Understanding the Price Sensitivity of the Online Buyer-(5)
April 8, 2009
Online buyers are far more price sensitive than offline buyers. That is, the price of the product is much more important for the online buyer than for someone walking into an offline store. When someone buys a product and has to select a particular merchant, they are “sensitive” to various factors, such as these:
■ Many buyers don’t care about pricing much at all. They are more interested in convenience, selection, location, and sales environment.
■ Many buyers want the product now and don’t care too much about price, as long as it’s “in the ballpark.” If the buyer finds the product, there’s a good chance the sale is made.
■ Even if buyers are shopping for price, there’s a limit to how much driving around they’re willing to do. Again, if the price is “in the ballpark,” price may be trumped by convenience.
■ Buyers don’t think too much about how much confidence they have in the merchant; if the business can afford a storefront and take credit cards, they’ve already reached a certain level.
■ Buyers can jump from store to store very quickly. It’s very easy to find a low-priced product extremely quickly.
■ There are many sites that will even do the price comparison for you. There are the shopping directories (see Chapter 25) and the merchant sites (Chapter 28), where buyers, more and more, are beginning their shopping.
■ Many buyers are used to, and now expect, a low price. Price is a much more important factor for them than for most offline shoppers . . . they are much more price sensitive.In fact getting a low price is why many online buyers are willing to delay gratification (to wait for delivery).
■ Many buyers now do a little research to settle on the exact product they want, then use a shopping-directory comparison tool to search for the product. Then they’ll ask for the system to show the products sorted lowest-price first and work their way through the merchants one by one. They often won’t even go past the first few low-price
merchants before buying.
■ If you have a really good price, you’re in a good competitive position.
■ If you don’t have a good price, many of the marketing techniques won’t be open to you; you’ll find it very difficult to sell through eBay, shopping directories, and merchant
sites, for instance.
■ The big merchants have a real brand advantage. Many buyers buy everything at Amazon, under the (not unreasonable) assumption that it’s a pretty good price, if not necessarily the best.
■ Selection holds value. Web sites that have a wide selection have an advantage; if people discover a hard-to-find product on your site, they may stop looking.
■ Focus is important. Sites that focus tightly on a particular type of product—and have a wide selection of a very small range of products—have an advantage, too, for the same reason. It makes the unfindable findable.
■ A classy site trumps a trashy site. Trashy sites make buyers feel uneasy. Classy-looking sites make them feel more comfortable. Even if your product, in your trashy-looking site, is listed in one of the shopping directories above a product from a really classy-looking site, it probably won’t matter how cheaply you sell; the classy site is getting some (much?) of the business.
■ Recommendations count for a lot. If a buyer recommends your site to someone because they’re so happy with buying from you, you’ll get sales regardless of price.
■ Simplicity is good. Making it easy to buy helps turn visitors into buyers. AllAboardToys.com, for instance, sells products you could buy on Amazon.com if you wished, but they make it much easier.
■ Brand differentiation matters. Look for ways to make your business stand apart. ShaneCo.com, for instance, a national jewelry chain, doesn’t compete on price directly; it competes on value and unique designs. They’ve positioned themselves as the price leader for high-quality jewelry, so they don’t have to compete head to head.
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