11 min
ECommerce Product Pricing: Do It Right! Chris Malta's EBiz Insider Podcast
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- Business
Ever wonder why so much product pricing ends in 95 or 99 cents? Those are known as “charm prices”. They use what we call the “Left Digit Effect” to apply retail psychology to product pricing.
Be sure to Subscribe to the Show!
Find much more TRUTH about ECommerce on my site.
EPISODE TRANSCRIPT
Product Pricing: Do It Right When I teach ECommerce, product pricing is always required learning. People have such horribly skewed notions about product pricing that it's always an eye-opener for them.
Before we get into it, it's very important to understand that if we’re going to talk about product pricing, we need to talk about WHERE you sell online.
The worst thing you can possibly do to ANY small retail business is to put it squarely in the path of a crazed, charging herd of the most bargain-hunting consumers on the planet.
A small home-based EBiz simply can’t compete in a serious bargain-hunting situation. It doesn’t yet have the buying power that the much bigger companies do. That means that the home-based EBiz pays a higher wholesale price per product and can’t make any profit when competing on price in front of consumers who are specifically bargain-hunting.
This is why it’s so difficult for a small EBiz to succeed on eBay and Amazon. Over the past several years, these huge bargain-shopping venues have become favorite hangouts for large wholesale and manufacturing companies who sell directly on eBay and Amazon, often under anonymous seller names.
They can undercut any small business on price. They thrive in price-driven destination sites like eBay and Amazon, and that leaves you out in the cold. If you’re not making at least a 20% to 45% profit on your sales, you’re not going to make a living at it.
So where should you be selling?
The best place for a home-based EBiz is, always has been and always will be on it’s own web site.
Why? Because your best customers are those who are searching for what they REALLY WANT, not for the lowest possible product pricing. When consumers are bargain hunting, they tend to go DIRECTLY to eBay, Amazon, Walmart.com, etc. However, when they search for what they REALLY WANT, they go to Google.
Far, far more consumers search for products on Google than on eBay, Amazon and Walmart.com COMBINED.
Consumers who search on exactly what they really want are doing what’s called “Discretionary Purchasing”. When people are buying on a Discretionary basis, they aren’t nearly as concerned about product pricing as they are about quality and getting exactly what they want.
THAT is the sweet spot for retail businesses either online or offline. Discretionary consumers far outnumber bargain-hunting consumers, and they will pay a reasonable retail price to get what they want. For a small business, that translates directly to reasonable profits.
I know, I know; you might be selling on eBay or Amazon. However, all that had to be said in order to talk about product pricing. The rest of this discussion pertains to ANY place that you’re going to set a retail price.
1. THE PSYCHOLOGY OF PRICING
Ever wonder why so much product pricing ends in 95 or 99 cents? Those are known as “charm prices”. They use what we call the “Left Digit Effect” to apply retail psychology to product pricing.
That effect is the fact that a nickel, or even a single penny will have an effect on a retail buyer that is HUGELY disproportionate to the actual money value in the price.
Most people who sell online tend to use the Left Digit Effect without really understanding why, because we’re all exposed to it on a daily basis in our own lives. However, many also ‘mix and match’ product pricing, and doing that throws off the consumer.
Consistency is the most important thing when it comes to the Left Digit Effect. Either always use it, or never use it. Either always use 95 or always use 99. I’ve consulted for an amazing number of EBiz sites that use 95, 99, 00, 50, 67, 97 and so
Ever wonder why so much product pricing ends in 95 or 99 cents? Those are known as “charm prices”. They use what we call the “Left Digit Effect” to apply retail psychology to product pricing.
Be sure to Subscribe to the Show!
Find much more TRUTH about ECommerce on my site.
EPISODE TRANSCRIPT
Product Pricing: Do It Right When I teach ECommerce, product pricing is always required learning. People have such horribly skewed notions about product pricing that it's always an eye-opener for them.
Before we get into it, it's very important to understand that if we’re going to talk about product pricing, we need to talk about WHERE you sell online.
The worst thing you can possibly do to ANY small retail business is to put it squarely in the path of a crazed, charging herd of the most bargain-hunting consumers on the planet.
A small home-based EBiz simply can’t compete in a serious bargain-hunting situation. It doesn’t yet have the buying power that the much bigger companies do. That means that the home-based EBiz pays a higher wholesale price per product and can’t make any profit when competing on price in front of consumers who are specifically bargain-hunting.
This is why it’s so difficult for a small EBiz to succeed on eBay and Amazon. Over the past several years, these huge bargain-shopping venues have become favorite hangouts for large wholesale and manufacturing companies who sell directly on eBay and Amazon, often under anonymous seller names.
They can undercut any small business on price. They thrive in price-driven destination sites like eBay and Amazon, and that leaves you out in the cold. If you’re not making at least a 20% to 45% profit on your sales, you’re not going to make a living at it.
So where should you be selling?
The best place for a home-based EBiz is, always has been and always will be on it’s own web site.
Why? Because your best customers are those who are searching for what they REALLY WANT, not for the lowest possible product pricing. When consumers are bargain hunting, they tend to go DIRECTLY to eBay, Amazon, Walmart.com, etc. However, when they search for what they REALLY WANT, they go to Google.
Far, far more consumers search for products on Google than on eBay, Amazon and Walmart.com COMBINED.
Consumers who search on exactly what they really want are doing what’s called “Discretionary Purchasing”. When people are buying on a Discretionary basis, they aren’t nearly as concerned about product pricing as they are about quality and getting exactly what they want.
THAT is the sweet spot for retail businesses either online or offline. Discretionary consumers far outnumber bargain-hunting consumers, and they will pay a reasonable retail price to get what they want. For a small business, that translates directly to reasonable profits.
I know, I know; you might be selling on eBay or Amazon. However, all that had to be said in order to talk about product pricing. The rest of this discussion pertains to ANY place that you’re going to set a retail price.
1. THE PSYCHOLOGY OF PRICING
Ever wonder why so much product pricing ends in 95 or 99 cents? Those are known as “charm prices”. They use what we call the “Left Digit Effect” to apply retail psychology to product pricing.
That effect is the fact that a nickel, or even a single penny will have an effect on a retail buyer that is HUGELY disproportionate to the actual money value in the price.
Most people who sell online tend to use the Left Digit Effect without really understanding why, because we’re all exposed to it on a daily basis in our own lives. However, many also ‘mix and match’ product pricing, and doing that throws off the consumer.
Consistency is the most important thing when it comes to the Left Digit Effect. Either always use it, or never use it. Either always use 95 or always use 99. I’ve consulted for an amazing number of EBiz sites that use 95, 99, 00, 50, 67, 97 and so
11 min