Learning pricing strategies from Top retailers

in pricing strategies

Top retailers spend a lot of effort on conversion and price optimization.

To learn from them, we've looked at Alexa top 100 e-retailer websites and automatically extracted collective statistics to see, how top sites optimize their product pricing.

Our findings can be used as inspiration for improving product pricing and conversion strategies in your own e-commerce store.

In this post, we'll summarize current observed trends for questions like:

  • How many products should be linked on your main page?
  • Should you end prices in 99 or .99?
  • Should you round prices, or use precise cent values?

Some notes on performed analysis

We've crawled the main page and all first level main page hyper links for retailer websites from Alexa e-commerce Top 100 category. Out of all parsed pages, we've identified product pages and extracted product prices.

Total number of identified product prices among all analyzed web pages was approximately 1000. Total number of web sites, which included direct product links on the main page was 56 (other sites either included links to collection or other section pages). We've used DiffBot to crawl all hyper links.

The whole process was automated and parsing is not always 100% correct, so our results can include some inaccuracies.

Also, the set of analyzed web sites contains a mix of retailers from various industries, so some of the approaches naturally make more sense for a particular vertical.

Here are the findings.

Number of products on main page

We've counted number of products which are linked from the title page of each retailer. Many top retailers have a huge number of products in their portfolio. Thus, it is interesting to observe the number of single products linked on retailer main pages.

Most retailers link to either 1-5 products, or to a larger number (21-50) of products on their main page.

Besides including product links, retailer main pages also often link to collection pages, where products of individual categories can be filtered and sorted.

Number of products linked from retailer's main page

Average product price

We've analyzed mean and median price for products linked on retailer main pages.

Results are summarized below. Most popular price category for products linked on the main page, measured by either mean or median is $20-50. Also, most retailers link products with prices ranging between $10-500.

Average price of product

Median price of product

Prices ending in 99

An old pricing rule of commerce is to end the product price in 99 or .99, to make the price look cheaper. Some retailers incorporate this rule, some don't. To confirm whether this rule is really common in practice, we've investigated how many top retailer products linked from main page have prices ending in 99, 99.0 or .99.

All price levels

Out of all products, 23% products end in double 9s. So, it turns out that most of the products are not priced using the "99" rule.

Next, we've also counted the proportion of "99" priced products for each web site. Most of the web sites use the "99" pricing for just a portion (<25%) products linked on main page.

Price levels: <=$100 and >=$100

We've also performed similar analysis for products with filtered prices for two price levels.

For prices up to $100, "99" prices represent 20% of all prices.

For prices higher than $100, "99" prices represent 32% of all prices.

It turns out, the "99" pricing is more frequent for the >=$100 product price level.

Round prices or prices with cents

We've also analyzed, how many products are priced with round prices, versus prices involving precise cent values (e.g. $60 versus $60.23)

All price levels

Out of total approx. 1000 products analyzed, 17% of products use round pricing. Thus, based on these learnings, floating point pricing is more popular among top retailers.

We've also counted the proportion of round prices to total prices for each retailer. It turns out, most of retailers use a mix of round and specific prices.

Price levels: <=$100 and >=$100

We've also performed the round price analysis for products with filtered prices for two price levels.

For prices up to $100, round prices represent 9% of all prices. Thus for products priced under $100, it is much more common to set prices with precise cent values.

For more expensive products valued at $100 or more, the number of round prices represents 40% of all prices. It is expected - naturally, cent values don't make much sense anymore at these higher price levels.

Most frequent words associated with increasing conversions

We've counted occurrences of words related to discounts or incentives for purchase. Most frequently used words are 'free', 'offer' and 'special'.

Most frequently used words associated with discounts

FINAL WORDS

Whether you decide to implement a price value strategy inspired by above topics, always test and measure your results. Pricing and conversion optimization is an ongoing process, which can help you become more profitable and bring better value to your customers.

About PriceOptimizer

PriceOptimizer is a pricing intelligence tool for evaluating and driving pricing strategies for e-commerce stores. Using historical sale, visitor and margin data, PriceOptimizer can be used to improve your e-shop product pricing and profit. Available integrations: Shopify and API.

Comments