Prices are too low, so nobody will buy

Too good to be true, so I am raising prices.

[gpilling]

I have a weird problem. I have made a huge purchase of product from a foreclosure sale of a large company. The company was doing $20M per year in sales and got behind with their line of credit. The bank liquidated the assets and I was the last buyer of them, and I bought everything. I ended up with $4M at retail worth of product, which I would be delighted to sell for $1M – a nice 75% discount and everyone would be happy.

I put the product online, and a funny thing happened. No one believes the pricing, so they don’t buy. I only know this from calls to the 800# asking if the price was real, and since people call every hour of every day asking the question, I am left to wonder how many people don’t call and just think it is a scam. They also complain that my shipping prices are too high, but I use actual cost.

So now I am changing course. I am repricing the product at 20% less that the average price online (instead of 50% less) and offering free shipping. I am also going to promote an aggressive price match policy - $20 cheaper than anyone!- to try and get some business.

Has anyone else experienced the “too good to be true” problem? Any advice out there?

[Brett_Tabke]

Yep - raise prices and promote promote promote. Advertise it as a sale of inventory or something.

Never ran into that problem specifically, but I would work with someone on your site. Make sure that everything about the site oooozes TRUST. That can take a real pro to execute a good site like that.

[percentages]

>Has anyone else experienced the “too good to be true” problem? Any advice out there?

No....We nearly all pay by credit card and are not that worried about the deal being "too good".

As an example.....Today I purchase a large number of "nuts & bolts" from a website that offered them far cheaper than a local DIY retailer like Lowes or Home Depot......Yes the deal was litterally for Nuts & Bolts at 20% the price of retail outlets!

The deal was "cheap", but, not too good to be impossible or true. I know the regular retail markup is at least 100%, on top of the wholesale markup, on top of the manufacturer markup......so at times a direct deal can be at less than 25% of retail and still be good and true, a buck can still be made by all just by cutting out the middle men!

[gpilling]

We buy nuts and bolts from China, prepackaged for our needs and get them even cheaper than 25% of retail at Home Depot. But that is another issue...

With my current issue, I have been trying to sell a $1000 retail item for $350. Every website I can find out there is selling them for $700, so my price is very low. I have adjusted the pricing so that the widget is now around $600 with free shipping (actual UPS charges about $100). I got a sale last night with that, so we will see how it goes. At least with higher prices I can afford to ramp up my Adwords spend.

People are funny, aren't they?

[corbing]

We had something similar happen last year. One of our manufacturers did a promo that for every 10 widgets we purchased, they would give us a different widget free. At the end of the promo we ended up with about 30 of these new widgets. They were each worth about $200 (average selling price online) so we tried to sell them for $125/ea. just to blow them out of here. Granted, they served a slightly different market than we serve, but they were still a deal and we advertised through froogle and adwords. I think we sold 2-3 of them in the first month. So, for a test, we put one of them on eBay with a starting price of $1.00 and no reserve. It sold for about $150 ($25 more than what we were asking). So, we ended up doing the same for the rest of them and not one sold for anywhere near what they could have bought direct from us. Go figure.

Generally, we don't do much eBay but it sure did work for this situation.

As a side note, I'm dying to know what you're selling. I always love a good deal! :)

[Essex_boy]

This is not new Ive seen this happen in Bricks and morter stores.

People have an idea that quality costs X when they go to buy an item if it varies to much then it be a con/rubbish so they wont touch it.

I saw this happen to a desk once in a friends antiques store, couldnt sell it so he increased the price by $400 and had three customers wanting it the following weekend.

People just dont know how to judge value

[sonjay]

Yep, I think "too good to be true" pricing can inhibit a willingness to buy. A couple of years ago when I was in the market for one of those expensive office chairs, I found a place online that was selling them for less than half the usual retail price. I was tempted, but I figured either the chairs were cheap knock-offs made in some third-world country, or were used (although claimed to be new), or the company was dealing in some sort of gray market. Whatever it was, I didn't want to worry about it. I went elsewhere and paid closer to retail. Case closed. I didn't even bother to call -- I figured if they were misrepresenting things on their web site, they'd also lie on the phone.

I second the motion -- raise your prices. Make them believable.

[bcc1234]

Do some reading on price sensitivity meter/measurement. It addresses "too good to be true" among other things.

[RailMan]

>>Has anyone else experienced the “too good to be true” problem?

it's well known that price is not the only factor that drives sales so don't sell as cheap as possible, sell at a sensible price and make sure your visitors can buy online quickly and easily

[Essex_boy]

I have heard it said that your prices should be around 3 - 5% lower than you competitor or way, way above them.

[gpilling]

After the first full day with Adwords back on and the pricing higher, we had a record day for sales and for net profit. This early evidence is promising, so I will keep it going and increase the Adwords spend and keyword count to see what happens. We did have one person call and complain about the price change, so we gave him the old deal. But sales were about double the previous best day, so I am not complaining.

The next planned changes are to increase the promises of having the best deal anywhere (which I can easily afford) and to see what happens.

After 20 years of being in sales, I am still amazed at how the emotional response will trump the intellectual response almost every time.

[Automan Empire]

emotional response will trump the intellectual response

If people used their rationality and intellect when purchasing, the auto industry for one would collapse immediately! :)

Still... online scams abound, and eBay is full of once-bitten, twice-shy shoppers. Can you honestly blame them for wanting to pay you closer to retail?

Thanks for sharing this interesting case study.

[Essex_boy]

once-bitten, twice-shy shoppers _ sounds like me

[treeline]

how the emotional response will trump the intellectual response almost every time.

Don't be too sure you -- you may have that backwards. Emotionally people want it cheap, but experience has taught them that you usually get burnt when you fall for too good to be true. Intellect winning out says: on average it's cheaper to go with reliable vendors, who price aggressively but realistically.

The few legit fire sales you miss out on are more than made up for by not getting taken.

[David_M]

"Reason Why" sales copy.

Do you explain why you are selling it for so low?