Your SaaS and
E-Commerce Dictionary
Your one-stop-shop for learning definitions, terms, strategies, and trends within e-commerce, pricing and online retail.
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Glossary Overview:
As experts in pricing and e-commerce, we’re dedicated to being your first choice when it comes to receiving knowledge and insights. Broaden or improve your understanding of the e-commerce industry, pricing and marketing strategies, consumer behaviour, and retail in general.
A
Assortment Depth
In contrast to the breadth of an assortment, the term "depth of assortment" is used when the overall assortment contains many similar articles. If a product is available in several variations, this is referred to as a deep assortment.
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AIDA Formula
The AIDA formula finds its application in customer-based marketing and stands individually for Attention, Interest, Desire and Action. These stages are part of the customer journey and show an ideal progression of marketing activities, from interest arousal to purchase.
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Avoiding Returns
Returns in excess can cause a bottleneck for online retailers in both finances and resources. Therefore, it is crucial to avoid returns as much as possible by eliminating return causes as best as possible. How this can be done often follows from the reasons for returns.
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Anchor Price
The anchor price, or reference price, is the price range that the customer considers reasonable for an offer. A known price is used by the consumer as an "anchor" to better classify another price. In connection with this, one also speaks of a price anchor effect. This is based on the fact that human judgments are arrived at through comparisons. Prices are therefore rarely perceived in absolute terms, but in connection with known reference prices.
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B
Behavioural Targeting
Behavioural targeting is a type of segmentation that utilises information about a website visitor or app user’s past behaviours to guide advertising insertion. It combines technical and geographical data of each visitor with other available habit history, including website actions, search history, preferred categories and more.
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Black Friday
A retail sales event with large discounts that are designed to stimulate consumption. The Black Friday tradition comes from the US and falls on the 4th Friday in November, one day after Thanksgiving. In Germany, the day is widespread, especially in online business and in the last years has been extended to several days up to a whole (black) week.
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Brand Awareness
Brand awareness arises when the user recognises the respective brand. Factors such as visuals, acoustics and atmosphere contribute to this recognition.
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Brand Store
In online retailing, a brand store is a store that preferably only stocks articles from selected brands.
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Base Price
The base price is the price per unit. The indication of the base price in retail is intended to lead to more price transparency for consumers. In (stationary) food retailing, the basic price indication on price labels has long been mandatory. This is intended to give consumers more security and control and to counteract the fact that consumers are offered "cheat packs". The mandatory basic price indication makes it easier to compare articles with different filling quantities.
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C
Cyber Monday
As a response to Black Friday, which originated in stationary retail, Cyber Monday focuses on discounts in online retail. Cyber Monday takes place on the following Monday of Black Friday.
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Customer Interaction Centre (CIC)
Further development of the customer service centre as a central platform in which the various communication services converge, where multiple customer data and information are bundled, irrespective of the communication channel.
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Customer Service Centre (CSC)
The Customer Service Centre is also simply called customer service. An organisational unit that handles customer concerns (problems, questions, support) by telephone or in writing via e-mail, chat or ticket system, with the aim of ensuring customer satisfaction.
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Conversion Funnel
A conversion funnel is comparable to a funnel for e-commerce. The potential customer passes through this funnel on the way to purchase (conversion). A visitor thus becomes a customer and passes through the steps of awareness, interest, desire, and action.
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Cost per Order (CPO).
The CPO model is used in online marketing and describes the billing method according to this pattern: an advertisement is only billed (cost) if a customer makes a purchase (order).
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Context Targeting
Context targeting is a method of making online advertising even more specific. With the help of keywords and text context, a vendor can place advertisements on suitable websites.
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Customer Journey
The customer journey describes the journey a customer goes through on the way to buying a product. Different stages can have a positive effect on the customer's decision-making process by supporting targeted marketing strategies.
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Check-Out Funnel
Similar to the typical conversion funnel, the customer passes through different stages in the check-out funnel. These stages start, for example, at a landing page and end at the "check-out page" (the thank-you page after the purchase has been made).
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Crooked Prices
Whether in brick-and-mortar retail or online stores, pricing plays a significant role in selling all kinds of articles. Under the generic term "price psychology", one quickly encounters the concept of crooked, or precise, prices. A crooked price starts to look like the "Just Below Price", always from the cent amount of an article price, for example, 6,87€. This pricing strategy often leads to price underestimation on the part of customers.
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Cues and Primes
Cues and primes are stimuli which retrieve mentally stored information from the buyer and are intended to influence them in a certain way. They are also used in the field of price psychology. Cues are aimed at cognitive thought processes. For example, expensive products are of better quality at the same time. In this case, the cue is the price, from which customers assess the quality of a product. Primes, on the other hand, are based on subconscious stimuli, such as a certain colour or a certain smell, which are intended to convey certain values (e.g. safety) to the customer and thus favour the purchase decision.
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Complementary Goods
The term complementary goods refers to goods or products that complement each other in their common use. In this context, the use of one good (product A) necessarily presupposes the use of the other good (product B). An example of a complementary relationship is the fountain pen and ink. The price policy effects of complementary goods have negative cross-price elasticity. This means that a price change (e.g. price reduction) of one good (product A) not only leads to a (in this case positive) change in sales of this good, but also - in the same direction - of the complementary good (product B), without a price change being present here.
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Cross-Price Elasticity
Cross-price elasticity measures the percentage change in sales of one good (product A) in response to a change in the price of another good (product B). Cross-price elasticity can be negative, neutral or positive. If there is a complementary relationship between two products, the cross-price elasticity is negative (see complementary goods). Cross-price elasticity is often used for products within a company's own range, but can also be applied to competitor products.
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D
Demand Coverage
In the context of online retailing, the term demand coverage describes the extent to which the retailer can meet the needs of its customers.
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Demand Generation
In the context of marketing strategies in e-commerce, there is often talk of demand arousal. As the name suggests, this involves awakening a specific and previously unconscious need in the customer. This can happen, for example, through advertisements or emotional content. In the best case, the need for arousal leads to a desire to buy.
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Dynamic Attribution Model
An attribution model shows which marketing channels have contributed to a conversion (purchase). A distinction is often made between email, SEO, affiliate and social media channels. The models are based on the customer journey and attempt to estimate the weighting of the channels' sales. A dynamic attribution model does not consider the individual channels in a static order, but in a network-like structure.
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Dynamic Pricing
Dynamic Pricing is when the price is automatically adjusted several times to the current market situation. Dynamic pricing uses information such as competitor prices to calculate an optimal price for each item. You use so-called pricing strategies to control the rules according to which the new prices are calculated.
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Differential Pricing
The basic idea of differential pricing is that customers are offered different prices for the same product. In addition to place of residence, age, type of customer and purchases made, the respective price can be measured by numerous factors.
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Dropshipment Models / Dropshipping
Dropshipping is a method that originated in stationary retailing and is now also used in e-commerce. Online retailers store their goods with the responsible wholesaler and have the items delivered directly from there to the customer. The online retailer does not even come into contact with the thing before it is delivered to the customer. This eliminates expensive storage costs for the online retailer, which can be saved elsewhere, for example, on the selling price.
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E
E-Commerce Strategies
Standing out from other brands and sellers in e-commerce can feel like an insurmountable challenge: When new competitors are constantly popping up and the landscape evolves every day, how can you choose the right set of e-commerce strategies to find new customers and drive sales?
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F
Fulfilment
Fulfilment is also referred to as completion or settlement. It comprises the entire process of logistically bridging the physical distance between the ordered goods and the customer. In the narrower sense, it consists of storage, picking, transporting and delivering the goods. Complimentary activities include payment, after-sales, and returns processing.
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First Click Approach
The first click approach originates from the attribution methodology. Here, the conversion is completely attributed to the first click, i.e. the first channel with which the customer interacts.
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G
Geo-Targeting
The IP address of the website visitor is used for location purposes and enables the display of location-based advertising. Geo targeting refers to a form of marketing in which the website visitor's location plays a key role. The area is determined digitally so that websites can display advertisements and content to the user based on their location (location-based services, LBS).
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H
Honeymoon Pricing
Similar to penetration pricing, honeymoon pricing initially sets the price of a product very low by the launch to win customers. This pricing strategy is widespread in subscription models, and a low-priced starter offer initially attracts customers who need to be retained. However, keeping customers is usually feasible in this model, as switching providers can often involve effort and costs for the customer.
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I
Impulse Buy
An impulse purchase is made when a customer makes a purchase quickly and more or less spontaneously, and the purchase is made without a conscious decision.
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J
Just Below - 9er Prices
Whether in brick-and-mortar retail or online stores, pricing plays a significant role in selling all kinds of items. Under the generic term "price psychology", one quickly comes across the concept of 9s prices, or Just Below prices. An example of such prices is 6,99€. The cent amount of a price ends, as with the "crooked prices", thus with a "9" and thus often ensures that the customer perceives the price more favourably, but often also with inferior quality than with smooth prices (e.g. 7.00€).
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K
Kano Model
The Kano model was developed by Noriaki Kano and describes how customer satisfaction with products or services is related. Product characteristics are clustered into three categories: Basic characteristics (basic requirements), performance characteristics (performance requirements) and enthusiasm characteristics (enthusiasm characteristics). The background to the model is the assumption that, in addition to the presence of basic features and performance features, customer satisfaction can be disproportionately increased by enthusiasm features in particular.
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L
Lead Time
Lead Time is the time an order ultimately takes from its receipt by the supplier to its delivery to the customer. Here is how it is calculated: [Delivery date] - [Order date] = Lead time.
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Last Click Approach
In contrast to the First Click Approach, the Last Click Approach focuses exclusively on the customer's last click. This attribution methodology attributes the entire conversion value to the previous channel contact.
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M
Margin Pressure
Margin pressure refers to the reduction in profit margin caused by internal or external issues like rising costs, falling prices or other factors. When a retailer is dealing with margin pressure, it means that something is driving revenue down or costs up, a prelude to a decrease in per unit profitability.
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Multi-Channel
In e-commerce, the term multi-channel is used when multiple channels are used for sales. The choice of the right online marketplace plays a decisive role in the success of this strategy.
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Maslow's Pyramid of Needs
The hypothesis of hierarchical motive activation states that the next higher need is only actualised when the hierarchically subordinate need is satisfied. According to this hypothesis, situational conditions that enable, for example, the satisfaction of the need for esteem (recognition) only acquire the character of an incentive after fulfilling the subordinate requirements.
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Margin Pressure (Retailer)
Margin pressure refers to the reduction in profit margin caused by rising costs, falling prices or the like. The profit margin or profit margin includes the manufacturer's or intermediary's profit.
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N
No-Line Commerce
The modern term "no-line commerce" describes the development in e-commerce according to which online and offline strategies are linked to offer the customer a holistic buying experience. Neither the order channel nor further contact should play a role so that the customer journey is as fluid as possible.
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O
One-Stop Shopping
One-stop shopping means the customer only has to visit one point of sale to satisfy their purchasing needs. Online stores such as Amazon or Bol.com with a wide range of products can often meet these needs.
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Omnichannel Strategy
Omnichannel means picking up customers on all channels, including online and brick-and-mortar. Customer data is used to tailor the customer journey. An omnichannel strategy is applied to link customer data, often using the AIDA formula. This is used to find out what customers want and their purchase intentions.
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Open Commerce Principle
The open-commerce principle can be traced back to the ABOUT YOU flagship store and describes a modern business model. The company works with a wide range of freelancers and internal employees. The company includes creative minds, content suppliers, developers, brand suppliers and retailers from outside.
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P
Psychological Pricing
Modern-day pricing is so much more than a numbers game. When thought about correctly, it’s a powerful way to build your brand and drive more profits. But how do you access the full power of pricing? The key is to understand the psychology that goes into a pricing strategy, and this article is a perfect place to start. To continue our series of articles about different pricing strategies, in this article we’ll discuss what psychological pricing is, how it works, and what you need to build a great psychological pricing strategy.
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Picking
Means to find ordered items in the warehouse and assemble them into packages ready for shipment. There are picking machines, robots or the manual execution of a so-called picker (picker, gripper).
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Pull Marketing
Pull marketing is a method in which the user can pull his/her information. Comparable with "lean-in marketing", this includes, for example, the retailer awakening a need to buy in the customer, so the latter asks for an article himself.
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Push Marketing
Push marketing is the opposite of pull marketing and refers to a method in which information is actively given to the user. In online retail, for example, this would be an advertisement that actively promotes an item to awaken a desire to buy in the customer.
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Porter’s Five Forces
The Five Forces Model ("Porter’s Five Forces") consists of five levels: Bargaining power of suppliers, the bargaining power of customers, competitive rivalry, the threat of substitutes, and the threat of new entrants. The model relates to strategic management and is often applied in the context of industry analysis.
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Pleasure Purchase
In e-commerce, customers often make a so-called pleasure purchase when buying relatively inexpensive items. However, expensive items such as cars are also purchased in this way. This particular type of purchase is characterised above all by the fact that the customer does not make a rational purchase decision but buys precisely the item that makes him feel good. Caution: Not to be confused with impulse buying.
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Predictive Behavioural Targeting
Predictive behavioural targeting is based on behavioural targeting. In this method, information about the user is extracted from data on web browsing behaviour and data sources such as surveys or registration data. After evaluating the data, suitable online advertising targets selected user profiles.
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Product Range Updates
In the fast-moving e-commerce sector, online retailers must keep their product ranges up to date. Regular product range updates are the keyword here. In addition to the breadth and depth of the product range, an up-to-date assortment also contributes to a positive customer journey.
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Price Skimming
Price skimming occurs when a new product is launched on the market and offered at a higher price at the start of the sale. In this initial sales phase, a brand's regular customers are targeted. In the further course, the product's price falls and adjusts to the market value to also attract price-conscious (new) customers.
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Penetration Pricing
Like honeymoon pricing, penetration pricing means low pricing in the context of pricing strategies for a market launch, which intends to encourage customers to buy and bring about market penetration. The danger, however, is that customers will switch brands/providers again as soon as the discounted product increases in price.
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Premium Pricing
Premium pricing is a high price strategy in which prices remain constantly high even after the product launch and do not drop again after a successful launch, as is the case with Skimming. This pricing strategy is particularly used for products that do not allow users to assess price elasticity.
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Price Comparison Site
A price comparison site is an online platform in which visitors can have the price of a particular item displayed by several suppliers or retailers. This means that a price comparison takes place, which can lead the visitor to a purchase decision. The most popular price comparison sites or portals include eBay, Idealo, Amazon and Google Shopping.
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Price Elasticity
Price elasticity as a sub-area of price psychology, measures the reaction of demand for a product after a price change. Accordingly, it measures how the quantity demanded behaves when the price of a product increases or decreases by at least one percent, i.e., how do consumers react to minimal or significant changes in price? Elastic demand can be identified if the reaction of customers is high (>1 *). Demand is inelastic if there is very little reaction to a price change (<1 *). If demand does not respond at all (0 *) to price changes, this is called entirely inelastic. *according to the scale of price elasticity, calculated by this formula.
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Price Image
A price image describes the perception of price characteristics of products or brands and can be either positive or negative. Price image is difficult to define because low and high prices can be considered positive or negative.
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Price Dumping
Price dumping involves a price measure or pricing of a company in which the classic, commercial calculation is overridden: The price is intended to undercut that of the competition and is often set very low. In the course of this, the manufacturer has to accept a loss in order to increase its market share. The measure is generally seen as rather controversial. The focus is on increasing market share or even squeezing out competitors. These often have a low level of capital, which is usually not able to withstand the predatory competition. This measure is also known in the international arena. As a countermeasure, market monitoring is carried out by legal foundations and competition authorities.
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Purchasing Power
The purchasing power of money indicates the amount of goods that can be purchased with a given amount of money. However, prices of goods fluctuate and often change. Purchasing power can also be described as the ability of households and market participants to generate effective demand on the (consumer) goods, commodities or services market. Inflation (depreciation of money) and deflation (appreciation of money) affect the purchasing power of money. For example, heating oil becomes more expensive in winter, while other goods such as bicycles or computers become cheaper in the same period.
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Pricing Strategies
Setting the right price for your e-commerce products is like playing a game with extremely high stakes, no clear rules and ultra-intense competition. Choose the right price over time and you can win over your target customers, creating loyal buyers who keep your business growing for years to come. Choose the wrong price and everything could go south, quick.
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R
Return Reasons
The reasons a consumer has for returning an order to an e-commerce store. These reasons can vary widely, and the seller will only know a customer’s reasons for returning if they ask upon receiving the return request.
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Retargeting
The tracking of a website visitor based on a cookie. Retargeting allows an online retailer to track a visitor to their website (if they have cookies enabled) to pages outside their website and display advertisements. The cookie stores information about the last website visit. Retargeting also includes and extends to geo-targeting, socio-demographic targeting, context targeting, behavioural targeting.
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Retail Positioning
In (online) retail, retailers are always trying to assert themselves in the market. To a large extent, this is done via so-called unique selling points (USPs), i.e., the company's unique selling propositions. These USPs can be transferred into a matrix, which summarises the retail positioning of the company. This shows whether the company places more value on, for example, price, assortment depth/breadth or shopping experience.
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S
Singles Day
Singles Day is celebrated on 11/11 and originated in China. It is one of the top-selling online shopping days worldwide. 2019 also saw the emergence of discount campaigns for Singles Day in Germany.
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Socio-Demographic Targeting
Socio-demographic characteristics such as gender, age, place of residence and social status from social networks, like Facebook, or internet services, such as Google, are used to display advertising content, provided the user is logged in and has activated this.
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Shopping Experience
A shopping experience can be both positive and negative for customers. These can summarise the factors of a shopping experience: Sales channel design, product journey, support, services, assortment breadth and depth.
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Semantic Targeting
A method of placing ads after considering the entire website text. In contrast to context targeting, which only filters for individual keywords, semantic targeting searches for key topics and text meaning, so the ads very precisely.
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Selection Order
In e-commerce, a selection order refers to an order that includes several items in one package. This is often the case in the textile industry. Reasons for this could be a minimum order value, free return shipping or low-priced items.
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Store-within-a-Store
The store-within-a-store concept has been around for some time in stationary retail. What is meant here is a store in a (larger) store. One example of this is cosmetics sales stands in a drugstore. In e-commerce, this trend is also slowly emerging and can be classified as no-line commerce. In the online concept, manufacturers benefit from having their small store in the retailer's online store.
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Substitute Goods
The term substitute goods refers to goods or products that are completely or partially substitutes for each other in the way they are used. In this context, the use of one good (product A) may necessarily substitute for the use of the other good (product B). An example of a substitutive relationship is butter and margarine. The price policy effects of substitute goods have positive cross-price elasticity. This means that a price change (e.g. price reduction) of one good (product A) not only leads to a (in this case positive) change in sales of this good, but also - in the opposite direction - to a negative change in sales of the complementary good (product B), without a price change being present here.
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Standard Prices
The standard price is a fixed price used in cost accounting for the valuation of material consumption for the operational performance process. It is thus intended to eliminate price variances. In cost accounting, it acts as a stabilisation factor and simplifies cost accounting considerably. The standard price is formed from past average values. This is done with simultaneous consideration of the prices to be expected in the future, in order to keep the difference between standard prices and effective actual prices as low as possible.
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Sales Area Productivity
Key figure used in stationary retailing to calculate how much sales per square metre of selling space have been achieved. In each case, a period is taken into account. Sales area productivity is calculated as follows: Sales per period divided by the pure sales area.
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T
Transactional Marketing
The goal of this marketing measure is selling, and the measure's focus is the product itself and its price. Within this process, the product is advertised online and offline using various campaigns and ends with the purchase.
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U
Unit Prices (Manufacturer)
Unit pricing involves selling a good to all customers through all sales channels at the same price. This represents the opposite of price differentiation.
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V
Value Proposition
This describes the added value or benefit that a company offers its customers with a particular product.
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W
Willingness to Consume
The term "consumption" comes from Latin, which means to consume and to use as well as to consume. Generally speaking, the term consumption refers to the consumption of goods. In the economic context, consumption specifically means the selection, purchase, use and consumption of goods and services. Goods are understood to be any means that can be used to satisfy human needs. The people who consume are called consumers. Thus, the willingness to consume describes the consumer's willingness to acquire goods to enable his or her satisfaction of human needs.
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Y
Yield Pricing
Yield pricing is a marketing strategy for the aviation and hotel industry. Airline seats are priced differently depending on the booking period, and early bookings are rewarded with a lower price, while late bookings are priced higher. Avoid lost profits and empty seats.
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Talk to one of our consultants about dynamic pricing.
