How to Beat the E-Commerce Downturn: Aligning Pricing and Marketing (Power Pricing Principle #3)

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It’s official – inflation is heading for double digits in both the US and the UK, and many other countries worldwide. The US Bureau of Labor Statistics, gives annual inflation at 8.6 percent to May 2022. This is not only the largest 12-month increase since the early 1980s. It is the first time any e-commerce operators have really encountered any significant inflation full stop!

So how to survive and even thrive in this environment as an e-commerce operator?

Well, one principle is aligning pricing and marketing in a strategic way. Premium pricing is ideally the best position to have.

Legendary marketing expert Dan Kennedy says simply:

“The best pricing strategy of all is creating visibly excess demand—in our case, a very busy, thriving practice, often with a waiting list.”

But how do we achieve this in e-commerce? And what are the alternatives? 

Pricing is strategy is a critical part of the answer. Today we will be addressing Jason’s Pricing Power Principle  #3: Align Pricing & Marketing.  

What you’ll learn

  • The impact of COVID and how that is combining with inflation
  • Why the globe as a whole is NOT “Post COVID” – and how this impacts e-commerce operators
  • THe opportunity that comes when your competition is weak
  • Which product categories are most at risk
  • Which is the most recession-proof product type
  • What a “reverse sale” is and how powerful it can be for your bottom line 

Resources

Some of the resources on this page may be affiliate links, meaning we receive a commission (at no extra cost to you) if you use that link to make a purchase. We only promote those products or services that we have investigated and truly feel deliver value to you.

[00:00:00] Jason: in a recessionary time and in high inflation time, your pricing strategy is the most central thing you can think through in terms of managing your success, going forward.
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[00:01:16] Intro: Hello folks. Welcome back to the eCommerce leader. We are talking today about pricing power overall theme that we’re talking about based on Jason’s book of the same name, pricing power, and today’s principle number three, and particularly in times of downturns globally, a really critical thing to think through and to have a solid answer to a solid strategy for, so let’s get cracking, enjoy the show.
[00:01:42] Jason: So yeah, principle number three from the book is align marketing and pricing. And so we’ve touched on this. There are a lot of nuances there. You, all things being equal, the most premium brand in a market has the most margin. Because they have the highest price points. If you can obtain that level in your marketplace, then you know, good for you.
[00:02:01] Don’t cave on that. And hopefully you’ve got the brand power and you’ve got the, the business, strength to endure a big recession and inflationary times, because there will always be buyers in a marketplace that don’t care about price. I know, it sounds weird to go into a recession or in a time of extreme inflation, but there are buyers in every community who are like, not, they’re just rich.
[00:02:28] They just have money. They just can afford whatever they want to buy. And it doesn’t matter to them so much. They’re more focused on the premier luxury brand product. Then the price they paid for, it’s a status symbol for them. It means more to them than just of some of the dollars.
[00:02:44] They spend on it. It means to them something emotionally or something in their social group or something, in society, it’s a statement piece and those sellers, that, that operate in that space and serve those customers. They are in the most favored position. All things being equaled, if they can, maintain that reality.
[00:03:05] And that, that’s the thing that you wanna think through is where are you now, if you’re not in that position and very few people are, then the question is, how can you create a context in which the value propositions, do really well for you financially? In other words, Selling items for a, in a value context or is justifying a low cost.
[00:03:24] And so it’s appealing to the masses, but still makes you a margin that you can live on. Those are the challenges and those are all marketing decisions. You’re really talking about marketing, not pricing. Pricing is just a, the fork and knife, but what you’re really working on is a big fat stake, which is, the position in the market, right?
[00:03:44] Michael: Yeah. But still you gotta have the pricing. I think pricing as positioning is incredibly PO important at the very highest end. So by the way, I’ve just had a quick Google there apparently. And I dunno how recent this data is, but 20.2, 7 million millionaires in the USA, which is a. Substantial percentage of the population.
[00:04:04] So the number of people, okay. A million dollars you could argue if you live in London, it doesn’t feel like that much money. To be honest, someone I’d be happy to be handed a million dollars, but it would basically buy a flat that we’ve got already, I think, instead of having a mortgage on it and then we’d be getting on with our lives as normal.
[00:04:18] But nevertheless, if you think there are, maybe I dunno, a few, a handful of Decca millionaires, et cetera, et cetera. There are a substantial number of people that I personally know in London, cuz I know some wealthy people here that yeah. Who really wouldn’t be, it wouldn’t make much difference to the moment about the recession, to be honest, unless it happens to impact their corner of the world.
[00:04:33] Yeah. So you have
[00:04:34] Jason: a great point. That number 22 million, what that be like 8% or something like that? Of the us population. I, something along those lines before that it was like 11%. So yeah, let’s just say between eight. And 10 or 11% of the population is a millionaire, which to your point, what does that mean?
[00:04:50] But, it’s an indication of, purchasing power potentially, maybe. Yeah. And so all that to say, there are people who will buy premium items, will, they’ll certainly cut back in times of extreme recession and many people who were in that category will fall out of it in times of extreme, recession.
[00:05:05] But nonetheless, there are people who can afford to, pay for premium items. Yeah.
[00:05:12] Michael: So now I’ve, you’ve got it in your pricing power book, which I’ve got in the principle 3m. You’ve got a great quote from Dan Kennedy, which I just wanna read and get your thoughts on. So he says the best pricing strategy of all is creating visibly excess demand.
[00:05:25] So that obviously he’s more been in the service industry marketing game, hasn’t he had a little dentist at one point. And what have you. Can we translate that to eCommerce. And do you think, how do you think that plays out? Do you think that’s the right way of
[00:05:38] Jason: putting it, man, the smartest marketers do I think of Elon Musk and his cyber truck, he’s been teasing that thing for four years or something.
[00:05:46] I forget how many people he had on his waiting list that had given a thousand dollars deposit or a hundred dollars. I don’t remember, but it was literally. Billions of dollars of future sales, because he created a context in which there was visibly visible, excess over demand. And under supply and the waiting list was the way to do that.
[00:06:07] That it is genius marketing and Dan Kennedy has identified it from the olden days, pre-internet era and people who are savvy marketers in the internet era can do similar things, having a pre buyer list. I’ve, we got clients who could, who could do this, who probably haven’t done it enough.
[00:06:23] In fact, You’re reminding me is that maybe I’m taking a note for a few clients as I think about this, but any time in which you have product releases, containers coming in. Product being made, it’s ready, any time in which you have a, an actual date and time where you’ve got products that can be purchased, you’ve got an opportunity to create a pre-buy list and to pre-sale, or do deposits, or have a early bird list.
[00:06:52] Those types of strategies. Those are all designed to. Demand ahead of, inventory delivery. And that’s the context in which, powerful pricing opportunities exist, because you can say, look, this is coming down the road. If you want this price, get on this list. And you can say in the future, the price is gonna, go up or supply will be gone.
[00:07:13] Those are the two options, you can say, Hey, and, event market. Are very comfortable with the psychology. That’s how you sell, conferences or big events is you say to them, there’s a thousand tickets. The early bird price is, $299. And if you wait past July 15th, they’re gonna go open price or they’re all gonna be gone.
[00:07:32] That’s an event marketing tactic. You can do that same exact thing with physical products. I have a container of goods coming from China. It’s taken me seven months to get this. It’s been ridiculous. It cost me three times more than I ever imagined. I’d pay for shipping. I only have 3,200 units and here’s the price point and they will either be gone or I’m gonna raise the price in the future to meet market demand and, get your name on this list.
[00:07:59] And, here’s the link or whatever, all of those, approaches ring true right now. Yeah. Everybody knows the shipping is a complete nightmare. So I think that’s where the alignment of marketing pricing and on marketing. And pre-sell. Really come to play. And I think it’s a huge opportunity for us as sellers,
[00:08:15] Michael: yeah, I agree. And by the way, pre-selling is entirely possible on Amazon in case you’re on Amazon’s seller going. Yeah. But Jason know that you don’t have to have your own DTC site. For example, I have pre-ordered Peter Zion’s audio book of no, not the audio book. I’ve listened to that. The, Physical book, I guess hard back of the end of the world is just the beginning, which is a cheerful title.
[00:08:34] And you can imagine what it says about geopolitics and demographics is it’s pretty, it’s horrible apocalyptic, but it’s an amazing book. I definitely recommend it, but the point is because I’m a fan and he’s built a fan base and a following. On Amazon, the platform that I know and love, or sometimes love hate, but the main platform for the guys that I, I help guess what you can, pre-sell on Amazon and I’ve physically done it.
[00:08:57] And lots of people will, if you’re good at creating demand. So I love this opportunity. I really do.
[00:09:01] Jason: I’ll tell you, this is one of the ways in which digital good sellers have a disadvantage. Over physical good sellers. All things being equal. I’m usually like digital goods, that’s the way to go.
[00:09:12] But, but I realize most of our audience deals in physical goods and this is a situation in which digital good sellers just don’t have this advantage. People know there’s unlimited forever supply of any digital assets it’s created. You can’t say, for software or for how to guides or for, video courses or something like that.
[00:09:29] There’s only 42 copies left. You just can’t do. But for physical stuff, you absolutely can. And on Shopify specifically, I will tell you that there are specific apps that you can rig up on your store that will, for example, give the stock, units count right under the, on the products page, right underneath the, add to cart button where, you know, so basically it can say like only four left in stock or two left in stock.
[00:09:53] We encourage our e-commerce, customers, our clients to install that. And, there’s several to choose from, but they basically all do the same thing. And that’s a really smart thing to do because it helps clarify that sense of scarcity, juxta position to the current price,
[00:10:09] Michael: Love that. And, couple of thoughts. Obviously on Amazon, this happens automatically, but you can engineer it by doing a couple of things. That being too trick, you can reserve stock. So you can put it on one side and say, this is not available for sale. So you could have 250 units in the FBA warehouse system.
[00:10:24] Spreaded all over the states or whichever country it is. And then if you’ve reserved, 210 units, you only have 40 left. So when it gets down to, the last 20 or so they’ll start telling people. So that could be a smart tactic, as long as you don’t overuse it. But the other thing I would say though, is the psychology of the sellers is very soon to me cuz most physical good sellers.
[00:10:42] And this is an extraordinary. Testament to the amazing time we’ve been living through, which historically has never been this way. We’ve effectively been able to treat physical goods as almost as replaceable as digital goods. , which is crazy. And that era, I think, is. I don’t think it’s drawn to a close.
[00:10:58] I think it’s over. I think there’s a sort of overhang psychologically that everyone in the world, including that’s right. Consumers and the eCommerce sellers. I know think this is temporary. I don’t think it is, but even if it’s not temporary, it’s gonna be around for, the next 18 next two Years’s.
[00:11:11] And what that means is. The reality is the physical goods are very limited and not easily replaceable. And therefore each individual unit, has a great deal of pricing power if there is demand for it. And to your point, the different categories have different levels of demand and sensitive to price.
[00:11:25] But I think people way underestimate this because their psychology is trained by as a consumer and as a seller, a generation of plenty where nothing was really ever in short. And this is suddenly changed.
[00:11:38] Jason: Yeah. This is the situation where it’s almost like which of the two options, which of the two bad options would you prefer as a buyer?
[00:11:46] And I’m thinking of the baby formula shortage right now in the us. It’s really actually so alarming and sad and horrible meaning you hear that these families that are like, please help me find this specific formula for my baby. Like I can’t find it anywhere. So the question is as a consumer, which would you have rather had.
[00:12:01] Low prices until there’s zero available. And then you have complete outage or prices that ratcheted it up real high so that it was available to you. But you had to pay four times as much or five times as much. And that is, on the horns of a dilemma that nobody wants to be on, but we’re as sellers in the middle of that decision making, vector, which of those two things do we.
[00:12:24] And I would just say, there’s real world implications. For baby formula, stuff like that. I would imagine that if you’re a, new parent, you would have rather had supply available to you, even though, even if you had a bay two or three times more, For it. And, yeah, I don’t know.
[00:12:40] But those are hard options, but I think we have to think through for our specific niches and for our customers that are looking for our products, which, scenario, which is least bad yeah. Of the bad options, I guess
[00:12:52] Michael: that comes down to, I guess you introduced me to the phrase.
[00:12:55] I think it’s price elasticity of demand or in elasticity. In other in other words, so petrol, IE gasoline has gone up 50% in the UK in the last few months are probably a little bit more, I got rid of my car about three years ago, partly cuz of things like that. And partly cuz we live in central London and it was OUS driving and we have public transport, but yeah.
[00:13:12] It’s one of those things there. If you have to drive to work because public transport’s more expensive or not available, you will probably, keep buying, petal or gas at that kind of price. There’s probably a level where it just basically causes massive recession. I believe that, there’s a certain.
[00:13:28] I think a sort of a 10 or $20 raise in the oil price correlates to 1% of reduction in GDP globally, or I can’t remember the exact numbers, but there is a correlation, but it’s very gradual. It’s not very specific to individual sales, whereas, baby milk might be another thing or baby formula, whereas there’d be other things to the point of the discretionary.
[00:13:46] Level, where people just go, I’m not gonna buy that sort of luxury level handbag, for example. Yeah. But I might buy myself a substitute, a sort of, luxury substitute, which I think is another positioning where on Amazon anyway, just generally not premium, but affordable premium. If that’s thing is a positioning.
[00:14:03] That’s always been quite, how can I put it quite native to Amazon as a platform? It’s not like there aren’t wealthy people buying a lot of expensive products, but it tends towards that. And I think. That’s not a bad place to go in my opinion. How do you look through this sort of lens of ity demand?
[00:14:18] What do you come up with as solutions there?
[00:14:21] Jason: Yeah, so the concept is if prices increase radically, does demand drop off or does it stay the same? And there are some things like, when a fuel could be an example, some of this, stuff’s not discretionary, you just have to buy it at any price point.
[00:14:35] And yeah, I, to your point about the price positioning on Amazon, I think I, I also think of target as an interesting, Case in point, my wife and daughters love target. They, it is just they’re addicted to target and I didn’t really understand it, but then I really started to ask them, what’s the pricing?
[00:14:51] What is this stuff like? What’s it compared to? And basically the pricing strategy for target is they have designs that are similar to high end designs, but they’ve manufactured them at a low price. Cost wise, so that they’re basically nice designs at an affordable price point to your point, how you describe it.
[00:15:11] And I think Amazon is good for that as well. And if you can play in that space as an e-commerce operator, you’re wise to do it, Target assembled that system by buying brands and by building brands internally. And if Smith and Hawkin is the brand, I always loved in the gardening space.
[00:15:26] They bought that company and it had a prestige brand concept. And then they made it just a shelf brand. And so I, you have to decide as a seller, can you create a, the feeling of a higher end brand, you do that through your photography, through your website, through your. Copywriting through your videography, through your social media, your, the look and feel of the packaging. And can you, but then can you deliver it for a good, a fair price and still make margin? These are the struggles. All of those components. The work for videography, the work for photography, the work for copywriting, the, the cost of the packaging for your, your product, all of those things are inflating radically.
[00:16:07] And can you even build a system like that? That’s the challenge. And so I think those are the hard decisions for sellers.
[00:16:12] Michael: I guess again, this is a sort of nice to have in good times and it must have in bad times. So I would say all the things you were saying about creating the feel of a high end brand, but with a affordable quality affordable products is something that all Amazon sellers I know really have been, the successful ones have been playing in that pool.
[00:16:29] I, I would say. It comes down some harder choices possibly, and maybe you do fewer product lines or you expand more slowly or you stop expanding product lines and just focus on what works. But I would always say there’s a sort of upfront investment or overhead type cost with photography, copywriting, videography.
[00:16:45] Packaging development, which can be considerable, but none of that, except for the packaging hits the direct cost. So each sale is incrementally more profitable, right? And I’m always a big fan of particularly marketing assets. And on Amazon, it comes down to the product detail page optimization. It’s a fairly simple but brutal flight , which has its nuances.
[00:17:04] Obviously Shopify, you’ve got a broader canvas to work on marketing assets are. They’re not one and done, but they’re one off in the sense that you maybe, you got to update more and more on, on someone like Shopify, but for an Amazon Lister, you could update it once a season and get away with it as long as you’ve adjusted for the new economic situation.
[00:17:22] And so I think paying once and getting paid multiple times is always a smart investment is what I’m trying to say rather than focusing too much on the direct cost, which is always a fight. Every single time you make a sale, and
[00:17:32] Jason: sometimes in an, a recessionary period, you can actually lean into the.
[00:17:38] Low cost brand. As a strategy. When I grew up as a kid, we would go to the grocery store called Lucky’s and they had a whole aisle of generic. Items that were all in a yellow box. You wouldn’t wanna be caught dead as a, fifth grader or sixth grader in school having, yellow box food, cuz it was almost like government food.
[00:17:57] It was like the cheap stuff, it’s like government cheese is a famous thing in America. It’s that’s what the poor people got. But if, you’re in a recession and you’re selling on Amazon, you can certainly lean into that as a strategy, yellow box is a strategy you can, for example, have a brown paper bag with a sticker on it and say, this is the cheapest version of this.
[00:18:17] You’re gonna find on Amazon, cuz we’re not spending any money. Packaging. And if the customer believes that argument and they like that, and they think, okay, this is a credible product. These guys are trying to be as cheap as possible. You might win sales with that approach, so that’s again to principle three in the book, aligning marketing and pricing.
[00:18:34] And there’s a lot of, creative opportunity there, to really think through how to appeal. The mind of the, and the psychology of the customer, yeah.
[00:18:42] Michael: It’s interesting. When you say that part of me is, reacting at a fear level almost as thinking, oh my goodness, the Chinese suppliers will always be cheaper, but that is, that has been true for the last generation really, or increasingly the last 10 years, but actually, With the COVID lockdowns and then goodness, there’s what else happens.
[00:18:58] Like the oil price rising, which will hugely impact China, cuz it imports everything in huge amounts, including oil. Then that may, there may be a tipping point where actually. Particularly American producers could become the low cost high value, good value to the bargain, lower pricing point.
[00:19:14] And that, that time may be approaching. I got a feeling that it’s a bit early for the making that work in terms of profit, at the moment, but who knows? It depends on the category you’re selling of course as well,
[00:19:24] Jason: like baby. So let me summarize, cuz we’ve got a hard stop here in a moment, but, Let me summarize this way in a recessionary time and in high inflation time, your pricing strategy is the most central thing you can think through in terms of managing your success, going forward.
[00:19:39] Consider a reverse sale. Consider repositioning your brand and your product lines, consider how your marketing aligns to your pricing and how to be creative in storytelling in customer conversations about how best to, be honest about what you have to do, which is. Likely race prices. And in those ways you can stay ahead of the curve here, look for opportunities to acquire your competitors as they maybe go under, and grow your brand and grow your, overall leadership in your niche, even during a recessionary time.
[00:20:12] So hopefully that’s a decent summary of the conversation. And Michael, as always, it’s an honor to hang out with you. I’ll just suggest that people check out. Call in show on the call app and then also on Spotify, where we tend to be rising every month, which is really exciting. If on any podcast player you’re listening to us, we’d love your highest and best review and, comment about the quality of the show from your point of view would be incredibly helpful as well.
[00:20:38] So Michael, appreciate the conversation, man.
[00:20:41] Michael: Jason, likewise, it’s been fantastic. Thank you. Yep. Talk
[00:20:44] Jason: soon.
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