E-Providers Startups and Pricing
So you've started up your e-commerce company or perhaps you are a freelancer working in the exciting field of e-commerce.
Maybe your services include web designing, data entry, hosting, e-consulting, social media management, etc - By the way, this is Piggi writing.
You've set everything up (or at least in your mind or on a piece of paper) and now you are wondering how much you should charge for your services...
You are probably thinking that you should charge less than other providers do, so that you can attract your first and precious clients...
Sounds like a reasonable strategy, but be careful of some "deadly" pitfalls...
We all want new customers, especially when it's a startup that we are talking about (Piggi would also like to conquer the world of e-commerce but let's not get into my personal endeavours right now!).
Unless you have created something which is extremely unique, you will probably have to adjust your prices based on what other players in your industry are charging for and chances are, that you might have provide more attractive rates than they do, so that you can be more attractive towards the potential customers.
"The question is, how low should you go"? A common mistake that many entrepreneurs do though, is that they sometimes drop their prices too low, expecting that they might trigger a nice positive client inflow.
Doing that, might give you an advantage, especially in today's lousy economic crisis, but there might be several pitfalls that come with following "the lowest possible" price strategy.
To start with, what many entrepreneurs don't realise is that providing the lowest prices in the market, does not necessarily translate into a mass flow of customers.
Why? Well, let's ask ourselves this question...
You can buy a leather bag made in China (no offence to China - Piggi loves any nationality, even though some people want to eat me), for a price of 50 USD and you can buy a similar leather bag, made by a brand called Louis Vuitton for the price of 1,000 USD.
The latter brand makes millions by selling their leather bags and its not just the wealthy people who buy them.
Many people (including students) save money for several months in order to get their L.
V.
bag.
So why do people spend so much for a bag if they can simply buy one for 50 USD? The reason is, that they are not buying a bag, but instead they are buying a brand.
The brand translates to quality, guarantee, craftsmanship, fashion and many other intangible elements.
"Sometimes people think that cheap is not always the best and are actually willing to spend more".
So taking that into consideration, it's always better to do some research and know how much people are willing to spend for a service before deciding to being the cheapest provider.
Another pitfall, is that providing extremely low prices to try and get more clients at the beginning, might make if very difficult for you to increase your prices when you finally have a good number of established clients.
Let's take another example, which is a real one.
Piggi likes to work out.
Yes I might be a bit chubby but I do my best to stay fit! Each time I complete a gym session, I usually buy from the fitness cafeteria one protein bar.
That protein bar cost around 2 USD and the price has not changed for several years.
If the fitness center decides to increase that bar just by 1 USD, do you think Piggi will still be buying it every time I go there? I mean, 1 USD is not a lot, but here is the catch: "People do not like to see a price increase, even if it's for a few cents! Why? Because they feel cheated and they start asking themselves, why should the store earn more for the same product"? There are many more examples I could give here, but I won't for three simple reasons: 1.
People don't like reading too much, 2.
It's 23:00 and it's past my bed-time and 3.
I think you got the point! So let me ask you again...
"What's your pricing strategy"?
Maybe your services include web designing, data entry, hosting, e-consulting, social media management, etc - By the way, this is Piggi writing.
You've set everything up (or at least in your mind or on a piece of paper) and now you are wondering how much you should charge for your services...
You are probably thinking that you should charge less than other providers do, so that you can attract your first and precious clients...
Sounds like a reasonable strategy, but be careful of some "deadly" pitfalls...
We all want new customers, especially when it's a startup that we are talking about (Piggi would also like to conquer the world of e-commerce but let's not get into my personal endeavours right now!).
Unless you have created something which is extremely unique, you will probably have to adjust your prices based on what other players in your industry are charging for and chances are, that you might have provide more attractive rates than they do, so that you can be more attractive towards the potential customers.
"The question is, how low should you go"? A common mistake that many entrepreneurs do though, is that they sometimes drop their prices too low, expecting that they might trigger a nice positive client inflow.
Doing that, might give you an advantage, especially in today's lousy economic crisis, but there might be several pitfalls that come with following "the lowest possible" price strategy.
To start with, what many entrepreneurs don't realise is that providing the lowest prices in the market, does not necessarily translate into a mass flow of customers.
Why? Well, let's ask ourselves this question...
You can buy a leather bag made in China (no offence to China - Piggi loves any nationality, even though some people want to eat me), for a price of 50 USD and you can buy a similar leather bag, made by a brand called Louis Vuitton for the price of 1,000 USD.
The latter brand makes millions by selling their leather bags and its not just the wealthy people who buy them.
Many people (including students) save money for several months in order to get their L.
V.
bag.
So why do people spend so much for a bag if they can simply buy one for 50 USD? The reason is, that they are not buying a bag, but instead they are buying a brand.
The brand translates to quality, guarantee, craftsmanship, fashion and many other intangible elements.
"Sometimes people think that cheap is not always the best and are actually willing to spend more".
So taking that into consideration, it's always better to do some research and know how much people are willing to spend for a service before deciding to being the cheapest provider.
Another pitfall, is that providing extremely low prices to try and get more clients at the beginning, might make if very difficult for you to increase your prices when you finally have a good number of established clients.
Let's take another example, which is a real one.
Piggi likes to work out.
Yes I might be a bit chubby but I do my best to stay fit! Each time I complete a gym session, I usually buy from the fitness cafeteria one protein bar.
That protein bar cost around 2 USD and the price has not changed for several years.
If the fitness center decides to increase that bar just by 1 USD, do you think Piggi will still be buying it every time I go there? I mean, 1 USD is not a lot, but here is the catch: "People do not like to see a price increase, even if it's for a few cents! Why? Because they feel cheated and they start asking themselves, why should the store earn more for the same product"? There are many more examples I could give here, but I won't for three simple reasons: 1.
People don't like reading too much, 2.
It's 23:00 and it's past my bed-time and 3.
I think you got the point! So let me ask you again...
"What's your pricing strategy"?
Source...