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Item Price Set Too Low - Hurt Sales?
olimits7

5+ Year Member



 
Msg#: 4337184 posted 10:11 pm on Jul 8, 2011 (gmt 0)

Hi,

I was wondering can having an item price set too low actually hurt sales? Would customers tend to think it's a "too good to be true" price and not buy?

I'm trying to learn more about item price points, and finding the best price point to use. Does anyone know of any good articles I could read regarding this topic?

Thank you,

olimits7

 

piatkow

WebmasterWorld Senior Member piatkow us a WebmasterWorld Top Contributor of All Time 5+ Year Member



 
Msg#: 4337184 posted 11:55 pm on Jul 8, 2011 (gmt 0)

The expression "reassuringly expensive" comes to mind.

I don't know of any literature but I have observed it myself in the music business. There is a price range at which customers will take a chance on a new band, too high and people will turn up and then complain, too low and they will stay away.

WorkTogether



 
Msg#: 4337184 posted 1:47 pm on Jul 15, 2011 (gmt 0)

For sure. I used to sell a cleaning product and I priced it at 19.99 thinking that was the best price. I later tested 19.99, 24.99 and 29.99 using google optimizer. The 24.99 won by a long way - sold more and made more, 19.99 second followed by 29.99. Lesson learned (and test prices if you can)

jecasc

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 4337184 posted 2:41 pm on Jul 15, 2011 (gmt 0)

I was wondering can having an item price set too low actually hurt sales? Would customers tend to think it's a "too good to be true" price and not buy?


A definite yes, this is possible. In my experience you should always offer a plausible reason when you are selling below normal market price. If you do not, the customer will start thinking and make up his own reasons. Second quality items? Counterfeit goods? Stolen goods? Due to expire? Re-imported? Returned items? Not an authorized dealer? Used goods? Company going bancrupt? Discontinued model?

So give the customer a reason why you are selling cheap. Any reason will do. Even if the reason is that you are selling cheap because it's Friday or Summer - special weekend offer, summer special. Anything will do.

Also do not forget that price is also a quality indicator for people. When you offer three items in the same quality but one for 10 EUR one for 20 EUR and one for 50 EUR, studies have shown that most customers will go for the 20 EUR item. Especially if there is no other quality indicator. Many retailers know that and that's the only reason they even list the 50 EUR item. To sell more 20 EUR items.

olimits7

5+ Year Member



 
Msg#: 4337184 posted 3:56 am on Jul 16, 2011 (gmt 0)

This is very interesting; I would never have thought that higher prices could help increase sales, but I guess every customer is different and use their own logic when placing orders even if the price is higher than other competitors.

What if all your competitors have similar prices for an item; for example each competitor is just a couple dollars above/below one another.

What would be a good strategy to use in this scenario?
- Come in with the lowest price only a couple dollars different than your competitors?
- Come in with an extremely lower price than your competitors?
- Come in with a price right in the middle of your competitors?
- Etc...?

Me as a customer, I think I would pick the lowest price that is only a couple dollars different than the rest of the competitors. But every customer is different; so I'm sure even the highest priced competitor would get orders to. I guess it comes down to what would the majority of customers pick?

olimits7

jecasc

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 4337184 posted 10:04 am on Jul 16, 2011 (gmt 0)

I guess it comes down to what would the majority of customers pick?


No, it comes down to making the highest profit. Even if you sell cheaper than your competitors and get more orders - they might make money while you are making none.

In my niche the Recommended Retail Price is 100% above the wholesale price. So those that are selling for RRP have to sell one item for 100 EUR to make 50 EUR. Those who sell 25% below RRP need to make two sales for a 50 EUR profit. So to earn the same they need to double their sales. Problem is: They don't. Because the customers in this niche are not very price sensetive.

So those selling for RRP are making more money with less sales.

So first of all - calculate your profit margins. Then try different approaches for different products and calculate not when you are making the most sales but when you are making the highest profit.

dpd1

WebmasterWorld Senior Member 5+ Year Member



 
Msg#: 4337184 posted 10:28 am on Jul 16, 2011 (gmt 0)

I was recently buying some hobby stuff and went through a few sites. There's about ten major sites for the niche, with 5 being above the rest. Out of those 5, one guy had prices quite a bit higher than everybody else. But... He also had many things still in stock that most of the others had run out of long ago... thereby offering more items then the others, and most importantly... items that you can't get anywhere else. He basically overpriced himself right into his own singular niche. He may not sell stuff as quickly when it comes out, but he will sell it... and sell it for more money. Which means he's working less, and probably making at least as much as his competitors. I guess that would be the 'turtle beats the rabbit' scenario.

MisterT

5+ Year Member



 
Msg#: 4337184 posted 11:01 pm on Aug 10, 2011 (gmt 0)


I think it really depends on the type of product. Pricing is the toughest part of eCommerce.

What I have learned: if you don't have the right products at the right prices, nothing else matters.

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