March 4th, 2014 by Elma Jane
Setting the right price for your products or services can be challenging, particularly given the many outdated ideas and misconceptions surrounding pricing structure. The problem with conventional wisdom is that it’s not always wise to follow. Let’s consider four commonly held ideas about pricing and why they may be standing in the way of increased profit for business.
Price Drives Sales More Than Anything Else (Quantity/Price)
Price is definitely a key component in a customer’s having decision but managers overestimate its importance. A computer error caused prices for online retailer products to be displayed at wholesale rather than retail prices for a weekend. The company expected a huge surge in sales, but increase was only marginal, revealing that the company’s customers were more motivated by other factors, such as customer service and the quality of the products themselves, rather than price.
Managers remember the 10-15% of customers that balked at buying due to price instead of noting that 85-90% of customers did not have a problem with the price.
Price Reign Supreme
Finding the perfect price is not the Holy Grail. Small businesses would do better to treat price as function of the value they provide to customers. The greater the value, the higher the price that can be set. Value represents a customer’s return on spending. The benefits receives for each dollar paid. Customers don’t mind paying more if we get more in return, whether the benefits are real or perceived.
Pricing Structure Always Depends On Your Competition
Small businesses set their prices based on what their competitors are charging, but this approach may end up hurting the company. Instead, try to understand how your customers view your product and your brand. Pricing structure shouldn’t depend on your competitors prices unless you and your competitors offer the same bundle of benefits.
Spread Out Price Increases
People gripe about air travel, but many small businesses might benefit by taking a page out of the airline industry’s dynamic pricing playbook. Don’t treat prices as set in stone. Sell 2014 products and services at 2014 prices. Consumers are less likely to grumble about regular, incremental price adjustments than larger increases spread further apart specially, if they aren’t linked to any visible improvements. You’re also more likely to fall out of sync with market realities if you initiate significant price hikes at multi-year intervals.
If you haven’t raised prices since 2006, you might not be losing money, but you’re still losing margin. Your customers want you to stay in business, and you can’t do that if the times change but your prices don’t.
What are you offering that the competition isn’t? (Yours VS Theirs)
Are your locations or hours more convenient?
Do you offer training or other support?
Is same-day delivery available?
Is your sales staff more knowledgeable?
Marketing isn’t about paying people to buy from you by giving away margins. It’s about creating valuable perceived differences between you and your competition, in the eyes of buyers and charging buyers for those differences. Anything out of the ordinary gives existing and potential customers a reason to drop by or click.
Posted in Best Practices for Merchants, Credit card Processing, Small Business Improvement Tagged with: greater value, losing margin, losing money, online retailer, price, pricing, pricing playbook, pricing structure, products or services, profit for business, retail prices, small businesses
February 24th, 2014 by Elma Jane
When someone asks what business you are in, how do you typically respond?
For many online sellers, the answer is likely I sell (name of the product), I’m an ecommerce merchant or I’m an online retailer.
Make the focus of your business your customers and its value proposition, not the fact that you sell online. It’s time to simply answer the question of what business you are in with a response that is more or less, “I am a (distributor, retailer, reseller) of (name your products) for (name your market).”
Back then, most business owners who sold products online described themselves as “ecommerce businesses” or “online retailers,” to differentiate from brick-and-mortar or catalog retailers. Most operated their own pure-play online stores. Some sold products on eBay. Amazon’s marketplace was mostly comprised of larger retailers. There’s an evolution in how e-commerce owners describe themselves.
Today, you will still hear many online sellers describe themselves as “ecommerce businesses” or “online retailers.” But, in 2014, those terms don’t really apply. Whatever you sell, you are delivering a set of products to meet the needs of a specific market. “Ecommerce” or “online retailing” is simply a technology and a sales channel.
There is now no difference between “ecommerce” and “commerce.” It’s time to get rid of the “e” in ecommerce. Most businesses participate in ecommerce in some fashion. You engage your customers in many different channels — your own e-commerce site, brick-and-mortar, online marketplaces. Regardless, you and virtually every other B-to-C or B-to-B company are selling goods to customers across those channels.
Why Worry about Labels?
Today, commerce is multichannel and highly competitive. It’s done online, on the phone, face-to-face, and on desktop, mobile, and tablet devices. Make sure your business has an omnichannel strategy, so your shoppers can find you. Make sure the information about your company and products is consistent regardless of the channel. Focus on whom your prospective customers are, what they want to buy, and how much they are willing to pay.
Business owners should think strategically. Part of strategic thinking is focusing on the bigger picture, such as having the right products and ensuring that your buyers can find them.
Omnichannel Focus
Think about omnichannel commerce every day. Get your brand and products in front of your target customers regardless of where they are shopping. Below are some things to consider to facilitate an omnichannel strategy.
Chat and phone. If you don’t offer online chat or take phone orders, consider doing so.
Marketplaces. If you aren’t selling your products in marketplaces outside of your own online store, consider doing so.
Mobile. If you don’t have a mobile strategy, you need one.
Payment options. If you only take credit cards for payments on your website, add alternative payments like PayPal, Google Wallet, or Amazon Payments.
Social media. If you don’t have a social media presence, your market share is likely declining.
Customer Focus
Twenty-five years ago, if you asked a brick-and-mortar retailer or a catalog vendor what business she was in, she would likely respond as, say, “jewelry retailer,” “men’s clothing store,” “a department store,” or “hardware store.” She knew her target customer niche, how to reach them, and what products they wanted to buy. Those businesses that did the best job of (a) matching products to the consumer, (b) offering low prices, and (c) utilizing the right distribution likely won most of the business.
It’s time to get back to that focus. It’s more challenging than it used to be because the purchase cycles are far more complex than in 2002. There is no longer a straight path from identifying the need to research to purchase. Consumers typically identify a need and purchase intent, research products, research prices, research products further, conduct social media research, and then purchase a product and demand instant gratification and free shipping.
To be successful in 2014, commerce – not just ecommerce – requires the following.
Emphasize your value proposition. Regardless of how a shopper finds you, be sure he can quickly find out that you are a leading retailer of products in your market. Being clear on what your business is will also help establish trust with your shoppers.
Execute the 4 Ps of sales and marketing – “product,” “price,” “promotion,” and “place.”
First, make sure you know your target customers and what problems they are trying to solve or the need that you fulfill with your products. Know their demographics, their buying cycles, price tolerance, and where they research and shop.
Know your competitors.
Posted in Credit card Processing, Digital Wallet Privacy, e-commerce & m-commerce, Electronic Payments, Internet Payment Gateway, Mail Order Telephone Order, Mobile Payments, Small Business Improvement, Smartphone Tagged with: alternative payments, Amazon, brick and mortar, catalog retailers, catalog vendor, commerce, credit cards for payments, e-commerce site, ebay, ecommerce, ecommerce merchant, mobile and tablet devices, omnichannel, omnichannel commerce, online retailer, online sellers, online stores, phone orders, sales channel, sell online
