The E-commerce Leader

[00:00:00] Jason: you don’t want to compete with yourself. On your new website. If you end up changing your prices on different places, it can cause real problems.
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[00:01:11] Michael: What is your near term business goal? Do you even have one, if nothing just popped into your mind, you may have a problem which would be that you are in business with no near term business goals. Directionist just surviving, not focused. So in today’s podcast conversation, we’re gonna address that issue and explain how pricing strategy connects to it.
[00:01:32] So Jason dramatic introduction, give us a little introduction to the pricing principle number four, and explain how it relates to having, or indeed not having any near term business
[00:01:40] Jason: goals. Yeah, I I think this is a vital topic to discuss and really the gist of it is we need to make sure that our business goal is aligned with our pricing strategy.
[00:01:48] Or really it’s aligning our pricing strategy with our core business goal. And, but that begs the question. What is your business goal? And, the truth is after a. Years. Some of us can and I would, I may point the finger at myself. Some of us can just get satisfied with where we’re at in business.
[00:02:06] We hit a plateau. Maybe we feel like we’ve got things sorted out sufficiently. And we’re like, this is good. I’m happy. I’m set. And we stop challenging ourselves with near term specific business goals, cuz we’re like just managing a system that works. But the truth is we all need short term business goals and those are either.
[00:02:26] Put on us by the market conditions or they’re put on us by ourselves. And, when we start a business, we’re frequently like real focused on the near term business goals. And so I just wanna challenge everybody to think about what is your near term business goal, and then how does your pricing stack up against it and your pricing strategy fit and align and support it.
[00:02:44] And there are other strategies of course, that have to support it as well. Operational goals, product strategy, goals, sourcing strategies on and on, but the pricing strategy that supports your business goals are particularly important. And that’s what we wanna focus on today. So hopefully that’s a good little introduction and tease up the topic nicely.
[00:03:00] Great.
[00:03:01] Michael: And so that’s a nice sort of, a broad topic of business goals, but with a very specific kind of slice through it with the pricing strategy. What are the common business goals that relate as pricing strategy then?
[00:03:11] Jason: Yeah. I think there’s a whole set of them. There’s more than we could ever even name together here, but I think, I brainstormed a list before we started the conversation and you done a few as well.
[00:03:19] And so let me just mention a few and, then we. We’ll dive into a few of these and do a deep dive into them. There, there are a lot of goals. The first goal, when you think about launching a new e-commerce operation would be maybe it’s to make a thousand dollars, a month, through your business.
[00:03:33] That’s a good first goal. That was our first goal and we did that for, it was, 18 months or more. But, before anything really changed. And that was just the goal we STR for. We run eBay back in the day, 2007. And, that was, that was the first good goal. Second goal might be building a bigger audience.
[00:03:50] Maybe you’ve got a business that requires a large audience, and you want a lot of followers. Different social media platforms, big email list, something like that. That’s a different business goal. Third one might be launching a new private label brand or, a new product, or even launching a brand in its entirety.
[00:04:05] The fourth business goal might be switching from a big marketplace, selling on Amazon to switching, or to adding a direct to consumer. Maybe you want to add, a Shopify site to support your product. That’s a very common goal. Another one might be taking market share from a bigger competitor.
[00:04:21] Maybe you’re an entre, you’re making sales, you’ve got something happening and you’re feeling good about it. But you realize that there are a lot bigger market players that are dominating and you wanna take share from them. Another business goal might just be survival. Maybe you’re on.
[00:04:35] On the bubble and your business is about to go under and you’ve gotta figure out how to do survival pricing. Another one might be reputation or market building in terms of your brand, name awareness, just getting yourself out there as an industry player. Maybe you’re in a competitive market with lots and lots of players, and you just need people to know your name and focus on name recogni.
[00:04:56] An eighth one, I think eighth on my list is, maybe you wanna create your own anchors and an anchor is a price point, or a price positioning of a product. That’s a whole different, I think we’ll get into that in, as we talk about, chapter nine of pricing power, but those are eight business goals that are pretty common.
[00:05:12] And I, again, all of us have different places we’re at in our business and the, your goal might be different than any of these, but, those are some that are. That are top of mind for me, Michael. I know you’ve got a few as or others. What are your thoughts on this? Yeah, I
[00:05:25] Michael: think there’s, pretty common goals and very good goals.
[00:05:28] So pretty concrete. I’ve come across in the private label and Amazon focused more narrow world that I tend to inhabit. I guess three other goals. One is doubling revenue. And I always question that as a go on everybody seems obsessed with doing that. I dunno. It’s gonna double this year. Okay. Why are you gonna do that?
[00:05:46] This coach of mine, Dan bravery went to, I can’t remember the name of the guy. He went tos really good. I think it’s, he’s written a book and I’ll look it up and I’ll put it in the show notes, but the guy who went. Keith Cunningham. I think it is written a book called the road less stupid. And I think Dan went to him and said, I wanna double my business next year.
[00:06:02] And he sat back and there was silence. And he said, I think that’s possibly the stupidest goal I’ve ever heard or something like that. so I’m not saying that sounds a bit aggressive, but I do not endorse this, but nevertheless, it’s gonna be a bit more mindful on that because why are you doing this? Is it because you think you’re gonna double your profit?
[00:06:18] Okay. Then why don’t you just say, I wanna double my profit. to do with the pricing question, right? Maybe a very different thing from doubling revenue. The other things, however, which I think are excellent goals, which are very common and very real things are creating a sellable business for the future.
[00:06:31] I took on a new mentoring client yesterday. He’s got that very goal within say three years and selling a business within the next 12 months. And we’ve had a member of the mastermind recently sell a business. And of course that means you’ve gotta think quite differently. Near term pricing, and profits.
[00:06:44] Really? Yeah. Those,
[00:06:45] Jason: the other things. So you’ve mentioned doubling profit. So you had doubling revenue, doubling, profit, creating a sellable business for the future and selling your business the next 12 months. We’ve worked with clients on all of those goals, actually. And these are, I like the doubling your, sales.
[00:06:58] I like the doubling your profit. A lot more because the truth is, big doors swing on little hinges. And many times you can end up doubling your profit without really increasing your top line revenue very much because it’s an operational efficiency thing. And, it’s a strategy thing and pricing, Really plays into that very nicely.
[00:07:17] So I like that one a lot. Okay. So that’s 12 business goals. And we could do a whole podcast just on these and really geek out over all of those, but that’s not really the emphasis of today’s show. Today’s show is really all about trying to figure out how to align pricing with your business goal.
[00:07:31] It’s a two step maneuver. It’s not good enough to just jump off the diving board. You’ve gotta do some kind. Acrobatic thing in the air before you hit the water to get any points, you’ve gotta do something interesting for the judges to say yes, that, that work. And so the question is how do you rig up pricing, to support any, any one of these and, that’s what we wanna talk about a bit more today.
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[00:07:51] Michael: Yeah. Great. So now we’ve been very rude about the doubling revenue goal. maybe we should take one or two of them that we are a bit more polite. I’m particularly biased towards the switching from a big marketplace to adding DTC site, sales, cuz I’ve got two or three clients who are doing that, but.
[00:08:07] Again, to the point. One of them does, I don’t know about a million bucks a year in revenue, but when we dug a bit deeper into it, they’re not very excited about it cuz they don’t really do anything except break even more or less. And other people have got it and it’s just losing money and it’s early days for them.
[00:08:19] Yeah. So I’m biased. Is there before we get into an individual one though, which I’m particularly obsessed with that one, it are there generalized pricing strategies that relate to all of the goals we’ve just mentioned.
[00:08:29] Jason: Yeah. We’ve talked about the three common. Pricing tactics in the prior podcast conversations.
[00:08:35] And just to review those, so we don’t have to clarify your terminology. There, there are three basic positions you take in any pricing, game. One is the. Penetration pricing or being the lowcost provider. That’s the low, the cheapest pricer. You’re gonna be the cheapest person selling the item.
[00:08:52] That’s called penetration pricing by the economist, the, that’s a hard road to ho because you have to be able to justify the low cost. Inside your business. You can’t just do that on a whim and say, I’m gonna make less than everybody else. You’ll go out of business. It won’t work. So anyway, so that’s penetration pricing the third or the second one is me too pricing.
[00:09:11] And that’s just where you’re in the pack of pricing. Maybe there’s 10, sellers that are all selling something similar and they’re all hovering in the $12 range. Then you too offer your item at the $12 range, so that’s me too pricing. And the then, and that’s real safe, and then the third.
[00:09:26] Strategy is premium pricing or prestige pricing. And that’s where you have the highest price product in the marketplace. You have to be able to demand that from the buyers and you have to be able to justify it over the long term. That’s generally tied to high value branding and, really exceptional marketing.
[00:09:45] So those are just three general strategies that many people will play around with. And so that’s, and it’s good context, I think for what we’re about to talk about as well.
[00:09:54] Michael: Excellent now. I guess we should talk I’ve poured score on the idea of just doubling revenue for the sake of it. Is there a sort of generalized error that you see with pricing strategy, across all the different goals that we talked about before we get into the individual goals?
[00:10:09] Jason: Yeah, the , the most comp like if you’re just saying to yourself, okay, those are 12 business goals and I could pick up two or three of those. I like them, or maybe two, one or two of ’em have it in top of mind right now. Or maybe you got one top of mind. If your pricing strategy or your pricing response to any one of those.
[00:10:24] Offer more discounts then you don’t have a pricing strategy really that, that’s not the right answer. The wrong answer is just coupon discount, coupon, discount, lower price. That can’t be the way to a sustainable path forward for your business. It just can’t, you can’t survive forever in that game.
[00:10:42] It ha you have to get more sophisticated than that. So I would say that’s a general error that many people would make is just what’s the solution to any problem. It’s lowering your price. It’s almost like the old thing that was like, if all you have is a hammer, everything looks like a nail, yeah. They just that get can’t be the right response. That’s not a sophist economic, strategy. That will, but you are absolutely
[00:11:04] Michael: right. What I think is interesting about what you’ve talked about with pricing strategy and linking that with having goals or other, the absence of them is in the absence of you having a clear goal as a seller in the marketplace, or indeed in, in a market, generally you are gonna be influenced consciously or not by the strategies or the priorities of the market.
[00:11:22] And if you sell on Amazon’s priority is lower price of grace selection. So they want you to put out yet another product line. Give more selection at a low price because that’s what they want for their consumers, but that doesn’t serve us at all and say, you’re right. That is very easy to do that actually.
[00:11:38] Jason: Exactly right. The consumer also wants one other thing. They want the lowest price possible and or it free and they also want it now. So what do consumers want? I want more and I want it now. That’s not a surprising, giving into that impulse lower is not a surprising or interesting pricing strategy.
[00:11:55] So anyway, so all that to say, that’s not the right answer. And let’s talk about one of the, strategies here. You mentioned the one. Switching from a marketplace to your own direct to consumer website, that’s a noble goal, a business goal. That’s obviously for e-commerce sellers that are on a journey of selling in marketplaces.
[00:12:12] That’s a fantastic, ex exercise to think through and launch and go through. We help many clients do that. And my Shopify, power course on TMY. I think we’re almost at 40,000 students. And that’s the journey. Most of them are on they’re, they’ve sold some on Amazon or eBay and they’ve made some money and they’ve figured, oh, I better get myself a Shopify site set up.
[00:12:31] And so the pricing strategy associated with that is really interesting to think through. And so let’s walk through that. So I’ll just mention three or four, five ideas related to having something you’re, let’s just say fictitiously, somebody selling $10,000 a month on. And, so they’ve got a six-figure business, and they want to sell, direct to consumer on their own Shopify site.
[00:12:52] So what would you do in terms of pricing strategy? What’s the battle plan or the general game plan? Let me mention two or three ideas here. So the first one would be, you don’t want to compete with yourself. On your new website. So in other words, you’ve got Amazon price points. Let’s say your Amazon price points, $20.
[00:13:10] You don’t wanna launch your Shopify price strategy and say, I’m gonna sell for $19. On my Shopify site, because I have more margin cuz Amazon’s not taking, my, my, the costs out on their side, so I can sell for cheaper. That’s a really stupid thing to do. So you don’t wanna do that. And the reason you don’t wanna do that is first of all, Amazon could see it and the marketplaces are very sophisticated now.
[00:13:33] And, if you end up changing your prices on different places, it can cause real problems. In fact, you can end up. We’ve had clients have this happen. One price on chewy and one price on Amazon and Amazon gets mad at the chewy price and the chewy price. People don’t care they’ll do sales or whatever, and it actually ruins your sales opportunities on all the places, because you’ve, you or someone else’s fiddled around with prices.
[00:13:57] The other thing about. Not competing with yourself is if you sell your product for, let’s say $19 on your own website, and then you, sell it for $20 on Amazon, what you’re expressing to the people who really look into it, the people who are really investigating who you are and what you’re doing is a lack of integrity.
[00:14:17] And, it’s a lack of pricing integrity, and you could argue and say, no, it’s not, there, everybody does this every place. No, really what you’re saying is if you buy it on Amazon, you get it for $20. You buy it on my site, you get it for 19. Why? Because well, that literally that, because you have no actual justification, that makes sense is a dumb positioning strategy for pricing.
[00:14:37] So don’t do that. Okay. So that’s the first thing is don’t compete with your. Publicly, but what you can do, this is really valuable and why Shopify sites are super, valuable to eCommerce operators is you can discreetly discount or you can create a non-direct or non obvious. Opportunities for, better pricing through Shopify site.
[00:14:58] How do you do that? You can do that through having loyalty points program. So loyalty point programs are, everybody does it. Starbucks has mastered this. Now everybody goes to Starbucks and you just, you don’t give ’em money and you don’t give ’em a credit card. What do you give ’em you just point the Starbucks app at the Starbucks person?
[00:15:16] I told somebody recently, Starbucks, I heard. Thought somebody else told me, Starbucks is basically a bank. Now everybody gives Starbucks their money and then Starbucks holds your money on an app. And then they let you use it in their store. what is happening right now. So anyway, but the, that lty program gives them the opportunity to give away a cookie or a free drink or a 10% off or a whatever.
[00:15:46] So you can create loyalty program. You can create VIP programs. And, and create, opportunities for your VIPs to get better pricing. We’ve helped clients implement these types of strategies and they really work well. You can, you can implement, buy, and save or subscribe and save on Shopify.
[00:16:01] So it’s the same exact price as you have on Amazon. But if you subscribe, you save on shop. And, and that’s actually on Amazon as well. You can mirror that on Shopify. So these are just, Shopify tricks of the trade that, or apps technically that allow you to have a better pricing strategy on your Shopify site than you would find on Amazon.
[00:16:22] So that’s the second thing. Third thing, and then, sorry, I know just going here, but third thing is, you could create upsells and cross cells that really increase your average order value. So you want to have average order value on your Shopify transactions, be as high as possible, and you do that through upsells and cross cells.
[00:16:41] And a secondary product concept there you’re playing with and the pricing for it is the object that you’re playing with, not the pricing for your primary product. So all these things work together on a Shopify site to create the context in which. You’re again, mirroring the Amazon price.
[00:16:59] So you have integrity, but you’re really creating a context in which there’s a real good reason for people to come and buy from you on your Shopify site. So that’s just a little bit, of what I would think in that regard for that specific business goal. Yeah.
[00:17:13] Wrapup: Hey there, folks. Thank you so much for listening to the eCommerce leader. Hope you found today’s discussion helpful. I certainly find that pricing is surprisingly deep and important and Jason’s given it so much thought he’s literally written the book on this pricing power. By Jason G. Miles is Jason’s full name on Amazon.
[00:17:33] Go check that out. I would just buy it straight away. Don’t even need to think about it. It’s two $99. I think on Kindle in the us, in the UK, whatever the pound equivalent is or the paper black version. And the reason why I think it’s important is shown by yet another discussion today, which is the alignment between your business goals and your pricing strategy.
[00:17:53] Or maybe there is a lack of both in which case you’ve really gotta think this stuff through. This is not a casual. Matter. And as I think the most important thing that came up for me today is just the renewed realization that if you don’t have a conscious pricing strategy, you’re just gonna take on whatever the environment you are in, tells you to take on.
[00:18:12] And if you sell on Amazon, particularly that’s gonna be sell more stuff at the lowest price you can. Get away with, and that is not necessarily correct for you. It might be right. So following close following competitors, but it might be very wrong. And if it’s out of alignment with where you want to go with your business, if you are saying, or thinking one thing and then doing another well, then it’s really time to think the stuff through.
[00:18:36] So hope that was helpful. Starting point, go get the book. And of course, as ever, don’t forget to subscribe to this podcast. If you haven’t already, if you. Any one of the podcast players out there. And if you’re on apple podcasts or Spotify, please, don’t forget to give us a rating out of five stars that will take you all of 10 seconds.
[00:18:53] And final thing to say is thank you so much for letting us help you and giving us your time and attention. We’ll continue to produce content as long as you want to have it. And we’ll continue to try and make you the best eCommerce leader you can be. Thanks very much for listening.
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