Monday 09 December, 2013

Why Low Prices Aren’t Always the Best Idea

What do people want when they shop? Common knowledge would say that they want the lowest prices possible. That’s the logic behind Wal-Mart and other big boxes. But if a retailer offers low prices, is it always going to win over its competitors?

Actually, low prices aren’t everything. Pricing your products too low could actually hurt your online store rather than help it. Depending on your market and its preferences, there could be other things that are much more important.

Solving Problems

Does your product solve your target market’s problems? If it does, your customers will be more than willing to pay good money for it. If another product on the market solves your customers’ problems better than yours even though yours has a lower price tag, you’ll still lose sales to that competitor.

Social Conscience

Today, with the race to the bottom that we’ve created with low prices and cheap junk made overseas, many people are choosing to buy with a social conscious rather than simply what’s cheapest. With news stories about overseas sweatshops, employees on food stamps and the ugly things that go into fast food, consumers are increasingly willing to pay good money to buy from the ‘good guys.’

The New Tribalism

People will also pay a great deal more to buy from a company that they consider one of them. We call these ‘tribes’ in marketing speak. A tribe is a group of people united by common interests and values. For example, a punk rock fan would rather pay more and buy from a cool online record store than to pay less and buy from Amazon. People want to buy within their tribe.

A Good Shopping Experience

It’s been proven over and over again that people will pay more for convenience and good service. If an online store offers a smoother and more convenient buying experience, it will get more sales even if its prices are higher than those of competitors.

Cheap Is Not a USP

Sure, people like low prices. But low prices are not the foundation of a good business. If your unique selling proposition (USP) is that you offer it cheaper than anybody else, you’re standing on shaky ground. The reason is that if someone comes along and manages to offer the same goods cheaper, you’re finished.

Know Your Market

The key is to know your market and understand what’s important to them. Are they socially conscious? Do they expect good service? Are they tribal in their shopping habits? It’s important to know what your market cares about and not to assume, but to rely on hard data. For your online store, offer a shopping experience that’s perfect for them. Low prices are far from everything.

Bob Steele

Bob Steele

Bob Steele is an entrepreneur, software developer, marketer, and author living in the Denver metropolitan area. He’s an avid outdoorsman who loves skiing, hiking, fishing, boating, and just plain having fun. His interests include games, space, technology, physics, cooking (well eating actually), economics, business, internationalism, and team sports. With over thirty years of professional consulting experience, Bob has been exposed to many diverse business models and has gained a sensible approach to life. Bob’s company, WaveCentric is focused on commerce, marketing, and entertainment related products.

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