Not long ago there was controversy with the three-starred restaurant in David Munoz (if he says his name is spelled that way, I won’t be the one to correct him), whose menu will go from €250 to €365 in January 2021, come on, a trifle.
How will be the thing that .
However, time seems to prove Muñoz right: not only have his reservations not suffered, but has already hung the “complete” sign at least until February. In other words, the probably-rotten-ass customers of this restaurant don’t care if they pay 250 or 365 or, for that matter, 500 euros for a tasting menu. What seems prohibitive to 99.5% of the population, for this type of client is nonsense, total, they spend more on food for their cats.
No, it is not that in we are going to open a gastronomic criticism section (by proxy, we could, but I am afraid that it would be taking things a bit out of the pot) but that This news is not even painted to talk about the bicha, of the elephant in the room, of the eternal problem that is there but that nobody comments on because it pricks more than a cactus in the Mexican desert: how to manage prices in eCommerce.
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Made the pertinent warnings, let’s put on the fireproof suit and face the dragon.
Where do the prices come from?
Except if we talk about macarons, no, the prices do not come from Paris. They don’t even come, strictly speaking, from a cost+margin equation. They come from VA (Value Added), which is like VAT but without the I. VA is nothing other than the value that the product provides to the customer. We buy things because they give us value: they make our lives easier, they solve a need for us, they make us feel good, they arouse the envy of others… not all the added value is strictly monetary.
That is why it is said that the price is one of the 4 “P” of the very old but very current marketing mix theory, which I have put in the following spring infographic to brighten your life:
Price is a basic component of our marketing strategy. And not just because it is the cheapest. Sometimes, as in the example of DiverXO, it is the opposite. that you know that Dabiz Muñoz has not invented anything, the strategy of raising the price to add value (that of exclusivity, since few can afford it) is very old. For example, this nougat advertising spot from the 80s:
“The most expensive nougat in the world” It was a slogan that the brand used profusely since the 1980s, and it still continues to do so, although with a slightly smaller mouth, that the oven is not there for many buns and it is still an industrial nougat. It is what it takes to create a very striking claim, that in the end you are a hostage of your own advertising.
what of the Toccata and Fugue of Bach as background music and the boastful tone of the voiceover (almost spitting out the words) are priceless. Pure eighties high-class, matched only by Ferrero Rocher spots in which Isabel Preysler stuns her visitors by offering them a supermarket dessert while elevator music plays. If this Christmas they return to the spot for the umpteenth consecutive season, I think I’ll go to Tibet. Or not, that maybe I get there and the Buddhist monks entertain me with Ferrero Rocher.
Another example of artificially high prices (remember the caveat at the beginning) is Apple products, especially iPhones. I know, cutting-edge technology, state-of-the-art materials, a superior operating system… whatever you want, but an iPhone doesn’t do anything that other high-end mobiles don’t do for 500 euros less. Let’s be honest: you pay for the manzanita, because it is a status symbol, something that many brands would kill for and maybe, glups, they will. Namely, the high price turns a “normal” product into an aspirational product that very few can access… but everyone wants to do it. Is there any other product in the world that, every time a new (more expensive) version is launched, causes queues for hours to be the first to spend up to 1,800 euros?
Okay, so I raise the prices and herding. Oh my friend, if only it were that easy. To be able to do that there is a) a powerful brand strategy behind it and b) an advertising investment that is not within everyone’s reach. Exclusivity costs money. Managing prices in eCommerce is not something that can be done by eye, it requires time and constant monitoring.
The question to ask is: How much is the consumer willing to pay for this?from which other questions that I would ask myself are derived:
a) Who is the target customer for this product?
That is, you have to define a clear and specific and know what its purchasing power is.
b) What are the prices of your competitors?
The market has some logics (segments, market niches, high, medium, low ranges, etc.) that you have to know to identify your competition and see in what price ranges it moves. Your competition does not have to be the one that sells the same as you, but the one that goes for the same customer as you.
c) What are your costs?
This is the mother of the lamb in SMEs. Really knowing your costs and allocating them to each product is more complicated than it seems and there are many methodologies to do it, but You must avoid doing the accounts afterwards like the plague. The better defined your cost structure is, the easier it will be for you to calculate the margin before putting a product on sale.
This is especially important in freelance businesseswho are not required to keep accounts and usually do the accounts roughly. This leads to many products losing money without knowing it until later, when the numbers do not come out. Costs mark the red line when it comes to managing prices in eCommerce. That does not mean that at a specific moment you cannot make a settlement below cost, but you have to be aware that you are below cost and how much.
Let me insist: calculating the costs well and allocating them to each product is not easy And, if you are not an expert, it is best to seek professional help. You need the help of experienced specialists who handle various cost allocation methodologies and recommend the one that best suits the circumstances of your business.
d) What is your added value?
A business can be exclusive in many things, not only in the products it offers. The contribution of value to the customer can come from the treatment and attention given to them, from the ease of buying, from free returns, from guarantees, from useful content on your website and/or from many other things, among which the attributes that define your brand are not a minor thing. Or to put it another way, they are a bigger thing. Haven’t you defined brand attributes? Well, it starts there.
Manage prices in eCommerce: some strategies
To manage prices in eCommerce correctly and turn them into a marketing tool, there are different strategies that may be interesting for you. Let’s go with some of them:
High-end and low cost in the same bag? It will be that not
Prices have a great influence on the positioning of your brand in the market or in the mind of the consumer, as you prefer. The customer looking for low cost products is not the same as the one looking for premium products. Therefore, having a totum revolutum in your eCommerce “because that’s how I reach everyone” is a bad idea unless you’re bald, your last name is Bezos and you get on space rockets with your colleagues to hang out. If you want to reach very different market segments, it would not be silly to do it with different brands.
Who said that you can only have one eCommerce website?
Full on your brand like there’s no tomorrow
The more established a brand is, the more freedom it has to set prices within its segment. I’ll give you an example: , who are also from my homeland (hello, ilicitanos of the world). They are not particularly expensive sunglasses, rather they are in the low price range, nor do they have a revolutionary design that has not been seen before. But they were clear from the beginning that the brand was everything to them, and they invested heavily in marketing to position it.
The result is in sight (sorry for the easy joke, but I had it to egg). To have your hands free when managing prices in eCommerce, your brand has a lot of weight. And no, a brand strategy is not something typical of “expensive” products. You can be an ultra low cost brand and still need to position yourself.
Different channels = different prices?
I don’t know how many times I’ve been asked this question in my life, and the answer is always the same: no, but with nuances.
a) Physical channel vs. on-line
A well-established trend in small businesses is to try to be competitive in all channels with the same brand and different prices for the same product. Is it a bad idea. very bad catastrophic. Does the ? Well, imagine the idiot face I get if I buy a product in your physical store and find it cheaper in your online store. To take wind the omnichannel.
b) Online channels with different prices
The same as the previous point, but in this case the price difference is between your eCommerce and the marketplaces you are in, for example, Amazon. So what you are going to achieve is that your loyal customers 1) abandon you and 2) turn green, grow hair and fangs and become trolls.
Ok, so how do I manage prices in eCommerce?
That’s where the nuances come in. Selling unique products that only you have (and therefore recognizable) is not the same as selling products manufactured by third parties. One thing is not my better or worse than the other, they just require different strategies. Some ideas about it:
1. If you want your prices online and in the physical channel to always be different, you should think about using a different brand to sell online, even with a different address so that your physical customers do not associate it with your store. Of course, you will lose all the possibilities of online/offline integration.
2. You cannot be competitive on Amazon (or other marketplaces) with your eCommerce store prices. This is not unusual, since Amazon has its own dynamics and requires a practically daily price review if you sell the same product as others and want to earn a good price. The recommended thing in this case to prevent your customers from grinding their teeth when they discover that you sell cheaper on Amazon is to do it with another brand. If not, consider that the products you sell on Amazon…
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