How To Price Your Products

//How To Price Your Products

How To Price Your Products

2018-12-18T01:27:27+00:00

Today we’re going to talk a little bit about pricing and branding and how the two things sort of mix together. It’s a difficult one when people get online to sell products. They often try to compete on price. It’s been an offline thing as well. People always think “Well, you know, I’m not going to buy something other than for the best price.” So therefore, when I’m going to start a business, that’s how I’m going to start my business, around offering the best price. And it’s usually been a losing formula. If you look at brands that have been around for a very, very long time, they usually not one compete on price. Look at Louis Vuitton or Chanel, or Gucci. Then look at at dollar stores, they usually come and go every sort of five, ten years, and then you’ll see a new dollar store brand pop up everywhere and eventually it dies off as well.

It’s really hard sometimes for people to understand that most people actually buy on value not on price. Having said that, there’s certainly a certain percentage of the population that do go on price. That very much used to be me. I had a real problem when we first started our business. I used to list items on eBay and I really sort of began with a very, very price conscious level. Tess came along and said, “No. You’ve got to charge more.” And I’m like “Well, no, you know, I would pay this much for the product and would just put on a reasonable percentage in and if we put up the price too much then people won’t buy from us.” That was a hard lesson. It took many years for me to learn that you have actually got to put your prices up and then add value. There’s a lot of ways that you can add value that don’t necessarily cost you a lot of money. Packaging is a great one. We’ve got some products where the packaging actually costs more than the product itself. But it’s because we have this amazing packaging that when people get it, and when it’s beautifully photographed in the website, helps convert more. It just, it actually adds a lot of value. Now to some of you out there listening to this you’ll say “Well, I don’t really care about the packaging. I just want to get the best price for the product.” And that’s fine. That may be true, that may not be true. A lot of what we think is true is not actually true in this space.

So, just start thinking about “Okay, if I put my prices up, if I doubled my prices, how can I double my value in a way it doesn’t cost me so much?” Other than packaging you might consider trying a lifetime warranty, which is a perfect way to add value. A lot of very cheap products won’t come with a lifetime warranty because I guess they can’t afford to, there’s not enough margin in there. But a lot of customers really think a lifetime warranty gives security. A lot of people buy on fear and security. So, that’s what you give them and they’re willing to pay for it even if, you know, only a very, very small percentage actually use it. We have lifetime warranties on some of our products and nobody’s ever used it in many, many years. Yet, people will pay for it because it’s just that it addresses a fear. So, you’re not in any way ripping them off. You’re giving them what they want. You’re giving them the value that they want. You’re giving them in many ways, the product that they want. The product that they want is the commodities you sell plus the security of knowing that if anything ever goes wrong with it, they’ve got some recourse.

So, that’s what we mean by adding value in ways that don’t necessarily cost you anything. Having amazing exchange returns policies, having you know, free shipping or paying for their return shipping. All these things are ways of adding value that the customer might not ever actually use or very small percentage do. And if you’re really unsure, why not just try doing it for a while and see what the numbers are. Just play the numbers. We’ve always done that. When we used eBay, we would send these stuff around the world that was  using completely untracked airmail because we didn’t have any choice at that time. And we knew without question that one hundred percent of our customers could’ve said “I didn’t receive it,” go on to PayPal, which was our only option at that time and get their money back. One hundred percent of our customers could’ve gotten their money back and stolen the item. I think we maybe had one or two out of thousands that ever said it didn’t arrive and to be honest, we actually believed them. We don’t think they are actually trying to rip us off. We sent them another one and never heard from them again.

If you’re looking to really cover yourself there, you can just have a system whereby if – and this is the system that we had actually used in my example – that if somebody said “Hey it never arrived,” we’ll send them another one and if they said again it had never arrived then give them full refund. Yes we’ve lost that but at least you got kind of like a wall up there where they can’t just keep doing it. And again, we’ve never had to actually use it. So, for many people I guess that would have been a scary thing and many people may not have done it at all and knowing that they could have lost, I guess everything. But really, if a hundred percent of those people that we sent those items to had said it didn’t arrive and kind of ripped us off then you would just stop doing it and find another way, but because I didn’t stop doing it, we made a lot of money out of it.

So, in many ways there are lots of little risks like these throughout business where you just have to play the odds and if the numbers work for you, great. If they don’t, well, find another way, find another system. So, back to the actual offering itself and choosing a price. Price also will determine where your brand sits. You might not be thinking about branding yet but branding really will come into all this particularly when you’re trying to offer a higher value, I guess, well, higher price I should say and a higher value, you know. This is where they’re really talking about stuff where you’re selling through your website for three hundred dollars when someone can buy the same thing on eBay for thirty or forty dollars. This happens everyday but remember that when somebody buys on eBay, they’re going, they buy on eBay because they are very price conscious. That’s where people who are price conscious go and whereas people who want a branded, nicer experience and they don’t want to tell people that they bought something on eBay. They want to say “Hey I bought this from this other boutique, online store. It has a lifetime warranty, all this kind of stuff.” Those kind of people don’t actually shop on eBay. So, they’re two types of different customers. Some people say “Hey, I’m worried about Amazon. I’m worried about eBay. They’re selling the same sort of product and how can I sell it for so much more?” You can sell it for so much more. Just sell a different “product”. Might be the same item but sell a different product and that product might be, you’ve made it easy for them because you’re ranked high on Google, and they’ve found it there. You’ve got a lifetime warranty, you’ve got free shipping maybe, you’ve got easy exchanges and returns, you have beautiful stores, very easy to go to, you have a great range of products that they can easily filter down to find exactly what they want, you have great customer service. All these things that they, let’s face it, are probably not going to get from an eBay seller whose got tight margins. So, that’s why you can charge a lot more and make a lot more money. You’re also not worried about people coming in and trying to get into a price war with you because you’re not basing your products on low prices.

So the other key is that you can’t start low. Wherever you start, when you start your business, you need to start at a reasonable level. Now, it’s difficult when you can’t find the balance. Obviously, you have to find a balance in that you can’t be cheap. If you start cheap, you’ll always be cheap. You can’t go from cheap brand to a premium brand later on down the track. You have to start at a reasonable level. But at the same time you don’t have three hundred years of history like Louis Vuitton has so you can’t start, yeah, selling a handbag at sort of three or four thousand dollars a pop. So, let’s say they’re the same, similar handbags they’re selling on eBay for thirty or forty dollars, you might want to sell for hundred, hundred and fifty, two hundred dollars. And overtime as you build up your brand, sure maybe you can start bumping it up. All I’m saying is that you can’t start at thirty or forty dollars and then hope to one day end up selling a thousand dollar handbag. It’s just not going to work like that. So you do need to think about what your brand is going to look like in the future right from the word go. And you need to start with higher prices right from the word go.

The other thing is is when you’re looking at say, ranking in Google and you’re going out there and getting, white hat links. A lot of the ways that we’re going to do that is by giving away products for reviews or going to many bloggers and they can give away or send them a product or they can give away to their readers, that kind of thing, to get bloggers to  link back to our site. And if you’ve got a high value product you’re getting good margins in, it’s actually a lot easier if you start giving away products. There may be some of your competitors might be drop shipping, for example, because they’ve got a lot smaller margin than you do. So in other words, you can, it’s a lot cheaper and easier for you to go out with your high margin, lower cost product and get back links to your site which again, over time will mean that you can, you will outrank if you are really doing the strategy correctly. So, there are so many reasons why you should be doing a higher margin product and looking to provide value and never competing on price.

I know that’s a lot in there. That’s a lot to think about but it is super important. That’s a super important part of the model. You can’t really skip it and you can’t just go “I’ll take everything else but I’m going to sell a cheap product and compete on price” because  it won’t work. It just won’t work. As Tess would say, “You are leaving the flour out of the cake recipe and you can’t expect to get the same cake.”
So on that note, thanks very much for watching and we’ll see you next time.

Leave A Comment

Subscribe 
Be the first to get latest updates and
exclusive content straight to your email inbox.
Yes, I want to receive updates
No Thanks!
close-link

Interested in joining our Ecommerce Mastermind?

Enter your email below to be the first to know
Join Waiting List
Close