The E-commerce Leader

[00:00:00] Michael: if you offer a guarantee or a warranty of some kind linked with the product and you make sure you’re clear about that, then if somebody sells that product without warranty, then technically they’re not selling the same product.
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[00:01:12] INTRO: Welcome back to the eCommerce leader podcast. Today, we are gonna talk about three simple ways to create pricing power. And in our previous conversation, we talked about three unfortunate facts about price setting, and this is about how to be a successful price set. So price maker, not a price taker. In other words, you exercise pricing power.
[00:01:31] You give your brand the possibility to charge more for your products than the market. Other otherwise dictate really powerful stuff. Simple. But very powerful and very actionable as well. So enjoy the show if you want to take notes by all means do, but if you want to check out the notes we’ve made for you go to the eCommerce leader.com and find the notes there.
[00:01:53] Thanks and enjoy the show.
[00:01:55] Jason: there are three things that you can do that I’d wanna mention today and really encourage everybody with. The first one is, you have the opportunity to create a unique selling proposition that will really help your pricing strategy.
[00:02:09] And I know this is an odd, A set of items to push together. Most of us have heard of the phrase, unique selling proposition, us P we’ve heard that in the context of branding and then a context of, creating your presentation on the internet, that kind of thing. And we haven’t really tied it back into your pricing strategy, but I wanna just remind everybody that the.
[00:02:31] Second word there is selling, the unique selling proposition. And so cuz a lot of times we think, oh, create a USP. Okay. I wanna be the brand known as, I don’t know something, we just make it up in our mind and, but the reality is what you really wanna do with your us USP is figure out what the customer would see as.
[00:02:53] In what you’re doing and find the synergy related to what the customer would validate and support with higher prices. And so how do you do that? It’s complicated, but there are ways to do it one way to do it is, for example, will a customer pay for an item because it’s local made local source local.
[00:03:11] This is becoming very true in food. Customers will pay a premium if it’s local, and, organic and that, and so if you’re in the food category, that, that there’s a pricing premium for local and organic. I bought some honey, not long ago and it was made locally and in the honey world, they say, if you buy local honey and eat local, honey, it’ll help your allergies.
[00:03:31] Cuz I don’t know, the bees have got the pollen from the local plants and you’re eating it and somehow your allergies help. So you see how that’s a it’s. A selling positioning tool that justifies a higher price point that us P of being the local locally sourced item underscores this reason why you should pay for it and even pay for it as a premium.
[00:03:54] So that’s one angle that lo is it local? And can that be the thing you use to charge for a higher price, but there are other angles as well. The thing that you want to think through is what could you do with your product to create that kind of unique angle? As we mentioned, I was just in England, we wanted to see gardens of England, the famous gardens of England.
[00:04:16] And, so we had our. Googled, we were Googling around and we were like looking on the internet and we were looking at trip advisors and stuff like that, asking people like, what are the best gardens to go to? And people would give us their advice. We heard that Blenheim, palace is the birthplace of Winston Churchill and they have beautiful gardens there, but really what we heard was birthplace of Winston Churchill, like 150 times, we heard birthplace of Winston Churchill.
[00:04:40] So we went there and it was a total disappointment. The gardens were just hardly, it was like a local park, your local city park. It was like they had big trees. That was their claim to fame in terms of the gardening stuff. It was a total bust, but it was really expensive to get into. And of course we walked through the palace and it was like, whatever.
[00:05:01] But they had clearly dominated the unique selling proposition with this birthplace of Winston Churchill, branding and idea. And it got us to go. It got us to take a half day and all things being equal. If I could go back over, The trip. I would’ve not gone there. And I would’ve found a cool, actual real garden that was, a proper British garden.
[00:05:24] That was really impressive. Cuz we did see some, but they were really not that easy to find and they weren’t really marketed that well. So you get the idea, you want to have a unique selling proposition that does the job, but of course you don’t wanna diss your customer. You don’t want them to have a bad experience.
[00:05:41] Oh, they said this was gonna. Something, and it turned out to not be, you don’t wanna disappoint. You wanna find something that it has truth to it and attracts the right kind of buyer and they’re willing to pay the, the premium price for it. So that us P piece to me is a huge way to justify you know, pricing.
[00:06:00] Michael: First of all, let’s reflect on your, British experience. I think that’s a typical sort of British tourist experience that, that they brand, I guess a lot of what Britain has to offer is really just to. Brand name perhaps for, Anglophile Americans particularly, or, other people who yeah.
[00:06:14] Think it’s all about history and, Winston church was an impressive character by the way. Mother was American, I think so an Anglo American himself that he, blend in Paris is very famous. I’ve never thought of it as a garden. And now I, that. Feeling is reinforced and then you, but the other thing to reflect on of course is just because you’ve hooked somebody, you got to pay once.
[00:06:30] Doesn’t mean that’s a great idea, cuz you are now living effectively a negative review online albeit it won’t really affect that many people unless listeners were planning to pop into Berlin Paris palace next week, but. In a place like Amazon, that’s a bad idea on any Shopify sort.
[00:06:42] That’s not a good idea. I guess that there’s gotta be a message to product match. They got the message incredibly strong, but they can’t, they, the, they got something misaligned between your expectations and what you got. So again, if you wanna build a strong brand, you’ve gotta make sure you line those up.
[00:06:55] So it’s never just about, all I would say is to reflect on that is. It’s never just about marketing it’s marketing plus product and product development needs the time with understanding the con consumer. I would say talking about the food examples. Make me think of an awful of thing. I’ve just been in France.
[00:07:09] And so they’re obsessed with great food and there are lots and lots of different types of. USPS that you can build in some of which don’t sit so easily in the sort of mass produced online type product. Handmade, traditional materials, genuine manufacturing process. You can have elements of those.
[00:07:23] I think, gluten free hypoallergenics are safe for people with all sorts of intolerances these days. And there are equivalent in, other things, I don’t know, for example, cleaning materials. And then there’s that kind of at the other thing that the Europeans are obsessed with, the wine is only allowed to be called a bull or wine.
[00:07:40] If it’s from a certain region, champagne is, if it’s anywhere outside the champagne region, you can’t call it champagne. It’s fizzy wine, even though it’s basically champagne. And there’s a sort of, that’s a really hard to engineer kind of trust and quality brand identity. But that’s the ultimate defensible thing, I think.
[00:07:56] Yeah. Cause I can imagine that champagne sales may go down over the recession. I’m sure they will. I don’t see the price necessarily going down because people, it want it to be expected in a way. How do we, start to, implement this stuff? How do we really create a brand that has that kind of pricing
[00:08:10] Jason: power?
[00:08:11] Yep. It starts with, an obsession with your customer’s desire for the specific product that you’re offering and really thinking through, what does that look like? How do you put it together? What will they, and won’t they pay for? What do they see value in? Those are all just amazing questions to nerd out over as you start to work on how your USP can support your.
[00:08:29] There are other ways you can be a genius pricer. Let me mention them. But first before that, let me return our conversation to, Lizette’s question earlier, which was Amazon’s proposing ridiculous pricing because, for some reason, and, we ask her why and her comment is she thought that in retail stores, the prices were lower.
[00:08:49] So this is, very interesting. We had a client, Michael, who, was very successful on. And then thought, why not also sell on chewy? Cuz it was a pet related, in a product. And so she started selling on chewy and on chewy, they were pretty liberal with their management of the prices and they would put stuff on discount or sale and when they did.
[00:09:14] Amazon immediately cottoned onto it and said, they would just affect her price. It was like Amazon was clear. They were not gonna be undersold by chewy. And so they would, I don’t know that they suspended listings, but it was clearly, flagged up as this is a problem. And the chewy people were basically like, not really, they were cavalier about it.
[00:09:36] They weren’t really. Supportive . And so ultimately she stopped selling on chewy and so Lizette, if your product or the product that you’re selling is out in retail spaces, listed on the internet for a lower price, Amazon will, will demand, price parity. And so you won’t be able to have it.
[00:09:55] If you control it, you won’t be, have it be able to have it out in a retail setting or other marketplaces, at a lower price. And having Amazon have to sell the higher priced version, they won’t do it. Michael, I don’t know what your thoughts are on that. You have different take on it, but that’s what I’ve seen at least.
[00:10:10] Michael: No a hundred percent. I’ve seen this many times. I think, one question I would have, obviously Phil ISED, but also for anyone listening is if you’re reselling a product, you have to be realistic about what you engage in retail arbitrage as coined by a friend, Chris green, means a difference in.
[00:10:25] Price between two different markets for the same product or service, right? That’s what you arbitrage is. And if you are in a market where you are pricing higher than it is elsewhere, then there’s not a particularly great reason why somebody should buy from you and okay. If you can get away with it, then why not?
[00:10:41] That’s not particularly bad, but Amazon is. In the business of enabling that Amazon wants to be, if not exactly, always the lowest cost provider it’s seen as their value provider. And that’s their branding, that’s their positioning in the market. They’re not always the cheapest stuff is cheaper on eBay quite often.
[00:10:55] But, that you’ll get, you are swimming against the tide. You’re swimming against the tide of a mighty river called Amazon. Don’t do it. It’s just not a winning strategy. If it’s a private label product. Then you need to get control of where your products are being distributed. It may be that people are buying them or reselling them illegally in some way, in which case, my advice is to keep it simple and do a couple of things.
[00:11:13] One is to send a cease to this letter. If you can find who they are and get some contact details that’s often effective. The second one is, to go and buy the available stock. And if they’re selling on Amazon, then. Doesn’t sound like it’s the same issue, but, finding the stock, buying it, trying to RA rag up as many flag up as many, FLAS with the different marketplaces that’s being sold to that it’s not authentic, whatever it is, or just buy the stock and keep it, cuz it’s destroying your value, your pricing power.
[00:11:37] So one, a few thoughts.
[00:11:39] Jason: We one other thought in that regard, and I think this works Michael, but you could also create a new, listing and have it be a kidded product, add something to it, sell the item, plus a rubber band or plus a, screwdriver or plus a, whatever it is that adds, increment value.
[00:11:57] Then you’re selling two items and you’re out of the ASIN. That’s in conflict because it’s. Not the same item that you’re selling and that will give you your pricing discretion back.
[00:12:07] Michael: Absolutely one last tweak to that idea, which is that makes a lot of sense and that could be difficult to implement physically a bit of work, but definitely a good plan, another thought, and you should go and, read up about this Lizette thought or anyone else in this situation.
[00:12:22] It’s, there’s something to do with the, I think called the first sale doctrine. But I remember speaking CJ Rosenbaum who’s in New York based lawyer who specializes in Amazon sellers. And if you offer a guarantee or a warranty of some kind linked with the product and you make sure you’re clear about that, then if somebody sells that product without warranty, then technically they’re not selling the same product.
[00:12:41] I’m a bit vague about the detail. So you’d have to go and read up about it and make sure you educate yourself properly and fully about it. But bottom line is you’re having to do lots of funny tricks like this. That’s probably a sign that the market you’re in is not a great market to be in. I would suggest as well.
[00:12:55] Jason:
[00:12:55] Yeah, there you go. Back to. Back to our list here. We’ve got a, another way to create pricing genius. Two more to go. And so lemme mention the next one. The next one is you can create your own anchors. Now, an anchor in pricing, economics terms, is this mental like signpost or milestone?
[00:13:18] Customer has in their mind about what is an appropriate price for your item? That’s the anchor price. So for example, if you say, Hey, I want a compact car, in the United States. And I, really it’s just for my kid to drive. And, and I don’t wanna spend a lot what price comes to my mind, 25,000 us dollars.
[00:13:38] Okay. I want a luxury vehicle. It’s gonna be super amazing. Like maybe like a European, what price comes in my mind. Oh, six figures. Definitely. So those are anchors and the, so you will live your life as a price setter in the environment of anchor. They are there in the mind of the customer, the only question is, do you control them?
[00:14:00] And the genius sellers control them. And so the classic example of this is like the high end luxury, purse sellers. And I was like this example, I use it too much, high end luxury purse sellers, you go in and there’s like a Birken bag or something like that. There’s like a $34,000 purse.
[00:14:20] Wow. $34,000 purse who in their right mind would pay for that purse? I don’t know, but there’s one sitting next to it for $499. Huh? I’ll buy that one, and, but then you just realize, wow, I just paid $500 for a purse. Now I’m not a purse buyer per se. And so this is not a market that I actually spend money in, but you get the idea.
[00:14:40] If you can create an anchor, then you have. Created the psychological space in which the customer is evaluating your products. And so how do you do this? The short long, and the short of it is you create a high price product and you create a high price product because the high price product creates an anchor for your other products.
[00:15:03] How often does, the super high end luxury items sell? I don’t know, but a lot of, I know there are a lot. Ferrari t-shirts that sell? a lot of Ferrari hats that sell a lot of Ferrari sweatshirts that sell, how many Ferrari sell? They might make more off their merch than they do off their cars.
[00:15:22] I’m not sure, but you get the idea. You create the high priced item and it gives you cover. Or the context in which the normal priced item makes more sense to the customer. Michael, what are your thoughts on anchors controlling them? If you have other examples that you come, you like or come to your mind?
[00:15:41] Have your thought on it?
[00:15:43] Michael: Yeah, a few. Not very eCommerce specific, but if you location, as we talked about in the past, all the context, things are incredibly important. So to your person, or as we call it a handbag, I guess example if you’re in, if you walk into certain stores in Oxford street, or I guess, some in the right locations in New York or wherever, then you expect incredibly high prices cuz everything else around is high price.
[00:16:04] The decor, the reputation, the brand. or push you towards expecting that obviously online with your own website, you can gradually, after a huge amount of work build towards that, unfortunately on a, an Amazon sort. In an Amazon or marketplace context, it’s hard to, engineer because basically you you are vulnerable to whatever Amazon stacks against you in the, search engine rankings.
[00:16:25] And they don’t really stack, like with like it’s, whatever sells a lot relative to a keyword, right? So you could put a word handbag in if you’re really insane and try and rank for the word handbag, but even luxury handbag. In the Amazon world luxury might mean anything, 5,000 bucks upwards, I guess instead of 5,000.
[00:16:40] I think you need to do everything you can, if you do sell on Amazon or any marketplace to engineer to get away from the search engine results page, as the comparison just before the actual buying point. So even an Amazon store is a lot better than Amazon search engine page. And if you can build a reputation within an hour niche, such that people do click through to your Amazon store and you sell a lot of stuff for $300, then you know, $50 looks cheap, et cetera.
[00:17:03] And you can do that within an Amazon listing with parent child relationships. So if you have variations, if you have a, it’s gonna have to be of the same kind of product. So it’s much sophisticated than, a fashion store or something, for example. Yeah. But if you sell, I don’t know, silk ne ties, you could sell one for $300 and then one for 51 for 35 and the 35 looks cheap in that context.
[00:17:24] And that certainly is something I’ve seen my clients do to a limited degree. And it works very well when they do it. It. Work to implement it. But again, this is where I think in the end, this is the true power of having your own store and creating your own context within that world. You can create your own anchors and you just can’t really do that to a powerful level in a marketplace.
[00:17:44] It’s just the customers create the anchors, although they’re allowed to and enabled by Amazon. But I think to your point, you are really a price taken on a price maker in that context. No, I,
[00:17:54] Jason: I would say the best way to be the price maker is to do the versioning that you described.
[00:17:59] And you said your clients that do it, or in the context in which they can do it, they see success. And that’s classic. You’ve got that. This happens at so many industries. You’ve got the ultra premium edition. Signed by the, autographed edition copy or whatever it is. And platinum gold made with real diamonds, whatever it is.
[00:18:20] And then you’ve got the, the economy version that is classic. That car makers started doing that a long time ago. I’m sure many other people pioneered it as well, but you two can apply that to private label branding have a premium or luxury edition. And apple does that with all of its devices.
[00:18:40] And it’s a very common pricing strategy. And that is the way in which you can create your anchor in that bubble or in your little set, to your point, Michael. So like on your brand page is way better presentation of that than in the VSR rankings where people wouldn’t see the premium edition, they might just see the economy edition.
[00:18:56] Okay. Let’s move on though. Cause we got one. Cover if it’s all right. And that is another way to be a pricing genius is to create a discount club for your buyers. And we’ve helped people implement this. We have this system in our own, e-commerce environment, and this works. So basically what you’re doing is you’re saying to your entire community, here’s the way in which you can get a discount in an ongoing way.
[00:19:23] It’s. Amazon prime or, it’s called whatever, whatever membership program name you wanna call it your discount club, call it your, loyalty and rewards, club. Now some of these can be free like a loyalty program, but others can be paid, where people will give you a hundred dollars to be in the discount.
[00:19:42] And then they get a standing discount that is very easy to execute on Shopify. Impossible to execute on Amazon. I think I don’t know any way to do that, but you absolutely can do it, in Shopify and it creates the environment in which you’re giving the customer what they want. You’re saying you want a discount.
[00:19:59] Here’s a discount. Let’s have fun together. Let’s sell some stuff and buy some stuff. And you create a good time out of it. Customers can be really responsive, to discount clubs or membership, pricing, that kind of thing. And so it’s definitely something to look into. If you can set it up for your business, with your customers, you can do really well and bake in their loyalty and their commitment and, repeat purchases and even have it be profitable as a line item in your business.
[00:20:24] Just because you’ve set it up. You charge people to be a part of it. In essence, it’s a product, it’s a virtual product that has, no cost of goods. It has future imposed discounts on your items. Just very interesting, economics all wrapped
[00:20:38] Michael: up in there. Absolutely. I I know that, Charlie Munga, Warren Buffet’s right hand man for decades.
[00:20:43] Now what boxer pathway is a massive fan of Costco. I think you, you are obviously a massive fan. You you mentioned it very frequently and I guess that having that cash flow from the membership, coming in all the time is a beautiful thing. If you can engineer it. I think for most physical product sellers, I suspect that’s gonna be hard to do, but you’d have to be very niche and I guess you’d have to be, definitely selling on your own well-branded channels.
[00:21:03] I think for those who sell on Amazon, there are a couple of elements of this, which is not quite the same thing. Obviously the most obvious thing is subscribe and save on Amazon. And that does increase average order value. I suspect that for most Amazon sellers, that’s underused. I think most people tend to look at it as an over, as a sort of optional extra, whereas Amazon tends to push it pretty hard and most stuff as a consumer on Amazon, I’ve seen recently anything that can be subscribed and saved.
[00:21:27] I’ve seen for me personally, they’re offering as an option before. The one off purchase. So they’re really pushing it. They’re trying to make it the default thing. So obviously that can increase average order value and include, future cash flow and the relationship between how much it costs you to get the customer and the value of it, et cetera.
[00:21:43] So that’s worth doing the second thing more strategic point around that is to think really hard, especially if we’re gonna sell on the marketplace because cross-selling up selling downselling and future purchases are all so hard to engineer compared to your own site. To really consider hard, what product lines you could have or add that can be subscribed and save.
[00:22:03] If you sell, dog balls, why not sell dog shampoo? For example, it’s a simple idea, but it’s really important. And the only other thing really, on Amazon is that you could in theory, and I’ve not seen anyone do this yet, but I just nothing to stop you having marketing assets outside of.
[00:22:18] which capture email addresses or a form of contact SMS, for example, and that you could then effectively have a sort of informal discount club, but they buy on Amazon, the difficulty with that, of course. So they go to Amazon and Amazon itself is gonna offer them something better value than you can offer, and they get distracted and buy somebody else’s stuff.
[00:22:36] So you can take bits. Off Amazon. But I think, again, this is a great reason to run your own store in the longer term, because it’s so hard to implement this stuff off that, have you’ve had clients that have done, both that sold on marketplaces and have tried to work towards their own DTC site.
[00:22:50] Have you found people that managed to implement these things off their own DTC site? Or is it always gotta be under your.
[00:22:57] Jason: it’s easiest under your control. Yeah. The subscribe and save functionality on Shopify is really good. There are, recurring, re rebuying tools or, subscribe and save tools, apps that are that work great.
[00:23:09] And every, we have clients that use them every week when we log in, we’re like, how many subscribing save customers you have now? It’s goes up, up. And, the only question is how long do they stay in the program? What’s the churn rate, but that’s a great thing. It’s a really a fourth idea here, but it’s a bit different than a discount club.
[00:23:26] It’s simpler to implement actually. And, and it works really well. In addition. So yeah, I would say, those are valuable reasons to have a Shopify site and build a brand and to sell direct to consumers. Absolutely. Man, I know that you’re struggling through here with your voice.
[00:23:42] Hopefully you’ll be back to a hundred percent health soon. Let me wrap the show up here. If you’re listening on, the. Recordings of this on the social media platforms. Thank you so much. Feel free to comment underneath if you’re listening via recording. And of course, if you’re listening to this in Shopify, sorry, in Spotify or apple podcast player or wherever.
[00:24:04] Pods are cast. Then we would love your subscription, your highest review. And I’d love to have you check out the other episodes. Scroll back in time, we have done a ton on pricing. We’ve also done shows on, of course, all other aspects of eCommerce. There’s always a new wrinkle, a new angle to talk about, and we love to do that.
[00:24:23] So thank you so much for supporting the show really is an honor. If you wanna check out more of Michael’s work, you could do that at the. What amazing fba.com
[00:24:35] Michael: is that the right? It’s amazing. So the podcast is amazing fba.com, where you can also get access to the 10 K collective, podcast is pretty much the same content these days.
[00:24:44] And we’ve just hit, collectively between the amazing FBA podcast, 10 K collective podcasts and the eCommerce leader this summer, we quietly passed a million downloads over the lifetime of all of those. We’re well, six figures with the eCommerce leader as well. So there’s plenty of people out there listening.
[00:24:59] So come join
[00:25:00] Jason: party. Yeah. Yeah. Thank you so much, everybody for supporting this show. It’s really an honor. We love talking about eCommerce stuff and of course, it’s great to have you jump in with us and ask questions live. So anyway, all that to say, really appreciate your support for the show.
[00:25:12] That was the eCommerce leader podcast with Michael Veazey in London, England in Jason Miles in Seattle, Washington. If you liked this content, don’t forget to subscribe to the show on your podcast app for free resources, including PDFs and videos on topics like traffic products and sales channels. Just go to www.theecommerceleader.com.
[00:25:38] No hyphens, just as it sound. Thanks so much for listening.