Pricing has so many roles to play in e-commerce. It has to cover product costs, personnel costs, and marketing costs to keep the business running (and profitable!), and it can act as a marketing tool, differentiating you from higher priced competitors. It’s a fine line to walk if you try to do it all – and most companies think they have to do it all.
But when it comes to conversion rate optimization (CRO), the lowest possible price isn’t always the right price – in fact price doesn’t necessarily depend on what the other guys are doing. The price you can charge for optimal conversions is based on a whole other criterion: Your audience.
Playing The Price is Right
Let’s play a game: True or False
If you lower your prices, your conversions will improve.
False – it depends on your audience and your unique value proposition (why they’re buying from you, rather than anyone else).
It’s counter-intuitive, but people don’t buy based on lowest price. They buy based on:
- Brand (which is tied to trust)
- Ease of purchasing
- How well you communicate your value proposition
- Proof your product will deliver the buyer’s desired outcome (also tied to trust)
- Reduction or removal of risk (read: Trust)
- Immediate action incentives
Basically, your sale depends on building trust, delivering desired outcomes, and tipping the scales of decision by gently prodding your buyer to act. When you have that combo in place, you’re no longer a price-based decision, you’re a value-based decision.
But – if your value proposition is, in fact, that you guarantee the cheapest price around, and that’s working well for you, then you’re already appealing to your target audience of bargain hunters. You don’t necessarily need to attract those who seek value to run a profitable business. Just look at Wal-Mart. You do still have to understand your audience and gain their trust though, because cheap prices won’t overcome those deficiencies. So read on.