June 01, 2017

Pricing Ying and Yang

One of the biggest trends of the past two years is pricing.

New items are being introduced at higher-than-average prices. Look at what this company did with prices over time.

Then look at what happens to items per order.

This is the classic "ying and yang" that we're all asked to manage. If prices go up, items per order go down. If prices go down, items per order frequently go up. The net of the two is represented via average order value.

The net of the two is positive ... in this case highly positive. This company managed the relationship properly.

If you can generate the same number of orders per buyer, and you can generate the same repurchase rate, and you can generate the same number of new + reactivated buyers ... then you can grow demand and grow profit and increase the size of your bonus check.

Of course, you aren't going to just raise prices. You will introduce new merchandise at higher prices ... and that strategy is r-i-s-k-y.

But there is a path to improvement - you can make a difference if you have a bright merchandising team and a bright marketing team.

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