Among the challenges you’re likely to experience when running a Shopify store is converting visitors into paying customers. That’s why many retailers want to know how to boost conversion rates when running Shopify stores. When you learn how to optimize your store’s conversion rate, your sales will increase, and revenue will grow. And you can achieve this by using the right pricing strategies. But, before delving deeper into the topic, let’s start by understanding the key concepts.
What is Conversion Rate Optimization?
It would help if you optimized the conversion rate of your store to benefit from your investment. And using the right pricing strategy is one of the best ways to enhance your Shopify store’s conversion rate.
Conversion rate optimization, or simply CRO, is a practice of boosting the number of users that perform the desired action on a store or website. For a Shopify store, the desired action is to purchase a product or clicking the “add to cart” button. You must understand what stops, drives, or persuades users to boost the conversion rate for Shopify stores. That way, you can provide the best experience for every visitor and prompt them to take your desired action. Ideally, it would help if you understood what leads to conversion and thereby improve your store’s conversion rate.
To understand conversion rate better, consider the following:
- Specific drivers that bring visitors to your store
- Particular barriers that make people leave your store
- Clear hooks that persuade visitors to convert
When trying to enhance the conversion rate of your Shopify store, focus on these three aspects. But, not all conversion issues are quantifiable with complex numbers.
How to Measure Conversion Rate
You can calculate your store’s conversion rate by dividing conversion numbers or the taken desired actions by the total visitors’ number and then multiplying results by 100. This calculation will give you a percentage of the conversion rate. For instance, if your store made 18 sales after getting 450 visitors in a month, the conversion rate will be 18 divided by 450 and multiplied by 100 to get 4%.
Ideal Conversion Rate for Shopify
Conversion rates for Shopify stores differ depending on factors like conversion goals. After all, every Shopify store receives a unique audience. Additionally, most store owners do not share conversion data. But, the average conversion rate can be an ideal benchmarking point.
According to a report of Little data about the conversion rate of Shopify stores, the average number was 1.6%. If this rate is lower than 0.4%, your store may be listed in the worst 20% of Shopify stores. However, there’s no ultimate or specific industry figure on which to rely or compare. Therefore, striving to increase the conversion rate of your Shopify store is the best approach.
Why CRO Matters for a Shopify Store?
Perhaps, you’re wondering why you should care to boost the conversion rate for your Shopify store. You’re spending your sales and marketing budgets, which could be depressing you if you don’t convert visitors into paying customers. What’s more, you could lose time trying to sell, and your profit margins could be getting thinner. Essentially, if you don’t convert Shopify store visitors into paying customers, you will end up losing your investment. Here are some of the reasons to optimize the conversion rate of your Shopify store.
- Increasing revenue: Doubling the conversion rate of your Shopify store could double the revenue too.
- Increasing profits: When you increase your Shopify store’s conversion rate, revenue will also move northwards. And you won’t double costs because not every expense is directly proportional to your income.
- More web traffic and customers: Higher conversion rates make a Shopify store more profitable. What’s more, your store can reinvest the profits into the business.
- Savings on redesign costs: Redesigning a Shopify store will cost you money and time. And if the redesign fails to consider conversion rate optimization, it may not yield the desired results. Redesigns are primarily aesthetic upgrades. And most designers or agencies design stores for beauty. Using the correct pricing strategies to boost conversion rate will save your store hefty redesign costs that might not deliver the desired results.
- Becoming the market leader: Conversion rate optimization focuses on the most beneficial aspects of your store. And you don’t have to be ten times better than competitors to become a leader in your market niche. You only need to make your store more effective and efficient.
What is Pricing Strategy?
The right pricing strategy can boost the conversion rate for a Shopify store. However, you should formulate and implement the right pricing strategy.
Meaning of Pricing Strategy
A pricing strategy is a method that a company uses to price its services or products. Whether small or large, a company bases the price of its services or products on labor, production, and advertising costs. But to make profits, a company adds a specific percentage into the final figure. Shopify stores have several pricing strategies from which to choose.
How To Properly Price Your Products?
To price the products of your Shopify store correctly, you need to perform a price analysis. And this entails the evaluation of the current Shopify Store’s pricing strategy against the market demand. Pricing analysis aims to identify pricing improvements and change opportunities.
Shopify stores should perform pricing analysis when contemplating new product ideas to develop a positioning strategy or run a marketing test. Price analysis is also ideal for evaluating pricing against consumer expectations or competitors at least once every year. Essentially, analyzing your pricing strategy can help you avoid waiting for a product to start performing poorly.
Here’s the best way to price your products:
- Determine the actual service or product cost
- Understand how your customer base or target market responds to your pricing structure
- Analyze the prices of your competitors
- Review ethical or legal constraints to price and costs
It would help if you analyzed your pricing model to determine a better or new pricing strategy. And this should apply whether you want to introduce a new product, upgrade the current one, or reposition your current marketing strategy.
Why is Pricing Strategy Important for CRO?
While pricing may not be a glamorous aspect of a business, it’s also essential. That’s because you create a specific perception around a Shopify store based on your products’ prices. If you set too high prices, customers will see your store as being too expensive. And if you put too low prices, your products might seem unappealing or cheap. Here are the key reasons why a pricing strategy is essential for conversion rate optimization.
- Increasing the market share: You can use your pricing strategy as a tactic for protecting the market share of your store. For instance, you can drop your prices slightly to beat your competitors. However, be careful to avoid falling the prices too low because this can make customers and prospects question your products’ quality.
- Driving status perception or image of your store: Too high prices can drive customers away. However, increasing prices can also enhance status perception and pull more customers to your Shopify store. That’s because some shoppers might feel that buying premium products from your store will elevate their shopping status. What’s more, some customers think that your store features high-quality products, and therefore, charges high prices.
- Driving profitability of the sold products: Selling more products is arguably the quickest way to increase profits. And this may seem rational. But, to drive long-term gain, your store should have a better pricing strategy. Thus, your store should invest in a good pricing strategy and implement it.
- Exhibiting ethical responsibility: When it comes to pricing, both small and large retailers must exercise a moral obligation. If retailers could choose a price for their products, the market would run into chaos. In addition to price-fixing, some practices like price discrimination, price gouging, and price collusion would undoubtedly be blatantly obvious. Pricing strategies, however, make the market a civilized space.
The pricing strategy your Shopify store will implement will increase the value perception of the customers that visit your store versus their perceived cost. And this can affect your retail business. Therefore, formulate and implement a pricing strategy that enables your store to compete with other stores.
Effective Pricing Strategies for Shopify Conversion Rate Optimization
When running a Shopify store, you have several pricing strategies to consider when you want to boost conversion rate. Ideally, it would help if you had reasons for selecting some pricing strategies over others. Here are some of the most effective pricing strategies for Shopify conversion rate optimization.
This pricing strategy entails setting product prices based on their costs. You also add a fixed profit or profit percentage to the product costs, which sets the price at which you sell the product. This pricing strategy’s fundamental merit is that it assures you a profit from the product’s sale as long as the unit sales and markup figures meet expectations.
Selling price = Cost per product + Profit per sold product
For example, a company bears a total cost of £100 per product. Then it adds £50 to a product as a profit. In such a case, the selling price of a product would be £150.
This strategy applies when a store sets its product prices based on the price at which competitors sell the same product. Ideally, a Shopify store owner researches and analyzes the competition to determine the cost to charge for a product based on the competitors’ prices for a similar item. For instance, if your competitors sell a product at a lower price, it’s up to you to decide whether to sell the same product at a lower or higher price depending on what you want to achieve.
With this pricing strategy, you consider what customers are willing to pay for a product you’re offering at your Shopify store. For instance, most customers could be ready to pay a specific price for a product without thinking much about its production cost. This pricing strategy is not easy to implement. However, you can get more profit with this strategy because you only decide the margin you wish to have rather than add value to your product. Value-based pricing does not involve a thought process. However, it’s an easy way of bypassing customers and being in synchronization with competitors.
For example, Brand A is about to launch its new 65-inch LED TV, which is the biggest screen in the marketplace at the time. Now, it wants to figure out how much it would sell the TV. The closest competitor, brand B, recently introduced a 60-inch TV for £599. Both TVs have similar features except the screen size. Now applying valued-based pricing, the best way is to calculate the price based on your product’s differentiation. In this example, it boils down to “How much would TV shoppers pay for an extra of 5 inches of screen size?” Let’s say it is £100, and then add that amount to £599. The value-based pricing of Brand A’s TV is £699. In reality, to calculate the price of differentiated features of a product, marketers typically need to apply research methods like conjoint analysis or qualitative customer interviews.
Effective pricing strategies can boost the conversion rate for Shopify stores when appropriately implemented. It would help if you first thought about what goes into a pricing strategy before deciding on your Shopify store’s products’ prices. Always remember that pricing is generally an iterative process. Thus, you might not set the correct Shopify store prices right away. Therefore, be prepared to make several trials and research the market to select and implement the right strategies for boosting conversion rate.
If you need any help in pricing your products to boost conversion rate, feel free to leave comments or contact HappyPoints.