There are many factors that need to be considered in pricing. The following is a brief description of some of the factors that cross-border e-commerce companies usually consider.
1. Channel factors
The retail and wholesale channels controlled by the seller directly affect pricing. The more channels the seller controls, the greater the pricing elasticity.
Porter’s Five Forces Model mentions that the stronger the seller’s bargaining power, the greater the product competitiveness and the greater the pricing elasticity.
2. Brand factorsThe brand of a product can have a greater impact on customers. A good brand image can bring a value-added effect to product prices. Famous brand products not only increase profits but also give consumers a sense of psychological satisfaction. In cross-border e-commerce, a good brand can increase product prices while enhancing customer loyalty.
3. Life cycle factors
At different stages of product development, the corresponding production scale, competition intensity, and customer bargaining power are constantly changing. Therefore, the pricing strategy should be adjusted accordingly. During the product development period, costs mainly include new product R&D design fees, raw material costs, equipment costs, etc.
In the early stage of product introduction, market education is required, which increases the cost of acquiring customers. Most customers are innovators. The customer scale is limited, but there are relatively few competitors. Seed user fission and precision marketing conversion strategies are usually adopted to reduce market education costs. The main costs include product trial sales fees and advertising fees. Cost plus method and fat withdrawal pricing method can be used as the main pricing strategies at this stage.
In the growth stage of the product, sales volume grows rapidly, most customers are early users, the number of competitors gradually increases, and peer competition begins to become an important factor affecting pricing. It is generally believed that market share should be considered mainly at this stage. Sellers can determine benchmark products and consider active competitive pricing strategies while maintaining price continuity.
In the mature stage of the product, sales volume reaches a peak, and the number of competitors is stable and begins to decline. Profits mainly come from cost control and sales to expansion markets. The company should turn its attention to innovation again and continue to consider active competitive pricing strategies.
In the decline stage of the product, sales volume declines and the number of competitors decreases. At this stage, the product has become outdated, and products with higher cost performance have appeared in the market, and the pricing power has been lost. Therefore, the market-following pricing strategy should be mainly adopted. Of course, timely completion of product innovation and reactivation of the product life cycle is an effective way to avoid the arrival of product decline, which is what companies should pay more attention to.