Geo-Targeted Pricing to Boost e-Commerce Profitability

Price intelligence is becoming a big buzzword these days. The popularity of Amazon and Google Shopping increases the pressure on e-commerce companies to monitor the prices of their competitors, and adjust their own prices in real-time to stay competitive around the clock. An intelligent optimization of pricing and a strategic thinking is essential to price intelligently and effectively.

Matching the prices of your competitors should be a good strategy if your competitors have a sound pricing strategy themselves. Otherwise it can be a real disaster. And this whole case scenario works only if your customers compare you to this competitor. At this juncture we must analyze our own attitude towards online purchases. The actual competitive situation is a subjective one. It varies from one customer to another. So pricing intelligence tools that give you objective information about your competitor won’t help you to take the right decisions.

There is a simple solution to this problem. A simple process will help you to measure the price shift and its impact on your sales. Run A/B split tests every day and measure the price shifts. This is possible only with an efficient technical setup that can perform a price intelligence survey for free every day. It should not be an objective one, which has little value to drive decisions anyway, but a subjective one, that corresponds to the competitive situation as your customers actually perceive it.

We’ve run such crowd sourced price intelligence reports on hundreds of e-commerce websites of all sizes, analyzed tons of data and came to this simple conclusion: Knowing the geographical locations of your customer is one of the keys to set up the optimal price points. There are obvious reasons behind it:

• The degree of competition varies a lot from one city to another. As for example, the local retailers of different locales price differently
• The standard of living varies from place to place, even within a single state. Disparity in income could be one of the reasons
• Online shoppers hate shipping costs! They prefer a price that is inclusive of all additional costs like taxes and delivery charges

The secret to boost the profitability of your eCommerce is to display different prices on your website based on the geographical location of your customers, and to run and analyze split tests every day to find out the optimal price points in every location. That’s easily done with well managed pricing tools.

Segmenting your market geographically, even within a single country or state, unlocks a huge potential for growth. You don’t have to match your competitors’ lowest price worldwide to stay competitive. It is sufficient to match the prices of those competitors who your customers compare with, in a given location.

This simple technique can improve the profitability of your e-commerce drastically. Are you ready to try it out? Or do you have some concerns about using it in your company? Let us know your thoughts!