Detailed explanation of cost-oriented and demand-oriented pricing strategies in cross-border e-commerce

In the field of cross-border e-commerce, reasonable pricing is one of the key factors that determine product competitiveness. This article will explore two major pricing methods: cost-based pricing and demand-based pricing.

Cost-oriented pricing

The cost-oriented pricing method is a method of setting prices based on the cost of the product. It is suitable for a variety of scenarios, especially for cross-border e-commerce. This method can help merchants better control profit margins. This method is divided into two types: cost-plus pricing method and expected profit pricing method.

Cost plus pricing method

The cost-plus pricing method is to determine the selling price by adding a fixed profit amount or profit rate to the unit cost of the product. The specific calculation formula is: [ P = cx(1 + r) ] where (P) is the unit price of the product, (c) is the total unit cost of the product, and (r) is the mark-up rate of the product. For example, when operating a cross-border e-commerce clothing store, the cost of a shirt includes purchase costs and transportation costs. By setting a reasonable markup rate, you can ensure that a certain profit is obtained while covering costs.

Expected profit pricing method

The expected profit pricing rule focuses on the long-term average profit target. It usually sets the expected profit level as a fixed percentage of cost or sales price based on past experience. For example, when calculating the sales price of a children’s windbreaker, in addition to considering direct costs, you also need to estimate international shipping costs and combine these costs with expected profits to finally arrive at the product’s pricing.

Demand-oriented pricing

The demand-oriented pricing method pays more attention to market demand changes and consumers’ psychological expectations, and mainly includes three types: cognitive-oriented pricing method, reverse pricing method and customary pricing method.

Cognitive-based pricing

Cognitive-based pricing is based on consumers’ perception of product value. For example, the price of umbrellas will fluctuate with changes in the weather. The price will be lower on sunny days and may rise on rainy days. This is because consumers perceive the value of the same product differently in different situations.

Reverse pricing method

The reverse pricing rule is to start from the final price that consumers are willing to pay and reversely calculate the manufacturer’s ex-factory price and the retailer’s wholesale price. This method helps ensure that all links in the entire supply chain can obtain reasonable prices. income.

Customary Pricing

Customary pricing rules are based on long-term fixed price patterns in the market. Although this approach is simple and straightforward, it may lack flexibility.

For cross-border e-commerce, the advantage of using demand-oriented pricing is that it can adjust price strategies according to different market conditions and improve product competitiveness; however, this also means that more energy needs to be invested in understanding the market characteristics of various places, especially In emerging markets such as Southeast Asia and Africa, using data analysis services provided by professional platforms can effectively reduce costs.

To sum up, whether you adopt cost-oriented or demand-oriented pricing strategies, you need to use them flexibly based on the actual situation in order to stand out in the fierce market competition.