How can TikTok sellers adjust the price of their products flexibly?
In the last article, we talked about how to find benchmark competitors and the logic of pricing TikTok goods.
The pricing of a product is determined by both the buyer and the seller. But the market is ever-changing, and our product pricing can’t stay the same forever. In this article, we focus on: how to adjust prices flexibly after the product is on the shelves, and give you a general SOP.
The first part tells you about the comprehensive considerations of product dynamic price adjustment, and the second part further explains the main factors of product price reduction and price increase.
A combination of factors affecting the movement of commodity prices
1. Product Life Cycle
Product life cycle (product life cycle) is the market life of a product, that is, a new product from the beginning of the market to the market out of the whole process. Product life refers to the marketing life in the market, the product and human life, to experience the formation, growth, maturity, decline of such a cycle, usually refers to the introduction period, growth period, maturity and decline, different stages of the product in sales, profits, buyers, competition, the main performance of the following chart.
(1)Introduction period: refers to the product from design and production until it is put into the market into the testing phase. New products into the market, it will enter the introduction period. That is, we often say “new products on the shelves” of the test phase. Usually in this stage, the product sales and the risk of competition is low, in order to quickly occupy the market, to the store to attract traffic, the regular categories will be low and negative profit operation. But special categories (such as: fashion clothing, jewelry, popular goods), can maintain high profits.
(2)Growth period: After the product comes out from the “test product” and “trial sale” stage, the sales volume increases rapidly, the profit increases, and the market is opened, while the competing products have not yet had time to enter the market. At this time, we should take measures to raise prices and follow up the market development at all times.
(3)Maturity period: refers to the product into mass production and stable market sales, product popularity and increasing standardization. As the number of people buying the product increases, the market demand tends to saturate. In the early stage, there is a tendency for sales to continue to grow, and profitability peaks with an increase in competing products. In the middle and late stages, due to the entry of a large number of competitors and the saturation of the prelude, the profit growth rate gradually slows down until it declines, and sales volume then has a tendency to decline.
(4)Decline period: refers to the product has entered the phase of elimination. With the development of technology, consumer habits change and upgrade and other reasons, product sales and profits continue to decline, the buyer from the public to the laggards. At this time the product should be reduced to clear inventory, companies should consider doing product upgrades and other measures to adapt to the new market demand.
2. Market situation and strategic layout
In this article, we roughly divide the market situation into two main categories: red ocean markets and blue ocean markets.
Red Sea Market: refers to an already existing, highly marketed and more competitive market. For the Red Sea Market, the key is to establish a connection between the brand and the consumer’s recognized values (e.g. emotional and identity connection). For white label/branded manufacturers and sellers, it is best to avoid direct competition with established brand merchants in the Red Sea Market if they are not taking the low price route.
Blue Ocean Market: A market that has not yet been discovered and where there is no competition. “Blue Ocean” usually does not mean that there is no competition or competition, but rather a new market segment obtained through differentiation. For example, “fashion apparel” is a red ocean market, while the clothing track developed for a specific group of people or a specific scenario can be a blue ocean market.
And in adjusting the price strategy, if our category in the red sea market, if there is no brand support, you need to keep up with the market price, keep the low price, low cost, cost-effective advantages, follow the principle of alternating value and cost.
And from the perspective of long-term operation, it is recommended that Chinese sellers expand the blue ocean segment in TikTok to gain more pricing power and profit margin.
Through the third-party TikTok data analysis platform EchoTik — Platform Big Board Analysis, you can observe the category big board of the target market, as well as the corresponding outgoing orders and hot products.
TikTok Shop began to refine its operations in 2023, and each store can only choose one category. Therefore, choosing the right category is a crucial first step for TikTok sellers, and it is recommended that sellers choose a category with high market demand, and on this basis, explore the blue ocean market with differentiated competition and develop their own mature supply chain.
3. Seasonality of products
Seasonal goods are goods that have significant seasonal characteristics in terms of production, acquisition and sales. For example, industrial goods such as air conditioners, electric fans and solar panels; and everyday goods such as umbrellas and swimsuits are seasonal products in countries where seasonality is evident, and seasonal changes need to be taken into account when stocking and adjusting prices.
The most significant manifestation of seasonal products is that there is a clear trend of ups and downs in sales throughout the year. Therefore, the monthly sales of previous years are also very important reference criteria. If you are not sure whether your product is seasonal in the market to which it belongs, you can search for the keyword in Google Trends and check the search trend of the keyword throughout the year as a reference factor.
Sellers in the peak season more stock, stock, and raise prices; off-season to reduce stock, you can make price cuts and anti-seasonal promotions to clear inventory.
Price Adjustment Strategy
1. Price reduction of goods
Many sellers facing product stagnation or poor sales, the timing of a bad price cut, or can not make a decision, have the same question: is my product does not work, or the whole market is not working? It is recommended that when you do market research and sales review, you can take the natural week as a unit, check the weekly sales of each product, as well as the weekly sales of competing products, for comparison. If this week compared to the previous week’s sales decline, and the market share also fell, the sales of competing products and the overall growth of the broader data, you need to consider adjusting the price or product.
When these kinds of situations arise, businesses need to consider reducing prices:
(1)Stagnation: When there is excess capacity and oversupply of goods, resulting in a backlog of inventory, companies can use a limited-time price reduction promotion to clear inventory, improve turnover and make quick return of funds.
(2)Seize the market: When a new competitor appears in the market, cut in at a low price and seize the market share that belongs to us, we can sell at a reduced price within the scope of profit allowed, so that the price can maintain a dominant position in the market, and we can adopt such means as 0.1 yuan or 1 yuan lower than the competitor to continuously follow the price.
Through the third-party TikTok data analysis platform EchoTik — Product Library, select the category to view the competing products under the segment; or search for product keywords to view similar products.
(3)Sold out not to do: when the return rate is high, product bad reviews, sellers should first verify the specific circumstances, such as non-malicious returns or products and customer psychological expectations do not match, size and other conventional reasons, most customers feedback on the use of poor results and bad reviews are true, then the goods can be considered to reduce the price of inventory clearance after no longer in stock. Usually, it is recommended that when the return rate is higher than 10%, it is necessary to assess the quality of the product.
(4)Cost reduction: When the product is produced on a large scale, or the cost of raw materials and logistics is reduced, in order to further occupy the market share and consolidate the position in the market segment, you can consider concessions and price reductions.
(5)Holiday marketing: holiday marketing is also an important point in time to reduce the price of sales, this “price concessions” can also be achieved through a combination of sales or buying activities. Before the price cut, you need to do a good job before the live pre-heating and other multi-faceted publicity, in order to obtain better marketing results.
2. Price increase of commodities
(1)Low inventory: when the product sales than expected, demand exceeds supply, inventory is about to run out, the new batch of goods is not ready to quickly into the warehouse, you can temporarily increase the price of 10% to 20%, for more profit, and wait for a new batch of goods on the shelves.
(2)Sales growth: When the sales of goods grow and enter the growth period, you can adopt the spiral price increase method, while raising prices to test the market’s response. The specific measures are: every other day to raise the price by 1 yuan, and observe the situation of the order, if there are still orders, then you can continue until the 30th day; if sales and market share decline in the middle, then the same method will be used to spiral down the price of goods.
(3)High refund rate/return rate (not due to product quality):If the refund rate/return rate of a SKU is higher than 10% and inspection reveals that it is not due to product quality, consider raising prices to offset the higher costs caused by returns. In addition to raising the price, the cause needs to be identified and resolved as soon as possible. The reasons for this may be: 1. malicious returns / refunds, may be peer competition or consumers want to take advantage of the psychology of small bargains, should increase the cost of returns; 2. product details page description and the facts do not match (such as: the goods do not match, material does not meet the reasons), should be modified as soon as possible details page, change the actual picture; 3. (clothing and boots category) size is not appropriate, etc., should be carefully checked whether the size of the bias Large/small, and increase the cost of return.
(4)Cost increases:Multiple factors such as higher raw material prices, higher international logistics costs, higher labor costs, changes in exchange rates and inflation can all lead to higher costs. Therefore, in order to ensure that profits are not affected, price increases can follow, and it is recommended that each price increase should preferably not exceed 5%.
(5)Product upgrade: Price increase caused by the upgrade of product features. For example: material upgrade (clothing fabric upgrade), performance upgrade (new features that were not available in the past), etc. If you are worried that the upgraded product is not recognized by the product, you can add a new SKU under the series (SPU) and compare the sales of the old and new models to observe the acceptance of users.
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