Sale vs high price

12 years ago

I don't know what you're selling, but even in this economy there are people who have money and even in this economy there are people who spend on one hobby, one pleasure.

Know a lady, didn't have money for the mortgage (as in, she was 3 months late) but her dog got the royal treatment every one of those month (shampoo, massaged, nails cut, bow ties, 2, pink placed, despite dog protestations, on dog's head. Each treatment cost $65. She could have just as well washed the dog in the bathroom sink (dog weighs 7 pounds with boots on), clipped the nails there too, put 20 bows for free, rubbed the dog's back and stomach while watching some animal show.

Son is right... But you need to work on positioning yourself correctly. As you well noticed, if you gain the big spenders, you lose the others. So, you have to determine what you want most: more money or to feel you've helped.

By the way, discounting is not a great idea... If you discount often enough, your clients are going to expect it... if you don't do it, they're not going to be sufficiently happy. But, it reduces margin. With smaller margins you have less to make sure you wow your customers. Unwowed customers buy less. You notice it when you need money, so you discount again... Cycle repeats, and pretty soon you're out of business.... Yes, I know, extreme scenario (but ask K-Mart and Woolworth's... Google them. K-Mart still has some stores around here). The opposite occurs when you raise prices... (Yes, you can go nuts and raise too much, beyond what your positioning warrants...).

I think it was Yanik Silver who said it best: I paraphrase: charge enough to be able to over-deliver.

Originally Posted by funkynassau

Our online biz has been chugging along fairly well and we decided to have our first sale for the month of August, with a different product slated to be on sale in Sept. We knocked 10 bucks off of a product that is only $69.95 to begin with, so it's a decent savings. We have sold loads of these sale priced kits, more than we imagined we would, so of course we are pleased.

Enter #1 son, the biz marketing grad. This son of ours knows a lot, he truly soaked in all that was taught in this field in college. Therefore he is a wealth of knowledge for us but he also tends to think he knows everything

He is of the belief that we need to jack our prices up so that the most expensive kit we sell is closing in on $150. It would be packaged nicer but in general it'd be the same thing as what we have now for $69.95 He thinks people have money and are willing to spend it, that the guy with the BMW or Porsche takes pride in his car and will cough up a lot of money to keep it looking good. In theory that could be right, but given the present economy I dont think so. Just because he's got the fancy car doesnt mean it's paid for.

I prefer the idea of a quick nickel to a slow dime, son thinks I am nuts

I dont want us to price ourselves out of the market, and do want a fair return on our product. Our successful sale showed me that people like a sale, the idea of a bargain. Son is amazed we've sold so many kits at the lower price. I think it's obvious that a discount appeals to many people.

What do you folks think? Is it better to go with a sale and give someone a break, and make a few bucks less and sell a lot more, or try to appeal to the more well off customers which would leave out the average guy? How do I get son to see that you cant charge a super high price, giving the illusion of grandeur, given the economic climate we are in. This all seems to simple to me but son argues the opposite.

Thanks

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shane_k

12 years ago

Are you already targeting these BMW, Porche drivers with any of your current products, at the price range you have them now? Or are your clientele regular everyday people who drive regular cars?

if you are not currently targeting BMW and Porche drivers then what is your sons plan to attract those kind of clientele? What kind of change in your marketing strategy does he forsee?

What is his suggestion on how you make the transition between the two target markets?

How long would this transition take place and what would you and your business do for income in that time period?

The bigger difference between your current target market and the one your son suggests the trickier it will be to make that transition.

Has your son thought of setting up a separate website that specifically targets this higher end clientele, this way you can keep your current site the way it is.

What he can do is then put banner ads on your regular site that would target that higher end clientele and drive them to this new site with the higher priced products.

And obviously he could also have other marketing methods to drive traffic to that new site as well.

Then after a couple of months of testing you can compare the two sites. You can choose to drop the lower end pricing for the higher end if the results point to that decision or you can keep both sites up and running, or you can just keep your current site.

If you test this way you still have the stable income from your current site throughout that transition period without alienating your current clientele.

Thanks
1 reply

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funkynassau

12 years ago

Thanks for the two replies, I'll answer the questions and see where we go from here. First off, we sell automotive touchup paint kits, Custom Mixed Auto Touchup Paintkits « ChipFixx. We sell only in Canada, and we have virtually no competition. My husband is the genius behind the paint formulation part of it, we'd be sunk without his expertise. I pretty much handle everything else, son gets his two cents worth in about marketing.

We did start off thinking our customers would be the average guy with a 2008 Dodge Caravan. Well we were wrong, it's mostly the people with the BMWs, Porsches, Acuras etc. as well as those who have classic cars. So it does appear to be those with more disposable income that are interested in what we sell.

We have put prices up over the last two yrs., steering people away from the bottom of the line kit that does not offer too much profit for us, and getting them into the higher priced ones which do offer good profit. However to increase the price the way son suggests, by $100. practically overnight, I think is a bad idea when the kits are not pricey to begin with. Also, biz is practically dead in the winter so now that it's almost Sept. it's the wrong time to up the prices. I am fine with an increase come March 2013 when people are getting their cars ready for the spring, but not by $100.

I want to have a decent return money-wise and I also want to feel we've helped someone with their car which is probably their second largest investment, other than their home.

We had just been talking about a second website, to create our own competition, and yes this could be a higher priced version of the second time. I do see it as an experiment to find out if people would pay a higher price for what we sell, so I am glad someone here has the same idea! Son and I could run that site, as hubby seems to be rather opposed to higher prices on the current site, but a second one could be quite different.

To me this is a tricky thing, I dont want to alienate our present customers who often come back for more, but I do want to increase profits.

Thanks for the feedback.
Funkynassau

Thanks
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ChipFixx custom mixed auto touchup paint kits.
http://www.chipfixx.ca

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DABK

12 years ago

Raising the prices on what you're already selling could alienate a bunch of people, unless you give them a good reason. 'Sorry, folks, prices have been going up on all our materials for the past 3 years. We've absorbed the increase so far. But we can't keep doing it." will allow you some increase, assuming your costs did go up (some of them will know if you lie, I think. Maybe not, maybe their costs have gone up and they're surprised you have not increased your prices yet.)

When I had my appraisal company, I once decided I was tired of getting $300 for a basic appraisal. I wanted $50 more, which turns out to be 16.66%. I had 15 clients (a lot for me, too many, actually). The biggest one, the one who gave me 20-25% of my business complained. I thought they were my best client too... never had problems collecting, all their agents were polite, friendly, etc.

I was not in a good mood, so I stuck to my pricing even for them. (I'm suggesting you increase prices on only some of your clients. About that later).

Short version: my biggest client divorced me.

Though my increase on the remaining clients was 16.66% and my biggest client represented 20-25% of my business, to my surprise, my revenue was up 2.3% the month after they divorced me.

So, I looked into it. Turned out, they were hiring my company (not often enough that I'd notice without tracking... No, I did not track enough back then) to appraise properties far away the most. With them gone, we could fit in more jobs from the rest of the clients, more than we thought we had room for pre-divorce.

My point? Segment your clients. Group them in as many useful ways you can think of. You might notice behavior differences that allow you create new products that fit one sub-group to perfection.

There's a vitamin you can buy. Long ago, they had one bottle for men and for women, old and young. Now you get Centrum for men, for women, for elderly. And the same 100 pills cost more. The pills are essentially the same (a little more zinc for women than men, etc... But they do have zinc. That kind of thing). Prices are larger.

Can you make paint that you market to Ferrari owners specifically? It could be the very same thing, just called Paint For Ferrari's. It could, of course, have better ingredients. In either case, the packaging has to be better. If it's the same ingredients, add something to the package. Every time they buy one paint job, they also get something done to spruce up their tires (I'm not good at this. I'm not into cars. I bought mine because it was reliable and black and just the right size.)

Can you sell what you sell as a bundle? Paint + 3 other things ( let's say, now you sell paint for $100. The new 3 items sell for $20 each. So, the package would cost, separately, $160. Except you sell it for $140. And you stop selling them together. After a while, you remove the bundle and sell them individually, except the paint is $108, and one of the other things is $23.

If you've given them long enough time, they would not be too keen on comparing your prices before the bundle and after.

Best, I think, would be to introduce a new product (at least the packaging has to be better) that costs you the same (except for the extra you spend on packaging) and charge more, giving yourself the margin you want.

A year ago, I needed some boxes. Costco was selling them in packages of 10, tied with a plastic band, for $10. This year, I bought another package. Same 10 boxes, but the price was a bit over $11. The difference. The 10 boxes I needed were inside a box (the same material my boxes were made of). Same company made them.

Being a marketer, I noticed, said, niffty job, 11% increase for, what? 1% extra costs? But I needed them, didn't have the time to go look to see if anyone was still selling them with the plastic band.

My 2 cents in many words.

Originally Posted by funkynassau

Thanks for the two replies, I'll answer the questions and see where we go from here. First off, we sell automotive touchup paint kits, Custom Mixed Auto Touchup Paintkits « ChipFixx. We sell only in Canada, and we have virtually no competition. My husband is the genius behind the paint formulation part of it, we'd be sunk without his expertise. I pretty much handle everything else, son gets his two cents worth in about marketing.

We did start off thinking our customers would be the average guy with a 2008 Dodge Caravan. Well we were wrong, it's mostly the people with the BMWs, Porsches, Acuras etc. as well as those who have classic cars. So it does appear to be those with more disposable income that are interested in what we sell.

We have put prices up over the last two yrs., steering people away from the bottom of the line kit that does not offer too much profit for us, and getting them into the higher priced ones which do offer good profit. However to increase the price the way son suggests, by $100. practically overnight, I think is a bad idea when the kits are not pricey to begin with. Also, biz is practically dead in the winter so now that it's almost Sept. it's the wrong time to up the prices. I am fine with an increase come March 2013 when people are getting their cars ready for the spring, but not by $100.

I want to have a decent return money-wise and I also want to feel we've helped someone with their car which is probably their second largest investment, other than their home.

We had just been talking about a second website, to create our own competition, and yes this could be a higher priced version of the second time. I do see it as an experiment to find out if people would pay a higher price for what we sell, so I am glad someone here has the same idea! Son and I could run that site, as hubby seems to be rather opposed to higher prices on the current site, but a second one could be quite different.

To me this is a tricky thing, I dont want to alienate our present customers who often come back for more, but I do want to increase profits.

Thanks for the feedback.
Funkynassau

[ 1 ] Thanks

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Gambino

12 years ago

The first question is, who is buying your product? Is it the guy whos looking for a quick fix for his 94 jeep, or the guy who's looking for a decent product to cover up his 2008 Altima, or the guy who wants to repair his 2012 porche? The price that these three people are willing to pay are probably very different.

I see you said owners of BMWs, etc appear to be your buyers. How many are you currently selling per month, on average? See if it would be worth it to increase your price.

The idea to create your own competition is a solid one. You wont alienate your current customer base, but you could create another customer base. Just increase the value of the 2nd product and raise the price tag.

Thanks
1 reply

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funkynassau 12 years ago

Our customers are people with vehicles that are brand new to 3-4 years old, primarily. The guy with the 94 Jeep is too busy trying to stay alive to worry about stone chips on his car. Our biz is seasonal, at present we are selling 45-50 kits a month, and that will soon taper off to next to nothing once the cold weather sets in. Prices would go up next spring when the car nuts get their classics/antiques out for the driving season and people see the damage winter has done to their daily drivers.

That does seem to be the way we are leaning, create another biz and have it higher priced to see who is willing to buy a premium product.

This biz is not quite 3 yrs old, we have come along nicely in that time. It's not our bread and butter so we can afford some tinkering and experimenting to see what works best.
- Thanks
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ChipFixx custom mixed auto touchup paint kits.
http://www.chipfixx.ca
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shane_k

12 years ago

If you are just targeting Canada right now, then how about when you set up another site with higher prices you can target that site specifically for americans.

They are not familiar with your current pricing levels that you have right now so no chance to alienate them, and you can keep your current customers happy while at the same time opening your company to a whole new market.

Not only that but because of the weather in the states especially the southron states being warmer for longer periods of the year, that would give you a longer seasonal reach.

Thanks

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darksaberco

12 years ago

I would also look into the ratio of repeat buyers versus new buyers. If you notice that the majority of your customers buy once and leave, then it would be a good idea to raise prices in order to increase margin. An increase of 150% is worth even more to your bottom line because of the set cost. Additionally, since you mentioned you have no competition your risk is even lower. Where else would they go?

Assuming you gain competition, you will be better off with the higher price point. There can only be one person with the lowest price, but if you have high quality products people will buy from you regardless of price.

Since you mentioned that winter months are near dead, I would raise the prices soon and compare your sales from this year to last year in the same month. After accounting for growth by taking last year's May through July sales and comparing them to this year, you can judge which you would rather do come spring.

Cars like that are also expensive, and I know people who have them. The people I know would gladly shell out some extra money for the product as long as they have had good experiences with it.

New customers couldn't tell anyways.

Additionally, people who pay a higher price are less likely to be a support hassle.

In short, switch until just before the season picks up and decide if you want to keep it like that.

Good Luck,
-Elliot S

Thanks
1 reply

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funkynassau

12 years ago

Awesome replies, and lots to think about! Thanks to everyone who's written to me.

Ok, we dont sell in the US because there are several companies there who offer what we do, so we'd be competition. Another reason is it's a pain in the butt to prep our kits to get into the US, everything has to be packed in plastic, put in a metal tin, sealed with tape, then put in another plastic bag and then into a box. I have sent kits to the US twice and I assume they got there because they didnt come back to me and nobody from Customs called me up. If it wasnt such a pain to ship we'd probably give it a try. There are a few cos. here who sell paint kits but not all inclusive ones like we have, one doesnt even include paint! So we have most of the Cdn market to ourselves.

Most people buy once, but we do have a few regulars who come back each spring for a new kit. We sell to a lot of guys with antique cars who cant get paint anywhere else, but it's hard to get the formulas for those old colours, tho we do our best to accommodate them.

The only reasons we put prices up in the past are valid ones, the price of paint has gone up a lot, as it now has to be all water based, no more solvent based, and water based costs more. We ship thru the post office and they put their prices up each January. Other items in the kits have gone up too, so it's not because we are trying to make more money, it's because the whole kit has gone up in cost to us.

DABK, thanks for the story about your appraisal co. Our kits come in several types, from the cheapest Economy kit for $39.95 to the Total Kit at $69.95. Each has different contents. It's the Total that is on sale now for 10 bucks off which still gives us a decent profit. About the vitamins story, it's the same with aspirin, you can get a huge bottle of plain old aspirin for say $6.00 or you can get the baby aspirin for twice as much for 1/4 as many pills, because it's meant for those adults who need a daily low dose aspirin to keep their blood thin...I view that as a ripoff but there's no way around it unless you have a pill cutter and want to spend the day cutting regular aspirin into 4 pcs.

Funkynassau

Thanks
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ChipFixx custom mixed auto touchup paint kits.
http://www.chipfixx.ca

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DABK

12 years ago

Aspirin makes you feel it's a ripoff because you don't need... Same with pop. Till recently, I could buy a 12 oz can around here, a 20 oz bottle, a 24 oz bottle, a 2 litter bottle. I don't like cans, so the smallest I could buy was the 20 oz. Except I don't drink that in one sitting, and I don't like it later. Now, there's one place that has them at 10 oz and at 12, and they've got my dollars.

I don't know anything about your business, but if you could either have better quality paint, and charge more (and more in relation to what it's costing you) or throw in something else that goes with paint (but so that the margin is higher for you), so that they do get value, yet you get your margin to go up.

Originally Posted by funkynassau

DABK, thanks for the story about your appraisal co. Our kits come in several types, from the cheapest Economy kit for $39.95 to the Total Kit at $69.95. Each has different contents. It's the Total that is on sale now for 10 bucks off which still gives us a decent profit. About the vitamins story, it's the same with aspirin, you can get a huge bottle of plain old aspirin for say $6.00 or you can get the baby aspirin for twice as much for 1/4 as many pills, because it's meant for those adults who need a daily low dose aspirin to keep their blood thin...I view that as a ripoff but there's no way around it unless you have a pill cutter and want to spend the day cutting regular aspirin into 4 pcs.

Funkynassau

Thanks
1 reply

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funkynassau 12 years ago

Our paint is proper automotive paint, like the factories use to paint cars, there is no way to improve it. We have 5 kits, from a super basic one to a total one, there's nothing else we can add that we have come up with.

We have talked out getting into headlight polishing kits as there's a valid need for that with some types of headlights, esp. the plastic ones.
- Thanks
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ChipFixx custom mixed auto touchup paint kits.
http://www.chipfixx.ca
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CharismaticMannequin

12 years ago

Funky,

I'd take what your son says with a pinch of salt. Colleges 'teach' a lot, but give very little. I've seen many guys come out of college, full of bravado, and think they know everything.

The truth is, you need to LEARN your target market in order to understand what they're willing to pay - which YOU have. You know your market better than your son (I imagine).

As for your predicament - people are willing to pay what they think something is worth. So my advice? Do some testing - drive traffic to two seperate pages, and see which sells better...the $70 product, or the $150 one.

Funnily enough, sometimes products actually sell BETTER when they're more expensive. People assume that a higher price means a better product - try it, and see what happens. You won't lose out on this, and you'll find out what really works!

Good luck!

Originally Posted by funkynassau

Our online biz has been chugging along fairly well and we decided to have our first sale for the month of August, with a different product slated to be on sale in Sept. We knocked 10 bucks off of a product that is only $69.95 to begin with, so it's a decent savings. We have sold loads of these sale priced kits, more than we imagined we would, so of course we are pleased.

Enter #1 son, the biz marketing grad. This son of ours knows a lot, he truly soaked in all that was taught in this field in college. Therefore he is a wealth of knowledge for us but he also tends to think he knows everything

He is of the belief that we need to jack our prices up so that the most expensive kit we sell is closing in on $150. It would be packaged nicer but in general it'd be the same thing as what we have now for $69.95 He thinks people have money and are willing to spend it, that the guy with the BMW or Porsche takes pride in his car and will cough up a lot of money to keep it looking good. In theory that could be right, but given the present economy I dont think so. Just because he's got the fancy car doesnt mean it's paid for.

I prefer the idea of a quick nickel to a slow dime, son thinks I am nuts

I dont want us to price ourselves out of the market, and do want a fair return on our product. Our successful sale showed me that people like a sale, the idea of a bargain. Son is amazed we've sold so many kits at the lower price. I think it's obvious that a discount appeals to many people.

What do you folks think? Is it better to go with a sale and give someone a break, and make a few bucks less and sell a lot more, or try to appeal to the more well off customers which would leave out the average guy? How do I get son to see that you cant charge a super high price, giving the illusion of grandeur, given the economic climate we are in. This all seems to simple to me but son argues the opposite.

Thanks

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Sale vs high price

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