Pricing is a powerful lever that can significantly impact every line on your balance sheet. For ecommerce businesses aiming for long-term success, getting your pricing strategy right is crucial.

In a recent DrivePoint Webinar titled "Hard Numbers: The Financial Impact of Pricing," industry leaders Brett Bone from Simple Modern, Andrew Case from MoonBrew, and pricing expert Drew Marconi from Intelligems shared their strategies for developing effective pricing models and conducting insightful tests. Here are some key takeaways on how to fine-tune your pricing strategy for maximum impact.

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Pricing is Dynamic

Brett Bone highlighted the importance of continually testing different pricing strategies. For example, this summer, he explored offering subscription rate discounts and bundling products into larger packages. By experimenting with these tactics, he saw a significant increase in Average Order Value (AOV) and profit margins. However, he also cautions that these tests should be organized into distinct sprints to ensure clarity and focus.

Early on, Simple Modern prioritized getting their products into as many hands as possible, even if it meant sacrificing margin. Now, they are more focused on positioning their prices relative to competitors and strategically raising prices to improve EBITDA.

Pricing is Only One Lever That Influences Buyer Behavior

While pricing is crucial, Brett explains that product differentiation is another key strategy that influences buyer behavior. Simple Modern creates unique designs that not only serve a functional purpose but also appeal to customers as stylish accessories. This allows them to offer premium products at higher margins.

Andrew Case from MoonBrew adds that beyond pricing, offering a free gift with purchase has significantly boosted their sales. He also emphasizes the effectiveness of cross-selling different product flavors, using A/B testing to determine the best combinations. By cycling through different products and observing what works, MoonBrew has been able to optimize their offerings and maximize revenue.

Pricing is a Collaborative Effort

As a business grows, pricing evolves into a collaborative process. What might start as a solo endeavor with a simple spreadsheet eventually involves multiple stakeholders. Brett and Andrew highlight the importance of bringing together key team members—such as the chief merchant, sales channel owners, chief marketing officers, and VPs of product—to discuss pricing strategies. This collaborative approach ensures that all aspects of pricing, from discounts and promotions to finance strategies, are aligned with the company's broader goals.

Final Tips for Pricing Strategies and Testing

When it comes to testing pricing strategies, it's important not to try everything at once. Start with high-confidence, high-impact tests. As your business matures, you can experiment with multiple strategies in parallel.

Make sure your tests are bold and allow enough time to yield meaningful results. For instance, don’t just make minor changes, like altering the color of a button, and don’t end tests prematurely. Businesses are cyclical, and you need to give your tests time to show their true impact.

Finally, always align your tests and strategies with your overarching business goals. Remember, pricing isn’t a goal in itself—it’s a tool to help you achieve your broader objectives.

Want to Dive Deeper into Pricing Strategies?

To gain more insights into effective pricing strategies, testing methodologies, and roadmap development, watch the full DrivePoint Webinar featuring experts from Simple Modern, MoonBrew, and Intelligems.