Forum Moderators: buckworks
Our situation is as following:
We're operating an online retailer with many competitors who are producing exactly the same range of products, the profit margin for that products are high so you have the a flexible range to move within, the problem comes when you decide to list the minimum price for your products, and in maximum of 2 weeks most of our competitors check our pricing list and then lowering there prices. so you now listing the highest prices, following that price war we've ended with the minimum profit margin, while the market could accept a higher prices but at the same time I can't raise the price as the sales really drop when we list a higher prices than the competitors.
So what could you do in situation like that, I myself decided to contact all of the competitors to discuss that but thought to discuss it here first as may be you already have a similar experience.
But I'm worried sales will go down. Has anyone noticed drops in sales by increasing prices by a small amount? On eBay these widgest go for £2.50 and people make about 18p. With eBay being every where these days, i'm worred I'll lose out to traders that are happy to make 18p a widget.
I can't compete with them price wise (I don't want to make that little on a widget) its just not worth it.
prices on ebay and how they were generally higher for the studied items than those sold on other sites.
Forgot to comment of Ebay. It's loaded with idiot housewives playing like they have a business. In our line, prices there are ridiculously LOW. Sellers come and go. It's more of a game to many of then, like bingo.
I virtually never shop on Ebay. Far too difficult to find and buy something I really need. But again, I don't live in a trailer park in Appalachia. Okay for niche collectibles, I guess.
(I really don't understand Ebay. Every time I look at it I wonder who all those people are listing $5 used clothing, and especially the rare ones who buy that junk!)
I have noticed the opposite. I was selling a widget for $5.00. I saw there were other people selling a similar widget in a larger size for $3.95, so I thought my five dollar price might be too high. But people were buying them, so I took a risk and raised the price gradually until now it is $7.00. I sell a lot more of these widgets at that price. A competitor is selling widgets very similar to mine but in a much smaller size for $12.50, and they are selling like hotcakes. To some extent, a higher price must lend some cachet to a thing, esp. if it isn't standardized. But I think it has a lot more to do with sizzle (the competitor with the $12.50 widgets really knows her sizzle. I often visit her site for inspiration in the art of bs). It seems like the more sizzle you have, the more you can charge for a widget, even if other people have the same one and are selling it for less.
Shoppers aren't going to spend hours on the web comparison shoppingThey Do , especially if it's a high price item
We sell a widget that is priced somewhere around twice what the major competitor is. We have trouble building enough of them to satisfy demand. It is a nice problem to have, and while I am sure that many people have looked at our website and gone running to the competition, it has not seemed to affect us.
If your product is indeed a high-priced, high margin item then I would use the consumers fear of loss to motivate them to pay a higher price. Write the copy on your website to reflect the pitfalls of dealing with inferior companies in your market segment (I am sure you know about their practises) and the other issues that consumers might face when dealing with the competition.
In our market segment, we have a competitor that offers very low prices and is famous for taking the consumers money before telling them that the product will be on backorder for 30-60 days. We compete with that by having a 98% order fill rate and telling people in advance if we can fulfill their order. A simple strategy, but one that has built considerable customer loyalty. One customer told me that he would rather pay me more than continue to deal with the other company which had caused him considerable headaches in the past. In this specific case, our widget was $287 and the other guys was $99.
I would raise prices, increase advertising and work on differentiating my message from the competition. Someone will ALWAYS be able to sell cheaper than you, but can they sell better?
Touched on a good point!
If your selling a generic product ( I mean something where people can’t do a exact comparason on a product number) a higher price often means to a prospective buyer QUALITY. Take a bed for example, a £50 pine bed might look the same as a £500 pine bed but which one would you trust to last longer and not collapse in the middle of the night?
A lot of people believe in the saying if looks to good to be true it probable so pricing something to cheap will get prospective buyers looking for a catch.
To those that scoff at discounters though, there are many discounting strategies that aren't always obvious.
The largest convenience store chain in the midwest, always insures that their gas price is $.03 less than their competition. They've done enormous amounts of purchase analysis and trends, and know that the odds are good that the consumer is going to purchase a fountain drink (where the profit margin is 800%), or smokes, or other items with good profit margins.
They advertise hard that their gas prices are lower also.
So, here's a retailer that breaks even or loses money on one of the largest revenue streams in their vertical, has a huge ad budget, but still is more profitable than their competition. (More profitable to the point that they've driven 7-11 completely out of their market area!
We have a online luggage client, that deep discounts their luggage sets and hard luggage. But, they don't touch their travel accessories, and briefcase/laptop case list prices... Same scenario as the brick and mortar convenience store chain. Get 'em in and buying the horizontal products, and make full list on the specialty items that have better margins.
Discounting makes sense if it's strategically used to boost overall profits. But I agree, if you are going to be the price leader to just be the price leader, then you won't be in business long.
