The Different Types of Pricing
There are three different types of pricing – expensive, mid-range, and cheap. If you had to take your best guess of where you want to be, then what would it be?
If you guessed mid-range, then you answered just like the majority of my clients. And yet studies have shown that you actually should try to be on the expensive side or the cheap side. If your prices are in the mid-range segment, then you’ll have difficulty standing out and making sales.
Instead, you should choose to set your products at a cheap price or an expensive price. There are different advantages to each.
Why do people like to buy cheap products? Consumers buy cheap products for the most part because they want to save a buck. If they had more money, then they would most likely buy expensive products.
Why do people like to buy expensive products? For three reasons:
- Uniqueness – They like having a product that no one else has.
- Quality – There’s a perceived sense of quality that comes along with an expensive item. We often think to ourselves, “If the item is expensive, then it must be made with higher quality materials.” Right?
- Prestige – Owning an expensive item allows them to show off that they have more money than other people.
Know Where Your Prices Stand
Invariably, the next question I get is – how do I know what segment my prices occupy? Well, you won’t know unless you do the following activity.
Copy and paste the name of one of your products directly into the Google search bar and start comparing apples to apples. Click on all of the ads and organic listings on the first page.
While doing this activity, you’ll get a clear idea of how your prices compare to the competitors that are selling the exact same item. Consumers are smart and they know whether or not you’re ripping them off. Your next step is to adjust your pricing accordingly.
You’re at a Disadvantage
When you’re starting out as a new drop shipper, you’re at a disadvantage. Most suppliers offer special prices for those moving a high volume of products. Make sure to get in touch with your supplier and find out what that magic number is.
Your first goal is to lower your pricing to where you’ll get enough sales to qualify for those discounts, even if it means making less profit per sale. Being able to have pricing that other competitors cannot have unless they move lots of product will give you a much more competitive edge in the market and oftentimes double your profit per sale.
How Should Your Pricing Look?
There really isn’t a surefire way to price your items. What works for you may not necessarily work for another business owner in a different industry. Test your prices and see how they perform, then do another test.
Having said that, there is a fair amount of psychology and research behind some of the common pricing strategies. Have you ever noticed how retailers price their items? Here is one of the best ways to price your items: the magical number of 9. This encompasses pricing that ends in a 9. In a post by Gregory Ciotti, he raises an interesting question – Does charging $39 really move more products than $40? According to one research study published in Quantitative Marketing and Economics, the answer is a yes. Prices ending in 9 were so effective they were able to outsell even lower prices for the exact same product.
Another good practice is to make your items look like they’re on sale. This will help influence customers to actually buy your products. You get to decide the sale amount, but I recommend at least $10 off.
As you apply the things I’ve shared today, I know you’ll have the pricing aspect of conversions nailed down. Stay tuned for part 2 where I’ll teach you about pictures and how they affect your ability to make sales.