Buying Customers: Lower Price vs Valuable Bonuses

regardless what it is.. if you are selling product I would use neither. I would ensure that I am price competitive both in the offline and online sector. within reason, you don't have to be at online prices ( they are generally lower than offline prices ) if your primary target is offline sales.

I am assuming you are wanting to sell local? I would then create a Local based Marketing Persona. The whole Think local vibe. Know you by name, polite local service. buy where you work / live. Comparable rates. Dependable delivery dates etc etc etc.

What you need to do is chip away at the idea that "online" is convenient vs you and your business. I mean really what is more convenient than someone 5 miles away making your stuff and delivering in a day or 2 vs ordering online and the shipment getting caught up in "Processing" and then taking the longest route possible when shipped and showing up a week later?

I will be honest.. its not an easy sell.. it takes time, you will in essence have to run a branding campaign to stick in peoples heads when they think of X they think of you and your business.

IF you go the route of free stuff or a discount... you will always have that expense.. which obviously increases your price, which ultimately puts you in a position such as radio shack.. there aint a damn thing in that store I cant find online for less. the only reason I would goto that store is if I NEED it RIGHT NOW. other than that I will wait and save 600% or more LOL

Understanding the "soft dollar" is where you should look if you are considering this approach.

It is not good to lose money so you are always going to be better off offering something that has a higher perceived value than what it costs you.

This is why hotels offer things like a "buffet breakfast".

They might position the breakfast as say $25-$40 and they offer it as a package with the room .
The actual cost of the breakfast is maybe $5 so that is their soft dollar cost.

All they need to do is offer rooms that include the breakfast for anything that is more than their regular roommate plus the soft dollar cost and they increase their profits.

You should always consider the profitability as that is what really matters when if comes to your business.

If you are going to offer something ask yourself and also do the sums "How is this going to improve profits?"

If you can show yourself on paper that it will make more money and you can't produce a better result when you test it then it is not going to help.

Best regards,

Ozi

So examples of this either way would be Southwest Airlines, Vista Print, Dollar Shave Club/Harry's, etc. The Hotel example by Ozi and cruises offering onboard credits would be more examples.

Southwest was growing and their competition decided to lower their prices to try and put them out of business, which was true. If Southwest matched the lower fares for long they would go bankrupt.

So they decided to give a bottle of bourbon to their frequent flyers. The bottle had high value and low cost and it worked and their competition lost a whole lot of money.

Other companies like Vista Print, and the shaving clubs, Omaha Steaks, etc, use the super low price starter kit, irresistible offer, to buy customers for the lifetime value.

Granted, Dollar Shave Club did this at a loss with the goal of being bought and it worked.

Vista Print makes money, and Omaha Steaks is family owned so they are not of the money losing "I hope somebody buys me or else my VC's are screwed" mentality.

My thought is that other companies are also interested in gaining customers at a break even or a small loss. Not many companies but some companies.

It seems like if the t-shirt company is selling to the RIGHT people, could add value to his purchase by partnering with other people that want to sell to his same target market a consumable product or an entry product.

For instance, info marketers will give their lower priced products to other marketers to be bonuses. The hope is that once they read your cheap stuff they will want the expensive stuff.

At the very least when the info marketer markets his stuff their is a larger audience that knows his name with an implied endorsement from someone they know, like, and trust.

But the info marketer doesn't just give his low priced stuff for free to anyone, he gives it as a bonus to a paid product, that is, good potential customers.

Granted, this is more a world domination approach vs a solid local on purpose business approach.

Walmart is doing well with low prices. Tons of restaurants are doing badly with Groupon kind of deals. Gifts can work wonders.

It's the setup and the follow up that determine which is the one to go with.

If I were to buy 5 t-shirts, I'd be tempted by the low price. Because I don't see me ever wanting something similar again.

If it were something else, something I would be buying regularly and often enough, it would depend on my role in the company (who I was trying to impress).

All of the above requires you understand well who is your client (what kind of company and who makes the buying decision).

Comcast, a while back, gave a few hundred dollars gifts to people who switched a business account to Comcast. They cut the check to the person they dealt with, not to the company. I know of one office manager who switched to Comcast to get the $400. (Not a stupid one, the company did benefit... Comcast service is faster than whatever they had before and some $70 less a month. But Comcast was not the only phone/internet company that would have saved this manager's company a few hundred a year.)

That said, I think it's best if you can find an item that, at full price, is a good buy and hook them in with that. Kind of like Dan Kennedy does... Buy a $10 book, then a $49 something, and, pretty soon, you're buying a $25k something.

If you're constantly giving away something for free/or for a reduced price, you're devaluing it. Not a good idea to devalue something you sell. So, give something for cheap/free that you don't sell...

It can be perceived as having lots of value or of being fun. I once helped someone by giving away a $5 Stabucks gift certificate (someone in the insurance business). $5 ain't much but it worked... To be precise, it got people to walk into the insurance company and talk insurance even though many didn't care to get the gift certificate. I am assuming it was not the great value that got them to act but the different approach, the idea that they were not dealing with someone boring and/or greedy. The owner of the company asked some why they came in who did not want the gift...

I remembered you on my way home... was the gist of their answers.

As a general rule I never sell anything at a loss. If your cost as the distributor is less than the cost to the consumer you will never be profitable because you are setting the expectation in your customer's minds that they will continue to get the product at the same price. I would much prefer to incentivise people for a first purchase. I have actually found that shipping an order with more than what was advertised lead to a much higher customer satisfaction rate. This can be something as cheap as a sticker and a custom note that says "We saw that you didn't order one of our badass stickers so we sent you this custom one anyways" or something dumb like that. On a side note you want to build your brand by targeting people with money not people that bought your goods because they were the cheapest available. How you brand your products determines the customers you will get and the market that you create. If you continuously out price your competition by a large margin (even if you are making a bit of profit) your products will be viewed as a "bargan brand" and your customers will expect you to continue selling products at a discounted rate. (think if H&M started charging $50 instead of $25 for a pair of pants they would sell way less until they lowered the price back down) Offering a one time low price does not have such a dramatic effect as in the example but it will drastically lower your reorder rate once you charge full price. In summary it is far better to focus on creating top notch customer service and over delivering. That way you turn customers into promoters who not only become repeat customers but also refer their friends to you and give you free advertising.

If you go to a surf shop at the beach they always sell tshirts for buy one get one free for about $20. The shirts are obviously worth $10 or less. They sell a lot of shirts.

My point is, double the price and give one away for free.

Same money, different perception.

Never lose money on trying to get a customer. How can you keep a customer if you sell them something at a loss but the next order you make double the profit. How I used to do it was Go high for the one off then say regular customers get a break. I have in the past said in a flyer I want your business and willing to lower my price to get it. So them 5 t shirts at $50 example but the next order is $35 Robert