When it comes to user testing e-commerce sites, it’s easy to wax poetic about defining the critical path and fixing various aspects of the design to fit the results of user testing. From where I sit – a freelance designer – I’m comfortable with this idea because it keeps me neatly in my yard. But there’s one glaring issue that we’re ignoring in all of this. It’s the issue that decides more than anything else whether a customer will buy your product. It’s price.
As a web designer, I find it’s a bad idea to get between a man and his profit margin. That is traditionally the role of the business owner in this equation: the business part. It seems like a gross overreach to make suggestions on price as a part of the user testing experience.
Furthermore, price might already be an absolute thing. The manufacturer could have pricing rules. Or prices have already been pushed as low as is feasible. It seems awfully arrogant to want to bring it up in a design meeting.
On the whole, I would agree with you. But that doesn’t mean we shouldn’t address it anyway.
A website that sells things is ultimately a sales tool. It’s designed and refined through user testing to sell things better over time. It only makes sense to have pricing strategies in place that encourages users to purchase your product while retaining a healthy profit margin.
To do this, the website, like any salesman, will need to become a better negotiator. It needs to make a persuasive case that your product is worth buying and that its worth buying at the price you have listed. Sounds easy, right?
Well, once you know a thing or two about negotiating principles, it will be.
Here are three strategies that will improve your bottom line.
Price is Relative
“There’s a sucker born every minute.” – P.T. Barnum
Everybody hates to be taken for a sucker. You hate it, I hate it. It’s a fact of life. When somebody says “It costs X number of dollars.” we instinctively think, “Is he telling me the truth?. I bet Wal-Mart (or the Dollar Store) has it for cheaper.”
Have you ever seen List vs. Actual Price before?
WTF is that all about? Shouldn’t there just be one price: the actual cost? What’s the list price about? And if it’s going to be $421.99, why not go ahead and make it $1,000?
It’s because studies have shown that people like it when they feel like they’re getting a relatively good deal. When a price is relatively lower, as in the above case, it makes a compelling case to buy the product. When it’s grossly higher than the price, something smells fishy.
Simply put: price is contextual.
There’s a deep psychological need to see things relative to one another. There’s no intrinsic value for most things that we buy. The market sets the price, whether it’s bananas or banana-splits. What a MSRP does is try to create a level playing field.
If a company like Apple sets a MSRP, you can expect to pay that on their website. In the case of an iPod Touch, Apple sells a 8gb model for $199.
Wal-Mart competes on price and sells it at a comparative bargain of $195.00.
But that’s strictly a pricing issue, right? I mean, Wal-Mart is known for having the lowest price (and everybody else is known for paying MSRP). But it’s really a conflagration of ideas. Yes, Wal-Mart is known for having low prices. But who decided that $195 was low for an 8gb iPod Touch? It’s Apple’s MSRP of $199. If it was at $89, Wal-Mart would look grossly overpriced. If it was at $299, Wal-Mart’s price would look like a steal.
The only reason $195 feels like a deal is because it can be juxtaposed against Apple’s $199.
It’s always better to contrast your price with another higher price, as long as that price doesn’t seem too high or unreasonable.
If you’re in the service business, take a cue from restaurant menus.
Research tells us that the top right hand corner is the #1 place where people look on a restaurant menu. You will never find a filet mignon in this space. Why? It’s because a filet is going to sell because it’s a filet, not because it’s on sale or costs a certain amount. The demand is built in because of the quality of the cut of meat. As a result, restaurants know they can use this as an anchor point. So they can price it at a premium.
You’ll see $40-50 steaks on the menu at a quality restaurant, no problem.
Why is that? In an economy such as this, are people dying to spend $40 on a steak? No. They aren’t. But once there’s a $40 steak on the menu, a $25 piece of fish doesn’t sound out of hand.
If the menu had a $25 fish as its highest priced item, everybody would be ordering the $12 pasta dish. But because there’s a steak for $40, $25 for an entree sounds reasonable by comparison.
The same is true with your service. For example:
When you look at the above example, aren’t you just DYING to buy the middle plan? It’s only 20 pounds more than the smallest plan but it includes SO MUCH MORE. And if you look at it, the Flyer Advanced program is WAY MORE but all you get is more flyer capacity. Sure, it makes sense to spend an extra 20 pounds when I can get an additional 6,720 capacity from it plus design and production. But for another 6,880 I have to spend another 100 pounds? Hogwash. Gimmie the middle one!
And that’s the point. There’s really only one selection on this page. But because they were able to frame it between the smaller and the larger, you think of it as such.
So think of your pricing in context. Pricing is relative.
Provide a Service That Trumps Price
Nobody would accuse Zappos as having the lowest price on shoes, though in some cases that is probably true. What everybody knows Zappos for is for their return policy. Simply put, if you don’t like it, you can return it. And they handle all the costs.
It’s great if you’re a user. You can order a pair of shoes without having to worry that you’re going to be stuck with them. That, as it turns out, is a bigger factor for people that buy shoes online than is price.
One of the key things you need to know about your customers is WHY are they buying from you. If you’re in a commodity market, like shoes, it makes sense to compete on something other than price. Otherwise it’s a race to the bottom. Zappos figured out how to compete on Customer Service. As a result, nobody comes close to matching what they offer from a customer service perspective.
Create Windows of Opportunity
Retailers love holidays. It’s because it lets them put their stuff on sale.
LOL. Okay. I’m kidding.
But if you read the weekly circulars you’d think I was telling the truth. Retailers can’t wait for a holiday – Mother’s Day, Father’s Day, Columbus Day, Back-to-School, Halloween, Thanksgiving, Arbor Day, Christmas, New Years – so they can give you an additional few percent of their product.
Why is that? What does Christopher Columbus, Thanksgiving, or the birth of Jesus have to do with early-bird sales?
Simply put, holidays allow for windows of opportunity. It gives retailers an excuse to create a reason for you to buy from them.
If you need an example that sounds hip to 2011, what about Groupon? Their whole deal is predicated on buying a deal on one day and how many people buy that deal in the same day.
In short, their whole gimmick is based on creating a window of opportunity.
Holidays aren’t the sum-total of opportunity windows. Promo codes are windows of opportunity too. If you give a 10% off promo code that’s valid through the end of the month, you’ve created a window of opportunity for them to get your product or service at a discount.
Price isn’t just contextual to other prices, it’s contextual to it’s own price.
In short, people love deals. Put a section on your website that says ON SALE and it will quickly become one of the most trafficked pages on your site. Finding ways to position your product as having an advantageous price will ultimately increase sales on your website.