest, visit your website and add a product to their cart, consult a friend, and finally decide to buy a product to complete their home aesthetic.
Obviously, there are many different channels and means of promoting your products. The channels and approach you use will vary depending on what you sell, who your customers are, and your budget.
Increase The Visibility Of Your Retail Business
Once you’ve determined where (place) you want to sell your products, it’s time to use those channels for promotion.
Using the examples listed in the previous section, here are a few ways to promote your retail business:
Brick-and-mortar store: Use eye-catching window displays and signage to draw in passersby. Host in-store events like product launches or workshops, and offer in-store discounts to incentivize customers.
Ecommerce website: Optimize your website for search engines to drive organic website visitors from Google. Use email marketing to keep customers engaged, send personalized offers, and offer product recommendations.
Online marketplace: Showcase your products on websites like Amazon, Faire, or Etsy. Optimize your product listings with high-quality images, detailed descriptions, features, and customer reviews. Consider running sponsored ads on the marketplace to increase product visibility.
Social media: Stay active online with engaging posts, videos, reels, and stories. Reply to customer comments and re-share happy customer reviews. Consider running social media ads to reach your target audience based on shopping behavior, demographics, location, etc.
Pop-up shop: Partner with other local businesses to attract more customers and foot traffic. Promote your pop-up or event on social media, via email, and through local community channels.
Mobile apps: Consider connecting your store with a third-party app like Shopify, Uber, or InstaCart. Entice customers to subscribe for access to special offers and discounts. Add delivery options to make shopping more convenient for your customers.
Wholesale: Partner with wholesalers or distributors to close more deals in bulk. Attend trade shows or industry events to showcase your products to potential retail partners.
Direct sales: Host product demonstrations or home parties to create a personalized shopping experience. Incentivize happy customers or other brands to become referral partners.
Paid ads: Use Google Ads, Meta Ads, LinkedIn Ads, etc. to reach target customers online. Consider implementing retargeting ads to re-engage visitors who have joined your email list but haven’t made a purchase.
Develop Your Retail Marketing Strategy
Your retail business is unique in the experience and products that it offers. But how do you make your store the obvious choice for potential customers?
With an effective retail marketing strategy, you’ll have everything you need to Price, Place, and Promote your Product, attracting more customers to you!
By focusing on the key pillars of product presentation, pricing strategies, distribution channels, and customer experience, you’ll create an environment that resonates with your ideal customers.
You can use a variety of channels – from in-store sales to ecommerce to social media – to promote your business and keep your sales strong.
Ultimately, the success of your retail business depends on your ability to connect with customers and communicate the value your brand has to offer.
Ready to master the 4 Ps? You got this!
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