Before we get into how you might approach pricing, let’s take a quick look at the different factors that actually impact how businesses price their products. There are many considerations you’ll need to think about - such as your production and logistical costs - not to mention the goals your business has set when it comes to the kind of revenue it aims to generate, and the size of the margins it's looking to make.

But, there are arguably other more influential factors to take into account too - external factors outside of your organization that you can’t necessarily change, but still have a huge impact on a consumer’s willingness to pay for your products.

Current political and economic developments, for example, have led to a degree of instability, giving rise to supply chain bottlenecks. Energy cost increases have contributed to worldwide inflation on a level that hasn’t been experienced for decades, and the possibility of recession should always be viewed as a risk, as it can reduce consumer demand in certain, non-essential product categories.

Another clear external factor to consider is the increasing importance of the environmental, social, and governance practices of your business - also known as ESG. This essentially looks at the impact of a business on society and the environment, and takes into account things like transparency and accountability. This is extremely important when it comes to consumer perceptions and the power of your brand. In fact, many studies show that, nowadays, consumers are willing to pay more for green, climate neutral, organic, vegan, or bio products.

Businesses that demonstrate they care about things like climate change, and aim to build healthy, mutually beneficial relationships with consumers, employees, partners and shareholders, can expect their reputation to grow - which will reflect positively on people’s willingness to spend money on their products, too.

When considering external factors, it’s also important to think about the different ways that consumers shop with your brand, and figure out if and how that should affect your approach to pricing. Consumers have not only become more discerning of the products they buy and the businesses they shop with, they’ve changed how they shop, too. Thanks to the ever expanding capability of digital technology, there are more and more opportunities for consumers and businesses to connect, like ‘Click and Collect’, for example, which is predicted to be worth over $700 billion by 2027. Social commerce is another touchpoint where businesses can connect with consumers…

This involves the sophisticated integration of social media and eCommerce, to the extent where engaging with social media and making online purchases can be viewed as one seamless experience – often within a single application and involving only a few clicks.

Social commerce is expected to grow to over $2 trillion globally by 2025, and it’s not the only shopping method that’s popular! Take subscription services, for example - almost 35% of weekly online shoppers use them, and this kind of scheduled, recurring purchase clearly calls for an alternative pricing model.

Pricing Considerations & Approaches

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