Online buyers are far more price sensitive than offline buyers. That is, the price of the product is
much more important for the online buyer than for someone walking into an offline store. When
someone buys a product and has to select a particular merchant, they are “sensitive” to various
factors, such as these:
■ The price of the product from that merchant
■ The convenience of purchasing from the merchant
■ The confidence they have in the merchant (whether the merchant “backs” the sale, for
instance, if anything goes wrong)
■ The additional costs, such as sales tax and delivery
Price is only one aspect in the decision to buy. But on the Internet, the weight given to price
is much greater. This is a perfectly natural, and much predicted, state of affairs. Consider the
buyer walking into a brick-and-mortar store who finds a product he’s interested in:
■ Many buyers don’t care about pricing much at all. They are more interested in
convenience, selection, location, and sales environment.
■ Many buyers want the product now and don’t care too much about price, as long as it’s
“in the ballpark.” If the buyer finds the product, there’s a good chance the sale is made.
■ Even if buyers are shopping for price, there’s a limit to how much driving around
they’re willing to do. Again, if the price is “in the ballpark,” price may be trumped by
convenience.
■ Buyers don’t think too much about how much confidence they have in the merchant;
if the business can afford a storefront and take credit cards, they’ve already reached a
certain level.
We know all this is true, because offline prices are often higher than online prices. And
haven’t we all been in stores and thought, “How do they sell at that ridiculous price?” The online
sales environment is very different, though:
■ Buyers can jump from store to store very quickly. It’s very easy to find a low-priced
product extremely quickly.
■ There are many sites that will even do the price comparison for you. There are the
shopping directories (see Chapter 25) and the merchant sites (Chapter 28), where buyers,
more and more, are beginning their shopping.
■ Many buyers are used to, and now expect, a low price. Price is a much more important
factor for them than for most offline shoppers . . . they are much more price sensitive.
In fact getting a low price is why many online buyers are willing to delay gratification
(to wait for delivery).
CHAPTER 1: How Your Business Fits Online 9
■ Many buyers now do a little research to settle on the exact product they want, then
use a shopping-directory comparison tool to search for the product. Then they’ll
ask for the system to show the products sorted lowest-price first and work their way
through the merchants one by one. They often won’t even go past the first few low-price
merchants before buying.
Understanding these concepts naturally leads to a couple of conclusions:
■ If you have a really good price, you’re in a good competitive position.
■ If you don’t have a good price, many of the marketing techniques won’t be open to
you; you’ll find it very difficult to sell through eBay, shopping directories, and merchant
sites, for instance.
Does this mean price is always important, that you can’t sell a product unless you sell at a
low price? No, not necessarily. It means you’ll have trouble with sales channels that compare
your product with others based on price, such as eBay, the shopping directories, and merchant
sites. But it’s possible to position your business—on your own web site—in ways that are not
directly related to price. The lowest price does not always get the sale.
■ The big merchants have a real brand advantage. Many buyers buy everything at
Amazon, under the (not unreasonable) assumption that it’s a pretty good price, if not
necessarily the best.
■ Selection holds value. Web sites that have a wide selection have an advantage; if people
discover a hard-to-find product on your site, they may stop looking.
■ Focus is important. Sites that focus tightly on a particular type of product—and have a
wide selection of a very small range of products—have an advantage, too, for the same
reason. It makes the unfindable findable.
■ A classy site trumps a trashy site. Trashy sites make buyers feel uneasy. Classy-looking
sites make them feel more comfortable. Even if your product, in your trashy-looking site,
is listed in one of the shopping directories above a product from a really classy-looking
site, it probably won’t matter how cheaply you sell; the classy site is getting some (much?)
of the business.
■ Recommendations count for a lot. If a buyer recommends your site to someone because
they’re so happy with buying from you, you’ll get sales regardless of price.
■ Simplicity is good. Making it easy to buy helps turn visitors into buyers. AllAboardToys
.com, for instance, sells products you could buy on Amazon.com if you wished, but they
make it much easier.
■ Brand differentiation matters. Look for ways to make your business stand apart.
ShaneCo.com, for instance, a national jewelry chain, doesn’t compete on price directly; it
competes on value and unique designs. They’ve positioned themselves as the price leader
for high-quality jewelry, so they don’t have to compete head to head.
Read More at MushGet
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