Home – New Forums Starting your journey Help with pricing! Causing headache!

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  • #995523
    robong
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    Hi folks! Long time lurker first time poster! What a great community this is!

    I have started a business which sells stationery, office and packaging supplies. We are in the midst of website development however the biggest issue I seem to have is with pricing. It has caused me daily headaches and anxiety.

    Here’s the problem.
    My products that I sell are seen as a commodity. I mean, copy paper, packaging tape, pencils, courier bags etc, which is why I cannot price them the way you would price apparel or something where the purchase is fuelled by emotion. What do you guys think?

    Our advantage and unique standpoint is that we offer stellar customer service and after sales service, however this is often difficult to convey and compare across a website.

    This particular segment really is a cut throat market and I am worried that if I price myself too cheaply and match the price of the cheapest competitor, medium to large customers may view our products and service as shoddy (as in you get what you pay for). On the other hand, if I price it fairly, people will just flock to the cheapest guy because again, it is a commodity item and there is nothing special about it.

    My other concern is that for most products, I am only $2 to $3 more expensive than the cheapest competitor. Should I just bite the bullet and match the prices? It seems a bit pesky, I mean you have an item for $40 and another for $42, considering again that this is a common item, most people would just flock to the $40 right?

    Thanks in advance for the help, this is keeping me up all night!

    #1202378
    bb1
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    robong, post: 240001, member: 87209 wrote:
    Our advantage and unique standpoint is that we offer stellar customer service and after sales service, however this is often difficult to convey and compare across a website.

    Yep, you have identified the problem upfront, there is no way a website can identify this. People will say get reviews and testimonials on your website. But lets get real, who believes these anyhow, I have never seen a website publish a bad testimonial, what does that say. How will you convey this. And do people really care, the only customer service thing you could really offer is fast delivery and most of the sites offer that, and you are than subject to your delivery service.

    And what after sales service is there on a box of paper.

    robong, post: 240001, member: 87209 wrote:
    My other concern is that for most products, I am only $2 to $3 more expensive than the cheapest competitor. Should I just bite the bullet and match the prices? It seems a bit pesky, I mean you have an item for $40 and another for $42, considering again that this is a common item, most people would just flock to the $40 right?

    Yes, unless you are offering something above and beyond.

    #1202379
    robong
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    Thanks Bert! Appreciate the response. You have hit the nail on the head.

    #1202380
    Rohan@TD
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    robong, post: 240001, member: 87209 wrote:
    Our advantage and unique standpoint is that we offer stellar customer service and after sales service, however this is often difficult to convey and compare across a website.

    Have you tried to convey this through a comparison table? ‘us vs. our leading competitor’? You could use something similar to flyingsolo’s join table, but compare yourself versus a ‘leading competitor’ (I wouldn’t use name them). Consider using green ticks / red crosses to clearly demonstrate your areas of differentiation.

    #1202381
    Dave Gillen – Former FS Concierge
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    There’s a book called Delivering Happiness about a company who sells shoes online, but has made Service their real product. It’s sure to give you some ideas. https://www.amazon.com/Delivering-Happiness-Profits-Passion-Purpose/dp/0446576220
    Something you could very quickly (today) is list all of the extra things you do (that your competitors don’t), pick the one that gives the clearest benefit to your customer, and promote this on your website/product pages.

    Good luck!
    Dave

    #1202382
    GeoffD
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    You could try bundling like or complimentary products together so that the purchaser only incurs one delivery fee or, better yet, try to engineer bundles whereby you can offer free delivery. How about a subscription type service where you deliver a pre-determined quantity of certain products each month to ensure that your customers never run out? Mad dashes to Officeworks used to drive me nuts! In a commoditized business, you must come up with other ‘levers’ to pull other than price. Otherwise it is simply a race to the bottom.

    #1202383
    Paul – FS Concierge
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    ^^ Awesome suggestions to experiment with. I think Dave is referring to the Zappos story. The founder originally had no stock and approached local shoe stores and asked to photograph their shoes. If they agreed and he could sell the shoes, he bought from the same local stores at full retail and shipped the shoes to customers.

    Amazon eventually bought Zappos for $1.2 Billion

    From an SEO point of view, you could differentiate yourself based on location if you deliver locally. Eg, it would be a lot easier to rank in Google for “stationary delivery (your location)” than it would to rank in Google for “stationary supplies” – there are lot of tactics that could be employed that all/most/many/some of your competitors are not using.

    As well, you could try the retail standby – loss leading. You also could try split testing an offer at one price and then another and see if one or the other gains traction.

    Conducting a lot of experiments to see what works will give you insights that you do not have now and the knowledge you gain from those insights will drive the business forward,

    I came across a quote from Bean Ninjas today that is applicable to low cost experiments:

    “We didn’t do market research beforehand. If you ask people, “Would you buy this product?”, they’ll probably say yes. The best way to find out if they’ll actually pay for something is to charge them for it and see if they still think it’s a good idea.” -Meryl Johnston

    #1202384
    Anonymous
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    You have several options depending on your e-commerce site capabilities and how much administration you want to do. When dealing with a mix of small and high volume customers you are best to look at things like volume/value discounting, customer category pricing, delivery charges, returns policy, rewards system, etc.

    If you do deal with a lot of business customers then creating a B2B portal for them and giving options like saved order lists, quick entry ordering, online inventory control can help differentiate your business from the others.

    You shouldn’t set your prices too meet the lowest competitor, if you start at the bottom you leave no where to go with things like discounting. There are times you simply can’t compete on price with other businesses, especially if just starting out, as they can have huge supply chain advantages such as lower transport costs, volume discounts, group buying power and better credit terms.

    Work out who your customers would go to for any comparison pricing, like Officeworks. I know from research they are definitely not the cheapest price for stationery on a lot of products and see if you can match their prices and still maintain a sustainable margin. If you try to compete with some others there is no way a new business could compete against some of those prices, as I’ve seen some at around 10% margin on what I could buy that product for.

    I can’t remember where I read it but a customers perception on price and savings differs a lot depending on the amount. The higher the price the more they tend to shop around, your example of the $40 vs $42 (5%) price may stand out to a customer but a $4.29 vs $4.79 (11%) is likely to not even register and a retail customer is much less likely to spend time comparing prices to save 50c.

    If you add on say a small volume discount of just 5%, convert the % to a dollar value before checkout by updating the shopping basket, customers relate better to dollar values, or free shipping. You are more likely for a customer to ignore higher prices.

    Your main concern at the moment is actually getting potential customers to your business than losing sleep on pricing. Start with RRP or 50% margin and look at addons to promote and work out a pricing/discount structure for larger customers.

    #1202385
    jan.sullivan2
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    If you get creative you might be able to swerve around the price issue.
    Can you be the friendly one they love to do business with? Are you local? Can you visit businesses with coffees early in the day? Host Friday drinks and display your wares, give some colourful samples away?
    Offering things like inventory control as suggested above is a good idea. The idea is to think of some problems that customers may have and step in with a solution – does no one notice when the stationery cupboard is getting empty? Do they buy white paper and forget they might need a colour for promotions? Or do they know the impact of colour in promotions? Can you mock up something in company colours and show them?
    Attend expos and give out brightly coloured post-its. The idea is to get away from comparison by price and into the mindset of dining, perhaps. We don’t go to the cheapest restaurant or even buy the cheapest coffee.
    Can you package a few products together to save customers having to think so much, or partner with photocopy service people?
    Delivery is a good idea too, if it suits your business model.
    Good luck with it, competing on price is a race to the bottom and it’s amazing how many people are happy to pay a premium. Study those examples and try to work out why, and align with that thinking.
    Jan

    #1202386
    atud1
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    A lot weighs on how much planning you did prior to starting your business. Has much thought been put on your business plan? If you did, you would have identified your main target audience for your products and a relevant strategy to reach that targeted audience should be employed. This would assist your greatly in deciding the right pricing strategy to employ. Customers who value cheap products vs quality aftermarket care can be seen as 2 opposite ends of the spectrum.

    Regards,
    Alan

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