Merchandising is the act of promoting products. To keep things simple, this article is going to discuss an ecommerce merchandising strategy onsite. This strategy is comprised of:

We’ll break things down based on those four sub strategies that together make up your onsite merchandising strategy. There’s a lot to talk about here, but we’ll only cover the things that we think are absolutely essential.

Why it matters

Your prices matter for two reasons. If your prices are too high, you’re missing out on conversions and will have a lower conversion rate than you should have otherwise. If your prices are too low, you’re losing out on profit that you could be making and that cash could be reinvested into ads to help you grow faster or more aggressively.

Raise Your Prices

Many merchants are so scared of customers thinking that their prices are uncompetitive, when in reality a majority of your customers are totally unaware that your competitors even exist.

If you’re considering raising your prices, now is a great time to do it. Inflation is at a record high and consumers are expecting to pay more. There’s no better time to make an adjustment that will receive little to no customer backlash.

Pricing Insights

The easiest way to determine if your products are over or underpriced is to set up a test during your “off season”. For example, you don’t want to test around the holidays or when your sales are at peak levels.

The test is simple: change the price of the product you want to test for 30 days. Track the revenue per visitor and the profit per visitor.

Then, change the price back to the original level. Take the average of your revenue per visitor and profit per visitor for the 30 days before and 30 days after the price change and compare it to the revenue per visitor and profit per visitor of the 30 days that the price was different.

Formulas:

Revenue Per Visitor = total revenue / total visitor count

Profit Per Visitor = total profit / total visitor count

If this confuses you, no worries, email us at [email protected] to talk about our consulting services to see if conducting price tests is right for you and something we can assist you with.

Discounting can be dangerous

If you condition customers to always expect discounts, they lose their appeal. They become something that is an expectation and not a gift or something that is a limited time offer. Brands far too often try to lure customers in with sales and discounts, have success with it and then come to the conclusion that they should just run never ending sales.

What happens is that you cheapen your brand. It works for a while, but if your brand isn’t a discount brand, eventually you’ll have to change things up and when you do, your customers might flip out. You’ve given them more discounts than they could have ever wanted and now you’re the bad guy who’s going to take them all away.

How to discount properly

If you don’t want to fall into the trap of overdiscounting, set a time limit for the sale or discount that you’re running and stick to it. If you’re running a sale for the month of July, you need to end that sale on August 1 at 12:00am. Customers need to know that offers are limited and will not last forever. Doing so will condition them to have a sense of urgency when it comes to making a purchasing decision.

How often should I discount?

We recommend running four major sales per year with the option to sprinkle in several flash sales strategically when you’re experiencing slumps during times when sales have been historically decent. The holiday season is an obvious time to deploy sales and discounts, but consider this: everyone else is doing the same thing. This means that ad market competition is high, driving up the cost of advertising. But to be fair, this is the time of year that people are looking for deals. However, they are looking for deals from brands that they know and love. If you’re an established brand that’s already acquired thousands of customers, stick to running holiday sales! If you’re not a brand with thousands of customers and you’re new to the market, consider trying something else.

New Merchants

We think new merchants should consider running their largest sales during times that are not traditionally known for ecommerce sales. This sense of randomness to your sales timing may actually give you an upper hand over your competitors because when you’re running your sales when ad market competition is low and ad costs are low allowing you to get in front of more eyeballs for less money!

Low Margin Products

It depends on your products, their prices, and if there are obvious up-sell/cross-sell opportunities (we’ll talk more about this below!) If you sell low margin products where there is not much room to go down in price, then the best option for you actually isn’t discounting, it’s bundling (we’ll also be talking about this below.)

Consumable Products

If you sell a consumable product (i.e. anything that you can run out of) like food, cosmetics, supplements, cleaning supplies, etc., then you should consider that sometimes it might be worthwhile to offer discounts that aren’t even profitable to run when only looking at the purchase that the discount is applied to.

What you’re hoping for is that you use the discount as a lure to acquire a new customer, even if it costs you money, and then that person will come back and buy that same product again once they run out. You pay for ads to acquire a customer, why not give away a little more if that’s what it takes to acquire customers for life?

We understand that this isn’t possible for some merchants for financial reasons, but if you can afford it, do it! In the long run, it’ll pay off big time because you’ll be able to acquire more repeat customers, faster.

High Margin / High Priced Products

These look like the easiest products to discount because you may have more profit margin to play with when assessing how much you can afford to give off. But, sometimes you really don’t need to offer any discount at all to these products. Let us explain.

Loss Leaders

There are certain products that are called “loss leaders”. The purpose that these products serve is to attract customers onto your site, but with the understanding that if they purchase those products, you’ll be at a loss on those sales. The goal, however, is to entice customers into your site with the loss leaders, but to sell them on other, more profitable, products once they’re on your site. Your higher priced and higher margin products are the products that you sell customers on after they were drawn to your site with loss leaders.

The funnel works like this:

What is it?

Up-selling is selling customers on more expensive products than the ones they were originally interested in buying. Cross-selling is the act of selling customers other products that they might also like and want to buy alongside the current product that they’re considering.

Why do I need to do it?

Every merchant should begin doing this because it’s the best way to increase your average order value. Improving your average order value will greatly improve your ROAS and will also allow you to be more aggressive with your Facebook marketing because you have more margin to work with to spend on ads and still achieve a profitable ROAS. Every dollar increase in average order value is another dollar that can be spent acquiring new customers with marketing!

How to set them up

There are a lot of ways to do this, so this section is going to be brief and to the point. There is simply no reason to not be up selling and cross selling shoppers.

Every product page should include a section that states “this product pairs well with:” and then lists other complementary products. Every shopping cart should also have similar functionality. Before someone checks out, they should see other products that they can quickly add to their shopping cart (maybe for a discount). People are compulsive shoppers and many buy on a whim. Having upsells improves average order value tremendously.

There are too many great solutions that have their own strengths and weaknesses for us to tell you that you should absolutely pick a specific one. All we know is: you absolutely need one. Do your own research and figure out which one will be best for your budget and the specific needs of your store.

Bundling is a great way to improve your AOV. Considering how vital AOV is to the ROAS equation, improving AOV is a sure way to boost your marketing ROAS. When bundling just keep one thing in mind: what do your customers naturally buy together or need together?

How not to bundle

It doesn’t make sense to bundle two dining room tables together because, let’s be honest, how many people are in the market for two at one time? Too many merchants fall into the trap of trying to bundle cheap products into an expensive bundle, but if the contents of the bundle just don’t make sense together, then it’s not a good bundle.

Bundling Examples

Bundling a toothbrush with toothpaste makes sense. You use them together! Apparel brands also have good opportunities to bundle. You can bundle three t-shirts together that are all different colors because who wants to wear the same thing every single day? No one!

CPG brands probably have the best bundling opportunities, especially food brands, because large families already buy food from the store in bulk, so why not buy in bulk online?

Successful Bundles

Remember, the most important part of bundling is making them make sense. Step into the shoes of your customers and consider what products they will first need together and then consider which ones they will likely want together. A great example of prioritizing needs over wants is the fact that anyone buying a pair of sneakers will need to wear a pair of socks with them.

Lastly, successful bundles are also priced reasonably within the context of your own store. If your average product price is $40, don’t try and push bundles that are $500. That isn’t even in the ballpark of what people are expecting to pay on your site. However, a $120 bundle would be acceptable because that’s what someone would have paid anyways, had they added a few items to their cart.