How Can A Cloud CRM System Help Distributors Develop A Competitive Pricing Strategy?

A cloud CRM system can help e-commerce distributors leverage data to develop a competitive pricing strategy and maximize profits.

You need a firm understanding of your operations, your customers and your competitors to gain a good idea of what to charge for products and services. Here’s a more detailed look at the three keys to developing a competitive pricing strategy.

1. Know your customers: It’s important to know what your target market is and what your customers can afford. If you were an automobile dealer, you wouldn’t try to sell a $400,000 sports car to someone looking to spend $20,000 — you would show them a vehicle that fits their budget.

   Knowing your customers will help you to adjust prices as needed. It’s very important to use dynamic pricing, discounts and incentives to attract new customers. These are all proven pricing strategies that have been around for years. Everyone knows these tactics are useful, but you must use data to leverage them in order to be successful.

   Information about customers and prospects can help businesses to identify an appropriate amount to charge, depending on the circumstances. For example, you may want to offer new customers a lower price on a product you sell that’s similar to another product they already buy.

   Meanwhile, you may find there’s no point in offering a discount to a repeat customer, because you can rely on them to return for your product time and again. Cloud CRM systems help in the effort to understand existing and prospective customers and hone in on the target market.

   Cloud CRM also helps to determine whether your marketing campaigns are successful. It’s crucial to monitor response rates to special offers to see whether those price points prompt customer action. If a promotion doesn’t resonate with your target market, you should make adjustments. Cloud CRM systems are able to manage marketing campaigns and the information needed to put together an effective pricing strategy.

2. Know the cost of your product: You must be able to determine whether you can make money on your products. To that end, it’s important to have a system to help manage all of the costs associated with your products, including landed, overhead and warehousing, in addition to the procurement cost. You can’t price items appropriately without knowing their true cost.

   Accurate cost management is critical to properly calculate whether you’re meeting your anticipated margin. For example, a product that costs $100 with a 10 percent margin must be sold for $110. Without a good handle on cost, applying a margin to determine a price is an impossible task. Keep margin information organized for everything you sell, as it may be different by product line.

3. Know your competition: How does your price compare to other businesses selling the same or comparable products or services? If you and a competitor offer the same product or a comparable product but yours costs significantly more, that’s probably not going to be a successful pricing strategy. If your price will be higher than the competition, you must offer added value in some other way.

Pricing strategy can make or break e-commerce distributors. Many factors must be considered so the right balance is struck, where you’re covering costs and meeting margins while remaining competitive. Information is fundamental to developing and maintaining a competitive pricing strategy, and that’s where a cloud CRM system can help.