As we reach the end of another financial year alot of businesses will be sitting down to evaluate their place in the market. One of the first things that always comes under the microscope is the pricing of both products and services. It's always something that is worth evaluating, and both an increase or a decrease in your pricing can have positive or negative effects on your overall bottom line. Here at 543 we certainly aren't experts in economics by any stretch of the imagination, but we do have the privilege of helping companies of all types get their businesses online. We've also spent a whole lot of time researching pricing and below are a few of the underlying factors we've seen recommended time and again.
Don't do something for nothing
This might seem obvious, but one of the big pitfalls that small businesses in particular fall into is pricing their products and services at cost. The logic is pretty obvious "if this costs X, then it shouldn't be sold much more than X." It's a really admirable way to do business, but it's also not sustainable. If you want to be fair to your customers and provide them with a great service LONG TERM, then you need to make sure that your company also makes enough margin to last a long time as well. For example, no one wants us to build them a website and not be around a year later to be able to manage it. To be the 'good guy' with great prices and longevity, you'll need to make money somewhere along the line.
Research, research, and a little bit more research
The beauty of an open market is that there are bound to be a number of competitors in whatever your field is, and there are likely to be some competitors near you. If your 'costs' are the absolute baseline for what you can sell, your competitors can be an easy barometer of where you can price products or services including profit/margin. Really look around hard and identify what competitors price themselves at and figure out where you want to fit in the price scale compared to them.
Who is your customer and what will they pay
Trying to understand what your customer might be willing to pay for your product or service is a really tricky proposition. For small businesses in particular, your gut instinct is probably to value your services less than what a consumer will actually pay for them. That's where your competitor research comes in handy - if you can identify a successful competitor with a similar product, then you know that you can match them and also have sales. Of course, you may also want to grab a different part of the market to your competition. If so, it may be worth canvasing that market to understand what their pricing perception is.
Pricing for perception
As counter intuitive as it may seem, a lower price point can potentially lead to less sales - depending on the product and the target market. A lower price can lead consumers to a belief that the product or service is going to be 'less' than something that is priced higher. For something like web design, this is definitely a phenomena we come across regularly. Our website prices tend to be on the lower end of the scale, and that comes with a risk that they are perceived as 'cheap'. Regardless of how high the quality of our work is, the pricing can still give the impression that if a customer uses us, they will not be getting a 'premium' product. That obviously isn't correct, and so our sales pitch needs to counter that perception.
Be smart with your pricing structure
A big pitfall of pricing a product or service can be that businesses get a little bit one dimensional in their thinking. Some industries will jump straight to their normal way of doing things, when there might be another way to look at pricing the same product or service that could generate more sales and increase revenue. Law firms, for example, will religiously price by an hourly rate, rather than going to a project based approach. That's just an example of course, but every business should at least go through the thought process of whether the way they are pricing could be done differently. Should you have multiple levels of products or services? Should you bundle groups of products or services? Should you offer discounts? Can you run a recurring revenue system instead of a one off fee approach? You might end up back where you started - but at the very least going through this thought process should get you closest to the pricing scenario that works best for you.
Behind the curtain - 543's practical example
As always, we like to be pretty transparent in what we do, so we thought we'd delve into how we've reached our pricing structures and the thought processes we went through. These will be different for everyone, but hopefully they at least give a real world example when setting your own pricing:
It's important to realise that each business will have a slightly different approach to setting their pricing. Some of our competitors (who we have immense respect for and will sometimes even refer clients to) are in a completely different price bracket to us because of things like cost structures and the segment of the market they want to be working with. We all have slightly different approaches to business and those different approaches can work for different companies. The important takeaway should be that it's always worth having a look at what you and your competitors are doing with pricing - and it's always OK to have an experiment and make a change.
Increasing sales with your site
This will be our penultimate blog on increasing sales on your website. As we reach the end of the blog series, make sure you get in touch with [email protected] if you have any questions.
CHECK OUT THOSE SMILING PEOPLE AT THE TOP OF THIS PAGE
We've found that any of our sites that have actual people smiling back at the clients seem to do much better than just generic photos with people. Hence the happy three people you see cycling across our website header.
BRIGHT BUTTONS BEAT TEXT LINKS ANY DAY
Oftern we find clients hiding important links in website text. There are benefits to this - if you use the correct search terms in links to the your page it'll help the search juice - but why not put them on a button? They are bigger, brighter and get clicked more often.
EXPERIMENT WITH COLUMNS
Have a play with displaying your content in one or numerous columns. It's said that alot of users prefer one column, but it all comes down to content and how you display that content.
Give your clients the chance to speak directly to you with a live chat function. Once you've hooked them in for a chat, the chances of a sale increase dramatically.
GET YOUR MUGSHOT ON THE SITE
As we've said earlier, people relate to people. Don't be afraid to use your photo - the logic that a big brand shouldn't have the individual faces often doesn't translate. The same goes with emails...we never send out a bulk mail campaign from a "[email protected]" address - we always use an individuals name - it's a more personal touch.
USE THE GRAPHICS TO TELL A STORY
It's amazing what the shape of a picture, or something as blatant as an arrow can do. Direct people to where you want to be on the page through the layout and the images used.
WE'LL BEAT ANY OFFER
For the most part people won't actually take you up on a 'we'll beat the offer of our competitors' - but using a phrase like that can instill confidence in the customer that they are getting the best price.
TRY DIFFERENT SIZED CONTENT
As a general rule we prefer shorter content and think that works better, but often it comes down to the industry. Some fact based industries may have customers that want a heap of content - try different lengths and see what works best.
HOW DO WE GET IN TOUCH?
This is a must do. A big one. Make sure you make it easy for people to contact you. As a rule of thumb we put a link to the contact page on every other page throughout the site. This might not be appropriate for an e-commerce store, but for service based industries it's a really good idea.
Selling on your website
GET SOME TESTIMONIALS & REVIEWS
It's amazing the impact a positive review can have. We like to place a single testimonial on each page of a client website - it legitimises a business without bombarding the consumer with too many. Facebook and Google both have facilities for reviews as well - make sure you contact customers and ask them for feedback.
Charge up your customers by charging up your text. Use emotionally powerful language to excite your consumer base.
LESS IS MORE WHEN IT COMES TO CONTACT FORMS
If you need to take lot's of information in a form, make as many fields as possible optional. You want that sales lead first and foremost, so don't scare them off.
MAKE YOUR SITE LINE UP WITH YOUR ADS
If you are paying for advertising then make sure what you advertise is also what your potential customer finds on the site. Never mislead - it might increase click through rates, but that won't follow with sales.
OFFER ALTERNATIVE PAYMENT OPTIONS.
Most payment facilities should do this these days, but be sure you offer PayPal and a credit card facility (even if it directs the payment through PayPal).
This is certainly one we have tried repeatedly. Changing our colour schemes had a direct result in sales. There is no magic colour, as for different products, different colours work better - the only way to find out what will work for you is to experiment. Don't be afraid to change colour.
Sales Conversion Tips
TELL THEM TO DO IT. SERIOUSLY, TELL THEM.
When we make a site we have a policy of making sure that wherever a user is on the site, they will very quickly find a link to that final point of the sales equation. For most companies that's a 'contact us now' button, but for others it might be a 'BUY NOW'. Whatever it is for your company - call them to action!
SALES UPON SALES. KEEP THE RECOMMENDATIONS FLOWING
If you have one product that sells very well, but you think another goes well with it - make a recommendation on the first product page. Recommendations to similar products or information on each page can work really well. Try to tell a story through the links in your site.
CREATE A SCARCITY IN PRODUCT
If you are selling an actual product online, think about limiting the number available and showing that number of stock left on the sales page. If there are 'only 2 left', you appeal to the primal 'buy now' aspect of a shoppers mentality.
DON'T SHOUT IT IF YOU CAN SPEAK IT
In a busy commerce world, shoppers aren't going to fall for overly hyped jargon. When you are writing the content for your site, be compelling, but avoid completely over hyping it. Don't be an informercial on the internet!
THIS IS AMAZING - BUT WHY?
Really spell it out to consumers what is good about the product. Make it absolutely clear what the benefits of the product are. Don't sell a 'TV Screen', sell a "52 inch, Plasma, HD TV Screen" for example.
TEST THE HELL OUT OF HOW YOU TELL THEM TO DO IT
A good website and good sales platform takes alot of experimentation. Something as simple as the text on a buy button can change how well a product sells. Test variations - 'buy now', 'order now', 'purchase' - and see what has the best effect. Test and test again.
SIMPLIFY YOUR CONTACT FORMS
We often have clients that want to grab as much information as possible...because it makes their life easier at the other end. As we have said time and time again, that's the complete wrong approach to marketing and sales. Think of the customer first...what is going to make their life easier, and make them more likely to contact you. Less fields = more sign ups...which means more sales leads.
STICK BY YOUR WORK
Have faith that you will do a good job or that your product will be top quality. For us, that means creating a first homepage draft free of charge before asking for a deposit. We know our service and product is excellent, so don't mind giving the first bit away free to get the conversion. For others, that might mean having a money back gaurantee - it reduces risk for the customer.
SELL AND SELL NOW
Language is surprisingly powerful. Use words like 'buy now', or 'secure your spot early' and you may be surprised at the quick increase in conversions.
LET YOUR CLIENTS SPEAK FOR YOU
Alot of older websites have a page specifically dedicated to testimonials. There is a reason for this - people like hearing the word of others before committing to a sale. Our personal view is that you should intersperse testimonials throughout the site (only one or two on each page). This constantly re-affirms the trust factor. If you have been reviewed by big companies, or have worked for renowned companies - think about including those logos on your homepage.
WHAT IS IT AND WHY DO THEY NEED IT
This seems obvious, but you really do need to know your product and SELL that product or service on your website. Rather than just saying 'here is my service', start saying 'here is my service, and this is why you need it'. It's always a good plan to think as a customer when you write your content. Ask yourself what would sell this product or service to ME. Why would I take the extra step of actually parting with my money? Once you can communicate that you'll be one step closer to making a sale.
Next post we'll start looking at a few technical features you can employ on a website to help with conversions. If you ever have any queries about our thoughts, just contact Jamie at [email protected]
Pricing your services & products
Recently, we've seen just how important a customer's perception can be to your bottom line. If you price too low, you run the risk of being perceived as 'cheap' and low quality, where if you price too high, the perception is that your product is too expensive. So the big question is how do you hit that sweet spot? The price where perception meets reality.
There doesn't appear to be a silver bullet for this one unfortunately, but there are a few well established guidelines that you should consider when setting your pricing.
THE CHARM PRICE
Multiple studies have now concluded that putting a "9" in your pricing makes a significant difference into it's attractiveness. Initially we thought this sounded like a bit of an old wives sale tale, and could never understand why companies continually put their prices at '$9.99', but it's been shown that having your pricing adjusted to this can increase your sales by 24% - and that is significant.
TEST THE SWEET SPOT
This is the big one. Pricing has been shown to, on one hand, give a perception of value and equally, on the other hand, a of a lack of quality, so it's really important to figure out what your consumer thinks is the right price. Funnily enough, this was pretty much perfectly shown by Kanye West recently - he opened a pop up store and started charging exorbitant prices for his "one of a kind" t-shirts. People were more than willing to pay this price, until they noticed the generic brand tag inside the t-shirt which told them it was just a cheap product with fancy sign writing on it. Equally, the Warehouse in New Zealand has had to battle a 'cheap and nasty' perception for the last few years, despite bringing in higher quality products.
DO RIGHT BY YOUR CUSTOMER
You won't find this one in any text book, but we strongly believe this is a critical part of the equation - particularly for repeat business. If you set your price as low as possible (without going below the perception of low quality threshold), you will ensure clients continue to return again and again. We certainly keep this as a key pillar of our pricing.
The last little takeaway we'd like you to think about as you read this blog is to think about how you yourself perceive products from now on. Don't just buy something because it is more expensive, and equally don't buy something simply because it is cheaper. Ask why the price is set at where it is. Think about the product, not the price. 543 will continue to keep our prices as low as possible and hope that we can debunk the 'cheap' perception by providing high quality website and marketing for our clients. They understand we can do that be reducing our overheads and working with systems that save them money without compromising on quality... Hopefully that means we hit the 'sweet spot' for pricing!