Today’s blog post comes to us from Gillian Muessig, Founding President of SEOmoz
For sellers of the unusual, the unique, one-off’s, few-off’s, and artisanal products, this article will really hit home. But, even if you’re selling products that everyone else is selling – name brand stuff that its sold strictly on who-has-the-lowest-price-including-shipping metrics, these ideas will help you set pricing that works, rather than simply competing to sell at the lowest possible price.
Correct Product Pricing Is Key To Ecommerce Success
The Lowest Price Can Put You Out Of The Decision Pool
Do you know what a Griffin good is? It’s a product whose value is generated by the marketing mystique around it, and it sells better when you increase the price. Cosmetics, perfumes, wines, liquors, and jewelry are all examples of Griffin goods. While cheap wines, cosmetics, etc are available, and there are some real differences between the very cheap and the very expensive stuff, there is a huge middle ground in which the pricing and the quality of the product have a lot of play.
I meet a lot of entrepreneurs who set their pricing by determining the lowest possible cost they can sell an item or service for and set that as their price. They bleed with every job or product they sell. When asked about their processes, they invariably say, “But I get every job I bid,” and “nobody would buy if I charged more,” or “I have to keep my price this low or I won’t make enough to meet my costs.”
Supply And Demand Is A Key Factor To Consider In Product Pricing
Unless you are selling strict commodities (the opposite of Griffin goods), nothing could be farther from the truth. Even backyard BBQ propane price fluctuations. If you want a tank of propane, you’ll pay about $50+/- to buy a new one, ~$20-30 to exchange your dripped-on, dirty, empty can for a fresh, albeit not always brand new one, and about $10 to refill your own tank (if you’re willing to clean it yourself and don’t mind if it starts to rust out on you over time.)
The cost differences have to do with the amount of value the customer puts into pristine appearance and their personal labor to clean things up themselves. But it also has to do with perceived value. And that’s the key to pricing your products.
The Difference Between Client Wanna-Be’s And Clients
A client is someone who understands the value of your product or (more commonly) service, and pays you a reasonable sum for them. They understand the value to their own business and know that they will realize a decent ROI from the investment. A client Wanna-be is a someone who wants to be a client, but doesn’t wanna pay (pun intended). They don’t care whether their investment in your products or services will be a good investment for their company. They play chess one step at a time and they are eternally stuck in the “get it for nothing or at least less” move.
Good pricing does NOT equal your cost of goods (COGS) plus operating expenses and taxes. While you need that number to determine your profit margin, (and sometimes to determine whether you have a viable product) set your price based on the perceived value to your customers. And then build that value.
Orange Vs. Tangerine/ Blue Vs. Blueberry
In the late 20th century, Apple sold computers that broke the color code. They exploded colors from Beige to Tangerine, Blueberry, Lemon, and other delicious names. Note that they didn’t name the colors of their products orange, blue, and yellow. They evoked the senses to envelope you and infuse you with their brand, which was rooted in avoiding the ordinary and always being extraordinary.
Perceived Value Also Influences Product Pricing
Perceived value is enhanced by the quality of your descriptions of your products. I won’t point fingers, but you know who you are. I’ve seen some Miva Merchant sites where the owners haven’t made an effort to write original descriptions filled with adjectives, verbs, case studies, applications, and a ‘story’ around the product. Read the description of a hat in the J. Peterman catalog and drool. You’ll know immediately that it’s worth your time to do the same.
Product Descriptions That Invoke A Sense Of Smell, Taste, And Sound Command Much Higher Prices Than Those That Simply Provide The Specs
Even if your product is sold elsewhere for the same or lower cost, the well written description on your website, accompanied by case studies in which your customer service won the day, can remind buyers that the purchase price is only the first part of the total cost of owning a product.
In short, you don’t have to be the cheapest in town if you take the time to build a site that is not the cheapest version of a website in town. Take the time to establish business practices that support customers ‘above and beyond’. Write copy that is so delicious that readers cannot help but want what you are offering. And flesh out your website with stories, hopes, dreams, and parenthetical photos, imagery and personality.
Leave the bland price cutting game to the box stores; they have more buying power anyway. Infuse your company and your website with passion and it will draw a loyal following of similarly inclined, super-customers who will help you spread the word.
Take The Time To Support Business Practices That Support Customers ‘Above And Beyond.’
Gillian Muessig
Founding President SEOmoz
CEO Coach at WebmasterRadio.fm
@SEOmoz & @SEOmom
Guest Contributor