Product pricing.

for a new dite selling generic widgets

[Essex_boy]

My site sells widgets seen in major TV shows, they are almost a generic product.

Instantly recognised worldwide.

But as my site is new and unheard of should I slash the sale price and run with say a 20% margin or should I run a normal price campaign (100% margin at least)? With prices like a competitors. I cant offer any thing diffrent to my competitors, the quality is the same, there are only a few authorised makers of theses widgets. Theres also no restrictions on where or how much I can sell them for.

My competitors are either small time joe's on a free webspace site or mega corporations like Amazon - point being neither are responsive to prices changes by myself. One site hasnt changed since mid '99!

The site is in the top 5 of all major engines except Google (yet, awaiting update), so I have no advertising costs. Its all free clicks!

How at the same time can I give my site credability, so people dont think Im a fly by night?

(AndyBoyd and DereckWong Id really like to hear what you both have to say)

[PCInk]

I'd go for your normal price. If it's a new site, you won't be inundated with sales, but you only need to sell one fifth with the figures you have given above.

Sometimes it is better for a company to put prices up. For example, imagine a window cleaner charges $10 per house and he has 50 customers per week. That is $500 per week. If he puts his price up to $12 and some (say 5) customers tell him to forget it, it may have this advantage:

45 customers at $12 per hour gives him $540 per week. You may think it wasn't worth it. But he now has a choice, he has extra time to himself each week (plus an extra $40) or he spends that time finding new customers who strive for quality, which could potentially find him $600 per week. Either way, he has not lost out as long as he doesn't lose to many customers, only you know that market.

Selling widgets at a lower price may start a price war and no-one wins in a price war but the customers. If you want to undercut other people, undercut them, but not by a lot because you probably will not upset the competition or the customers and you will make more profit, even if numbers of sales are lower.

[gibbon]

"Selling widgets at a lower price may start a price war and no-one wins in a price war but the customers"

absolutely

[webmasterworld.com ]

[PCInk]

If the uniqueness of your business is 'cheaper prices', you should rethink your stategy. The cheapest companies are not the most successful (normally).

Look at Fiat, Volvo, Rover and compare them to BMW, Mercedes and Audi. Which are the cheapest and which are struggling and which are affluent? Who sells the most? Why is it that the latter three sell less than the first three but are not struggling?

You need something other than price:

BMW: Prestige, Good sporty handling, Reliable

Merc: Very high prestige, Luxury ride, Good customer service (maybe not from dealers-but from Merc they are good, very good)

Audi: Lower price than above yet still prestigous. Cheaper entry to prestigous motoring.

Now look at the others:

Fiat: Rust quickly, unreliable, very bad handling (most models, but not all)

Volvo: Safe, slow, expensive, little prestige

Rover: Depreciation like a dropped stone, fairly reliable, no character to the car, old chassis, very revvy engines

People will spend more with the BMW, Merc and Audi over the others mainly because of two factors: Prestige and reliability. They offer both. I know of someone who spends £100,000 on his cars and changed from BMW to Merc because he phoned the head offices and got them to look for a car for him (nearly new). Merc could not get what he wanted, but had something close. BMW never responded. BMW would have been cheaper if he could have gone with them but Merc were the helpful company and got the business and have had at least two sales since from his company.

Find something that sets you out as different (and not price if you can help it).

In my trade, everyone sells the same 100 items. The most popular items. So I thought different. I decided to start selling unusual items, now over 3000 items, covering 2900 that you cannot get from many internet companies. I get a lot of orders for items I would never have dreamt of even offering and now they are standard stock items and they fly off the shelf almost as fast as the top 100 items.

Perhaps it could be your customer service. Phone the customer and ask if everything arrived OK. Give them your name and ask them to call if they have any problems or need any help at any time using your product. They may never call, but they will tell their friends.

Maybe it is remembering about them, knowing who they are and the type of customer they are. Amazon do this: they find products you may be interested in and offer you these from page one of their site. Personalised.

Oh, I forgot to mention: Amazon don't have the best prices either.... but people trust them. There is another, trust. Offer a 100% guarantee, a no cost returns policy, try before you buy, disclose full privacy statements and terms and conditions, help them navigate your site better with FAQ and glossary thus helping them glide to that basket page with no second thoughts - they trust you, they know all about your product and they will pay.

There are millions of ways to be different, try one, they do work.... but forget price, all your competition who think about price are likely to be bankrupt before you are.

[Essex_boy]

Yeah prices this is exactly what I Thought.

Ill go heavy on customer service and offer the widest range of widgets under the sun.

Thanks

[gibbon]

"Look at Fiat, Volvo, Rover and compare them to BMW, Mercedes and Audi"

PCInk this is rather a bad metaphor. Mercedes is not doing well at the moment, whilst volvo (one of ford's premier brands) is doing well with some good new models.

Also you imply that you cannot make money at the "bottom end" of the market. This is certainly not the case. You can offer value for money products profitably, look at WalMart. You do not have to sell premium products to make good money.

Find your own strategy, price is a issue, but not the only one. Think the point about all this is simple. If you understand your market you will do well. If you dont understand your market you will feel compelled to price cut to compensate. Love your product, hug your product and believe in your product - you WILL do well.

[pbreit]

I'm always surprised when someone makes this type of inquiry without providing a link to their store. Certainly we could all provide much, much better feedback after seeing the store.

[gibbon]

dont think that we need to see the store - often muddies the issue anyway

[Essex_boy]

Hmm dont want to post a link to the store.

Cant see how that would help, Ive given the most important details in my first listing, besides WebmasterWorld doesnt allow it.

[Big_Balou]

Seeing the store has no bearing on the question.

As has been stated above, and it looks like you've listened, competing on price is a lose/lose. Find something about your store or operation and highlight it. Examples already given would be customer service, return policy, shipping, toll free number, personal shopping assistant, etc. Something to set you apart from your competition.

[PCInk]

gibbon, but look at those brands. Given the choice, which would you buy if money were no object? Probably one of the last three. But they are more expensive, but are their cars REALLY better? The answer is yes, but are they worth the extra amount they ask for? The answer is probably no (the cars are probably fractionally more expensive to build), but people still want one.

The latter three sell a LOT less than the first three, yet still are making money by selling at a much higher markup and offering the customers something else: desirability, customer service....

Walmart might sell at discount prices and do well, but to do this you need to get a lot of customers to the site/through the door. A new startup cannot do this easily. It is more difficult for a new startup to compete on price alone than it is for a large existing company, it is possible, but it isn't easy.

[Essex_boy]

The pricing thing reminds me a time when I worked for a designer clothing importer in London.

We wholesaled these Major Italian brand cotton tshirt's which sold for retail of about £120 - US$160.

The quality was the same as say a walmart $10 t shirt but the name/image made it worth more.

So price is subjective - an items worth is only as one person see's it.

[gibbon]

>>an items worth is only as one person see's it.

absolutely and in this is why mail order companies have traditionally done their own photography - to differentiate their product from the mainstream

as I say find your own strategy, but dont forget you can sell "cheaper" merchandise whilst maintaining a healthy margin - you dont have to just sell "BMWs" to compete. But you can sell good value lines like you would sell a BMW and extract extra value from your customer

[derekwong28]

I agree that you should not price your products too low. A 20% margin is not acceptable unless you drop-ship. There are always hidden costs that do not become apparent until later on e.g. credit card fraud, lost, damaged or returned merchandise, and of course the tax man. However, I find that Internet sales are very price sensitive, especially for generic products.

I find the analogy with cars very confusing. You are talking about product brands here rather than the actual store. In Hong Kong, almost all mercedes and BMWs are now grey imports from unauthorised dealers. For a discount price of around 10%, people are willing to forgo a comprehensive warranty.

There is a very famous 4-story Chinese Restaurant in London ChinaTown which has 2 stars in the Good Food Guide. It prides itself as offering the lowest prices in London but is also infamous for being rude and abusive to customers.

The waiters will shout abuse at you, throw menus at you, slam a teapot on your table. Once they took away a plate of food because somebody else had ordered it first. A couple who threatened to complain their behaviour to the tourist board were told to "go home and make love"

Several years ago, there was an incident when a group of yuppies complained about the food and asked to see the chef. The chef came out with a massive meat cleaver and slammed it so hard onto the table that it stuck. He then shouted "Now who is complaining?" The yuppies sat in a stunned silence.

It is a well known fact many of their customers go there to be abused or see others abused. This just goes to show that if prices are cheap enough, people will put up with anything!

[gibbon]

i know the restaurant you are taking about mr WONG :)

brilliant food, been there many times, would recommend it to anyone

[Essex_boy]

I think Ill steer clear of that place....

[Essex_boy]

Just tried a big drop in price and it appears to be working sales are coming in at near a 5% conversion for teh 3 pages Ive dropped on.

Should be interesting.

[lgn1]

Sometimes perception, is more important than the facts.

You can advertise your price as the lowest prices, and just keep the price a few cents cheaper than most of the competition.

You are wasting money if you undercut by too much.

Since we keep a very carefull eye on the competition, we have a very focus view. Most consumers have no clue on how to comparison shop or they are impulse buyers. Sometimes they are just happy that they found the product at all, and will buy without thinking.

The idea is to make the most amount of money by doing the
least amount of work.

[Essex_boy]

Well yes thats a good point but with vastly increased volume I can now go back to my supplier and seek a reduction in price.

So all things being equal I should be quids in.