Pricing strategies
It’s that time between Thanksgiving and Christmas which means that the holiday season must be upon us. For marketers like me, it means it’s the time of year my efforts are put into overdrive to keep the online cash register ringing.
It’s the one time of year that everybody is aware of all the stuff you can buy. Retailers know that people looking to buy gifts around this time and they want some of that hot gift-gifting action. But mostly, it boils down to an increased customer awareness.
In this highly competitive environment, retailers FREAK THE FUDGE OUT. They try everything in their power to lure people to buy.
Here are 4 ideas that will help you win your share of sales during the Holiday Retailmageddon.
1. Increase Your Average Order Value
This is an oldie but a goodie. If you’ve ever wondered what the “free shipping over X dollars” thing was about – here’s the deal. It feels like it’s about the company covering the cost of shipping with profit before offering it to you, and to a certain extent, that’s true. But what the “free shipping over $X” is really about is raising the average order value.
Most people, especially if you sell inexpensive products, are going to want the minimum amount for their needs. This will create a natural average order value that corresponds with typical user behavior.
It’s also true that we all hate paying for shipping. If a user can justify spending more now to offset what they see as a worthless cost (shipping) then they’ll do so with the idea that they’ll just have more of the stuff that they are buying. However, having more of the product causes them to treat it differently and to use it quicker. Thus, setting an average order value will increase how much someone spends with you AND make them buy more than they otherwise would have in the long run (if they are a repeat buyer).
The key is to set the value high enough to be impactful to your bottom line without setting it so high that your customers can’t easily spend enough to reach it.
2. Offset Shipping Costs (Besides Free Shipping)
Something a lot of retailers like to do around the holidays is to offer free shipping. And that’s not altogether a bad idea. I use it sparingly throughout the year and prefer to pre-announce it and use it as a tent pole for ongoing marketing efforts. A lot of retailers, especially on Black Friday (which just passed) want to offer free shipping. And in most cases, that makes a lot of sense. But it’s possible to be more calculating about your shipping offers.
Offering free shipping is good, but it’s the whole shebang. Once it’s free, you’ve done all you can do here.
If you have a “Free Shipping Over $X” offer that has been offered for some time, then your customers will know the cost of shipping. It’s market cost up to $X and then it’s free.
Since they already know this (and because you can remind them in your marketing), you can offer to reduce the rate. So, if it was $70+ gets free shipping, now $50+ gets free shipping.
You could also offer flat-rate shipping, or otherwise subsidize the shipping cost without giving it away.
If you’re competing against Amazon, you might have to resort to drastic measures. But if you’re a boutique business or offer something unique or special, take advantage of pricing yourself against yourself. You’ll get the majority of the effect of offering free shipping without having to totally write off that expense.
3. Market Effectively to Your Current Customers: Create An Incentive Calendar
The sprint between Thanksgiving and Christmas is at once insanely fast and terrifyingly slow. If business is brisk, the time passes in a retail blur. If sales are slow, nothing could take longer than the holiday season. Each minute somebody doesn’t buy drags on forever. It’s like being a Philadelphia Eagles fan. When you lose 7 in a row, those 7 weeks feel like 7 years.
To guard against that lull, retailers rain down a blizzard of offers and incentives. If you want to be smart about it, you’ll create a calendar and then market that calendar to your customers. For instance. You may have two free shipping days – Black Friday and December 19th (the last day for Ground shipping to reliably make it by the 24th). Then you want to spread your offers around. You can pick the spacing – do a 12 days of Christmas idea, or offer deals on specific goods on specific days.
If you’re a long time retailer, you probably do most of this already. The key is to write it down and to tell your customers. If you are clear about your deals to your existing customers, you’ll see that they’ll reward your message clarity with new sales.
4. Use Free Samples as Implied Discounting to Create New Customers
This will be difficult to apply to a store such as Amazon, but for every company that makes a perishable product, this one is for you.
Samples have always been an effect means of gaining new customers. When you have a physical location, this isn’t hard to do. But when your storefront is digital, giving away samples creates problems.
For one thing, there’s the cost. Unless your sample is a postcard, it’s going to cost you at least the price of a stamp to deliver a sample. That’s on top of the sample cost. If we’re being really conservative and say that it costs $0.50 to send out a sample (in reality this is likely to be closer to a few dollars), sending out samples – unless highly effective – will become cost prohibitive very quickly.
Knowing this, we need to devise a way to put samples in the hands of people likely to use your product. This will increase your ROI and minimize wasting samples on those who are not interested.
An easy way to do this is to give additional samples to your existing customers to give to their friends. At best, you are allowing your customers to sell your product by word of mouth. At worst, you gave a little extra product to a paying customer.
And this is what I mean by the phrase “implied discounting”. By offering the free samples along with the product, the buyer thinks “I am really getting more than I pay for. I can choose to keep the extra for myself if I want.” And that is true. But it’s also true that people like to share the things they love. If you enable them to do so, with the free samples, you will gain new business and find product evangelists. Your good faith in offering freebies to give to others will be rewarded.
The idea is simple: when a customer buys your product, include a few samples for them to give to their friends. If you have the capability, include a customized message. Something along the lines of “These samples were create by [Company Name] for [Customer Name] to give to you. We’d love to know what you think! Tell us at [URL]!” for added oomph.
Wrapping it All Up
People love it when they feel like they’ve gotten a good deal. By leveraging this desire and presenting your customers with opportunities to have that feeling, you’re going to sell more goods. We’ve covered 4 pricing strategies in this article and there are a host of others. They draw their inspiration from psychology, marketing, and human factors. Remember, we’re in a service business. As long as the customer feels that you’re looking out for them and that they have ways of getting a good deal, you’ll create your best chance to have good holiday sales season.
Want more? Here are 3 Pricing Strategies to Increase Sales on Your Website.
