Hot trends for 2023

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It’s the end of 2022, so it’s time to look forwards and see what is going to be selling like hot cakes next year.

Many of 2022’s best sellers will probably continue to do well. But there will be several themes that will become particularly noticeable next year.

For instance, with the economic environment still looking difficult, consumers will be looking for small treats. They don’t want to spend a lot of money but they do want to feel special, so this isn’t the same kind of thing as ‘cheap stuff’.

They’re looking for quality and luxury, but in tiny amounts. It’s like having a really intense  but tiny chocolate truffle, instead of a big slice of apple pie. In the tech crash of 2001, Estee Lauder saw lipstick sales rocket; women weren’t buying expensive handbags or shoes, or new outfits, but a new lipstick was both easily affordable and made them feel good.

So small indulgences might be products like

•      costume jewelry

•      lipstick

•      chocolate

•      aromatherapy oils

•      silk socks.

Customers might want to buy a new fruit bowl or coffee mug, but probably not a whole new dinner service.

Male grooming has been a really strong sector for a while, and there are plenty of small treats in this sector too; shaving foams, gels, mustache waxes, and so on.

Another trend we’ll see a lot of is “make do and mend“. The European Union has even passed laws requiring makers of electronic and mechanical products to ensure that products are easily repairable.

Repair products could include packs for repairing mobile phone screens or car windscreens, touch-up pens, or furniture reviver kits including different wood color waxes and scratch removers.

In this sector, you’re not providing craft materials so much as giving people an easy way to avoid a big outlay on having to buy things new. A leather dye and scuff remover is an easy way for someone to make their shoes last longer. Think about how you can present these products in a classy and user-friendly way, and make your customers feel really happy about using them.

Clothing has been all around the place since the pandemic started, with fashion oscillating between comfy onesies for the home and extrovert strut-your-stuff trends for back to the office. But athleisure has been an area that’s done really well. Now the trend seems to be for smart athleisure like Muji’s lovely soft gray pants and loose linen shirts.

In home decor, there’s a similar trend for hygge, for soft, welcoming, cocoon style stuff. Big chunky knit throws and shaggy rugs, for instance, warm a room up nicely. Yes, this trend has been around since 2017 but it’s still going strong, updated to include a more natural and decluttered style.

While sustainability isn’t top of mind for consumers right now, about half of all consumers have got used to buying sustainable and eco-friendly products. That market isn’t going away, but it might slow. However, cork and bamboo products will keep going, with new products joining the mix; cork yoga mats, bamboo bowls and plates, even bamboo pajamas and cork laptop wraps. The final word for this year is authenticity. Customers have got interested in local food, local producers, and local traditions, and they’re looking for things with an authentic feel.  If you can mix the local story of single estate teas or coffees with a sense of luxury, for instance, you have a really convincing product. A set of spices for a particular cuisine, like ‘all the Korean spices you need’ or ‘the Singapore box’ could do well

316


Creating a Pricing Strategy

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One kind of strategy is just matching your competitors’ prices, and it’s one that a lot of FBA sellers use. Automatic repricing software can carry this strategy out effectively without your even needing to think about it.

But there are other kinds of pricing strategy that work, too. Each strategy can work for particular types of product and in particular situations, so we’re going to talk you through the different strategies and where they fit.

Premium pricing means you will always be a bit more expensive than your competitors. Does that sound stupid? Will anyone buy your product if it costs more than the alternative?

It works for luxury products. Louis Vuitton, Burberry, Chanel, Mercedes all use premium pricing. It also works where your product is clearly the best. For instance, if you sell a ruggedized computer that can deal with being used in sub-zero temperatures or in a desert sandstorm, can be dropped two meters without breaking, and is waterproof, you can charge three times what most laptops cost and still have buyers beating a path to your door.

Premium pricing works for brands which have taken the time to establish themselves as thoroughly reliable. If you want to get there, you will need to put a lot of work into it, but it can be a very profitable strategy.

Value-based pricing looks at your buyer’s needs and the way they assess the value of your product, and works backwards from there.

To do value-based pricing properly you need to look at one particular segment of the market, look at what your product does that the next best alternative doesn’t, and then think about how much customers might pay for that function. For instance, if you have a self-emptying cat litter tray, you want to focus on apartment dwellers with indoors cats, who need the function most; and you want to think what premium they will pay to have a completely clean apartment with no unpleasant odors or spilled litter.

Sometimes you might start by looking at what customers can afford to pay. If Ford wanted to introduce an e-car for lower income households, it would probably start by setting a price that would be attractive, and then try to design the car to fit.

Price skimming is a pricing policy that suits fashion products and tech life-cycle products. When you introduce a new product, you price it at a premium at first, and then you lower the price little by little to make the product available to other customers and more competitive. You’ll also probably be lowering the price as your competitors catch up with you, or new competitors enter the market.

The opposite is penetration pricing. You need to price low to start with to gain a market, if, for instance, you have an untested and innovative product. Once it’s become mainstream, you can increase the price.

You could also use mark-up or cost-plus pricing, and simply aim to charge double what you paid for an item. The difficulty with this is that customers really don’t care what you paid for your inventory; they only care about value, or about the comparison with other products. While you need to have a way of ensuring each product you sell is profitable, as a pricing strategy, this doesn’t work that well.

Competitor matching is a strategy that can do well. Some retailers will offer to match any competitor’s price, though you shouldn’t do that unless you’re certain that in 99 percent of cases you have got the best price. Go a little further, if you want to gain market share fast, and you could adopt a strategy of undercutting. However, the problem with that strategy is that you may end up never being able to raise your prices, and unless you are really smart with your sourcing, you could end up with low profit margins.

Whichever strategy you choose, you’ll also need pricing tactics for the short term. For instance, you might discount for the holiday season to expand your customer base, or to accompany a major ad campaign. Get the strategy right, though, and the rest will follow.

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Defining your competition when you’re creating a pricing strategy

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When you’re creating a pricing strategy, unless you have a unique patented product (and even then, your patent will only last a limited time), you’ll want to look at your competitors’ pricing as a guide.

For instance, if you’re selling colorful vintage style floral print dresses, you’ll want to look at similar clothing and see what kinds of prices customers are paying. There may be a difference between the top brands and others; there may be a wide range of prices, or there may be quite a narrow band of prices within which you’ll need to fit.

But should you really consider all those products your competitors? That depends.

For instance, you may have competitors who are very small sellers with only a few products in your product segments. It probably isn’t really worth thinking about what they charge, as they are ‘price takers’ rather than ‘price makers’. Their limited size gives them limited market power.

You can weed them out by simply looking for how much they sell on Amazon and what their sales rankings look like.

Competitors with poor reviews are also unlikely to limit your pricing. Potential buyers may be attracted by the low price, but put off by the negative reviews, or possibly by the lack of any reviews. Additionally, Amazon probably will penalize them for those reviews by ranking them pretty low, so buyers may not even get to see those products.

You may also find some competitors regularly price at a premium to the rest of the market.  Work out why that is. It may be because they have a well known brand name, or offer superior reliability or a unique functionality. A good example of this would be a fountain pen manufacturer that makes its own special nibs for calligraphy.

Some brands also sell at a premium price because buyers think they will become collectible; Lego special editions, for instance.

If these price makers have advantages that you don’t, then you can regard their prices as the upper limit to what you can charge.

Making a price map showing the prices at which each of your competitors sells, and the rough amount of their sales, should give you a good idea of how the market is laid out and where you might fit.

You might also want to look at substitute products. One example might be if you sell a sink plunger, look at the price of other ways of unblocking drains. That might also give you good marketing copy; “$50 a year on bottles of drain cleaner or a $6 sink plunger? You decide!”

Now you can evolve your pricing strategy. First of all, you need to decide where your product fits on the map. That’s not necessarily in the middle; if you think you have a high quality product compared to most of the others in the segment, it might be further towards the top priced sellers than the bottom.

Then you need to think about getting started. Right now, if you have no sales and no reviews, buyers are taking that quality on trust. One good way to get past that is to decide on a launch discount to encourage customers to try your brand. That can be particularly effective when there’s one big name, or maybe two, that you need to compete with.

Why not price lower? Because then, if you want to raise your price later, you may lose sales as customers feel bitter about the price hike. Offering a limited discount has the advantage that when it’s over, you can revert to the regular price with no hassle. (And of course Vipon can help you with discounts if that’s the way you want to go.)

As for the permanently out of stock products that seem sometimes to fill Amazon, you can go ahead and ignore them. If they’re not in stock, they’re not competition!

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Urgency and discounts

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If customers know they can always get a discount, they aren’t going to feel particularly motivated to buy right now. They know they can come back tomorrow, or the day after.

For discounts to work, you need to create a sense of urgency. Your potential purchaser needs to feel that if they don’t press the buy button right now this very minute, they’ll miss out.

One way some retailers do it is to email their customers with news of new discounts, letting them get ahead of the queue. Of course, for this to work you’ll have had to build your own email list – not particularly easy if your business is based on Amazon.

You’ll want to get used to copywriting that pushes all the right buttons, with phrases like “ends soon”, “hurry!”, “last chance”, “today only”, or “one time offer”. If you have your own e-commerce website you can add a strong call to action right next to the buy button.

But there are other ways to create urgency, too. You might have a flash sale or a lightning deal. Customers know that this deal will only be available for so long, so even if they don’t buy right now, they’ll likely come back before the end of the day or week. Lightning deals on Amazon, of course, last even less time, so they’ll probably hit the Buy button good and fast.

Preorders at discount prices can also work well to get new products off to a good start. “Order before Tuesday 19th for a special discount” will get buyers thinking about what happens if they wait till the day after…

When a time limit coincides with a special occasion, such as Thanksgiving, Veterans Day, or Black Friday, it’s particularly potent. These are great times to offer Flash Sales, particularly as buyers are often likely to be looking for deals at these times in any case. Of course, you’d want the special occasion to be relevant to your product; discounts on cement mixers, laptops or dehumidifiers probably won’t work their magic for Valentine’s Day.

On the other hand you might set a limit for the number of units available at the special price. One UK retailer uses the slogan “When it’s gone it’s gone”. That can actually be more effective than a time limit, as your buyer doesn’t know how much time they’ve got. Those 100 units might take till tomorrow to sell out, or they might all be gone in ten minutes.

Clearance sales are a particular case in point. Buyers know that you’re clearing out the last inventory, so they know there’s only a limited amount left. Limited-edition products are another way that manufacturers and retailers create scarcity in luxury items. For instance, a limited edition handbag might have just 500 units sold worldwide; the scarcity of the product allows the retailer to keep a high price and still build in the big FOMO factor.

You might also want to add scarcity by only allowing one purchase per customer. This also helps you defend your product against resellers buying it at sales price and then putting it on sale at the original price, making a nice profit margin.

Of course if you use Vipon, you can also get access to buyers who have already proven that they’re really motivated to get discounts. Motivated buyers plus scarcity plus time pressure is a really great way to get your products moving out of the warehouse!

285


Value Vs Price

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Oscar Wilde once said  “A cynic is someone who knows the price of everything and the value of nothing”.

A lot of FBA sellers focus on price. They use automatic repricers, they try to undercut their competition, and they believe price is what’s going to get them sales.

In fact, buyers are looking for value, not price. If someone doesn’t have a cat, they don’t want to buy a cat toy at any price. If they do have a cat, and it only plays with catnip fish toys, they will only buy catnip fish toys. The value lies in the fact that choosy cat will play with it.

They might try other toys, but they feel they’re taking a risk. Choosy cat may not like it. So they’ll want to pay a low price to reflect that risk. If you happened to have a discount offer, they might be tempted.

With fashion goods, buyers might look for one of two different kinds of value. A woman who knows she looks good in black might see an asymmetrical cut black linen dress and instantly see that it’s going to make her look amazing. That’s the value to her. It’s personal. On the other hand a lot of buyers want to be in the trend, or they want to buy a particular designer brand so they can show that they own it. That’s a social value, in some ways.

The interesting fact here is that for some designer brands, sending the message “I’m rich enough to afford it” is part of the value. Of course, someone who’s not quite rich enough to afford it will jump at the chance to buy it in a sale. But if there are too many sales, the original buyers may feel the brand has been devalued; anyone can buy it now, and that exclusive appeal has gone.

Let’s think about another instance of value, the Swiss Army Knife. These are genuinely all-in-one tools which can open beer and wine bottles, fix loose screws, cut and file your nails, whittle or saw through wood, cut wire and get stones out of your horse’s hooves.

Their value is that you have one small tool which isn’t difficult to carry around and which can easily get you out of a fix. And they’re also known to be reliable and high quality. So they sell at a reasonably high price.

But some products that try to do everything just don’t sell. A fridge that’s integrated with your home entertainment system? Would you actually pay extra for that? Back in the old days before the internet, one telecoms company produced a component that could be both a router and a modem. That allowed a network engineer to order inventory without knowing how many of each they’d need, which was convenient.

The trouble was, it cost three times as much as either an ordinary router or an ordinary modem. The concept was great, but the price was way out of kilter. Of course, eventually component prices came down and now we all have little boxes that do both jobs sitting in our homes.

And then there are over-engineered products. For instance, a juicer selling at $400 that had all kinds of intriguing bells and whistles, but was actually slower than juicing your oranges by hand. The price, here, is higher than the value.

So when you’re setting your prices, do some hard thinking about the relationship between your price and the value that the product delivers to the buyer.

Of course, you might then want to offer a discount to give a very special extra value to the buyer or to get a product off to a good start. In which case, Vipon will be happy to help!

234


Pricing a unique Amazon product

By Vipon last updated on 0 comments

Usually, if you’re an FBA seller, you’ll have plenty of competition. But sometimes, you may end up being the only seller of a particular type of product. For instance, if you get in early on a new health trend in supplements, you might be the only seller. This might not last long, so you want to set a price that will maximize your profits by giving you the best mix of high margins and plenty of sales.

You could just apply a mark-up, and that’s what lots of retailers do. But buyers don’t care how much you paid for the product. They only care about what it does for them. So while you will probably make some profit if you use a regular mark-up, you might not make as much as you could.

You can look at substitute products; that is, products which are not the same as yours but which fulfill the same need. For instance, one local food market has several great take-out stalls. They have burritos, Japanese bento boxes, Chinese fried rice, and just recently a super Ghanaian Afro food stall arrived, selling chicken and peanut stew on jollof rice with a side order of plantain.

Obviously, no one else was selling the same food, and in fact there’s no other African food truck anywhere in town. But most of the other stalls were selling around a four bucks price point for a snack and eight to ten bucks for a proper meal. So a box of fried plantain sells for $4, and the stew sells at $9.50.

The big decision here, though, was whether the customers at that food market were adventurous enough to pay a premium for Ghanaian food, or needed a discounted price to be tempted away from their regular stands. If I’d been in charge I think I might have nuanced things by pricing at $5 and $10.50, and offering a promotional discount for the first few weeks.

You can also look at the value your product delivers. If it saves buyers a hassle, even a low-level hassle like having too many cables around the office, that might justify a relatively high price. If it preserves something expensive – for instance, an acid-free mounting for a work of art or a stopper that can keep a half-empty bottle of champagne nicely bubbly – then it would get a premium for that, too.

Some photographers spend $50 a time on filters that don’t do anything. Does that sound stupid? It isn’t, because the filter goes on to a lens that might be worth $600, so if anything gets scratched or broken, it will be the filter, not the lens. It’s insurance!

Think about how important your product is to your buyer. If it’s a novelty green fingernail decal for Halloween, it’s not really important. If it’s a suit to go to job interviews, it is very important. Importance equals value and means, which you probably guessed, you might succeed with a relatively high price.

Think about how long your product will be a solo product. If you have a new kind of cocktail stick, you’ll probably just have a couple of months and then competitors will have organized their sourcing. If it’s a complex health supplement you might have quite a bit longer. You need to get those sales to make your best profits before the competition get there, so a higher price together with a bigger ad spend might be the best idea.

There’s no easy way to do this. You really do need to think it through. In fact, it’s probably not a bad idea to think through these issues even if you do have competitors.

And of course, if you want to offer a promotional discount, you know where to come: Vipon!

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“Excess inventory” and how to deal with it

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Amazon’s algorithms are very smart. For instance, they can tell when you buy a luxury pen that you’ll need a refill to go with it. They can guess when you start to advertise your product what keywords will be most appropriate. And they can tell just how much inventory you ought to have in the warehouse.

If you have too much, watch out! Amazon charges you for stock that has been in the warehouse too long without being sold.

First of all you need to check your inventory and sales figures on Seller Central. If sales dropped recently, Amazon may have recalculated how much stock you need based on that lower figure rather than on your usual sales level. If you can already see sales coming back, then it’s likely things will adjust in due course.

However, if you really do have too much stock in the warehouse, there are several things you can do. If the situation looks really bad, and you have somewhere to store stuff, you can take it out of the warehouse, though you’ll still have to pay to get it back.

If sales have been flagging a little and your stock is relatively high, re-marketing is probably your best bet. Take a look at your product page and refresh the photos, improve the keywords, or rewrite the product titles and descriptions so they are punchier and more persuasive.

You might also decide to push your advertising budget up a bit till your sales start shifting your stockpile. Depending on the scale of the problem, just doubling your ad budget for a couple of weeks might be all you need. If your product lacked visibility, that should address the issue.

You could also bundle your excess stock with another product. For instance, if you sell pet stuff and have an excess inventory of dog collars, include a collar with every leash you sell and you’ll soon make inroads on the excess. You’ll be able to charge a little more for each leash, though you might not make the full sales price of the collar as customers will expect the package to sell at a discount to the value of the items if purchased separately.

If you have a really major problem, such as a stock of last-generation mobile phones or last season’s fashionable sandals, then you can use Amazon Outlet to offer deals. You could, as a last resort, use Amazon’s FBA Liquidation to send the inventory to a wholesale liquidator; but in that case you’ll be lucky to get back 10 percent of your intended sales price.

The other fast way to shift inventory, of course, is to use a one-off promotion. Discounts, particularly deep discounts, can get your product moving fast. That will push it back up the sales rankings as well as getting rid of excess inventory. So why not use a short term coupon campaign through Vipon to target discount-hungry buyers and free up a bit of warehouse space?

250


Amazon Discounts and Customer Expectations

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When you’re setting your discount levels for a promotion, obviously you want to check the profit you’ll make at each discount level. There’s no point increasing your sales dramatically if you’re not making any profit.

But another thing you’ll want to bear in mind is how effective a given discount level might be in the market. Will a 10 percent discount, for instance, make your customers sit up and notice, or will they sigh “Just ten percent? That’s not much”?

If you’re in a sector that’s having a tough time, you may see discount stickers all around. In that case, of course, you’re going to have to work harder. If you’re in a boom market, possibly no one’s discounting at all.

We wondered whether simply Googling “Amazon discounts” would be a good way to find out what customers are seeing. It was an interesting exercise, and it gave us several ideas which we’re sharing with you this week.

First of all, it’s worth noting that Amazon doesn’t miss a trick. Amazon.com came top of the search results. Clicking through to Amazon’s discount page showed discounts mainly around 10-15 percent, mixed up with a lot of “Save $$$$” ($2, $10, and in one case, $300) offers.

However, the second thing we found was that the other Google search results showed much more significant discounts. The table below shows how many times each discount level appeared on page one of the search results.

DiscountNumber of times shown
25%3
30%2
50%3
70%1
80%1
90%1

That’s interesting. Google doesn’t show any discounts below 25%, and the area between 25% and 50% is a sweet spot accounting for the vast majority of results. The second page of results showed rather more of the higher (70% and above) discounts, and one 5% discount. So Google obviously thinks people who are looking for discounts are looking for big ones.

Where do those search results refer? In most cases, to a coupon site, or a newspaper. If customers are looking for discounts, this is where Google thinks they’ll want to go – after Amazon itself. (In fact, if they’re looking for big discounts, this is where they’ll want to go first, of course, given the relatively small discounts on Amazon’s discount page.)

So if you want your discount noticed, you’re best off using a coupon site like Vipon, rather than just promoting it on Amazon. (Of course, it’s also an advantage that Vipon is a membership site, full of members who are looking for discounts. Many of them won’t necessarily bother checking Amazon, they’ll come to Vipon first.)

What happens if you look for your own product? “Amazon discount stationery” featured 20%, 25% and 40% off deals. Stationery is a consumable product with usually quite a low price, so we’d guess the discount needed to motivate buyers is relatively low.

“Amazon discount toys” showed 5% and 10%, but also 70% and 80%, giving a very mixed message! It looks as if some toys may be end-of-line, as some toys do date. You might remember crazes like yoyos and cabbage patch dolls; one year’s hot toy is the next year’s fire sale.

On the other hand “Amazon discount beauty” did feature discounts, though without as many numbers being specified, but it was particularly notable for having quite a high proportion of results from fashion and women’s magazines focused on Prime Day discounts.

That’s intriguing. If you’re in beauty products, maybe it’s worth sending out a couple of press releases if you have good Prime Day discounts or a good holiday offer! And obviously, in this sector a Prime Day discount can help you get sales even after it’s ended, if women end up reading the article and seeing your product!

Try out your own product or brand, and see what discounts pop up on the search results page. It’s a great way to see what’s going on, and where Google sends people who are searching for a particular type of product.

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What’s happening to the US economy, and what does it mean for FBA sellers?

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The world has not had a great few years. First came Covid, with widespread disruption to trade – from lockdown, to a virtual cessation of international travel. Then came the war in Ukraine, together with a huge rise in oil prices that has sparked inflation. And then the Fed put up interest rates to try to stave off inflation.

Remember, we’ve had nearly 20 years of low interest rates and low inflation, so this is pretty disruptive.

The big problem is that the US was technically already in recession in the first six months of 2020. Normally, the Fed would reduce interest rates to kick-start the economy. But instead, it’s had to raise rates to get rid of inflation – despite the fact that this is likely to cause more economic pain.

The stock market is taking a gloomy view, with the S&P 500 index down from 4,796 at the start of the year to 3613 today.  That’s a fall of nearly 25 percent. Cryptocurrencies have nosedived, too – Bitcoin is down more than 60 percent.

However, the US currently has the lowest unemployment rate in five decades. So although everyone’s having to tighten their belts, right now we’re not in Great Depression territory; people have jobs.

Will they continue to spend? The jury’s out on that. A lot of people, though they’re working and not badly paid, are not feeling confident about their ability to get through a major downturn. They already have a lot of debt, with revolving credits like credit cards, home equity lines of credit, and personal loans growing fast. Right now, they’re not taking the scissors to their credit cards, but my guess is the less confident will probably aim to repay as much debt as they can.

Consumer behavior will change. Nielsen research shows the majority of consumers think recession is already here, and they’re shifting their purchases accordingly. They’re shifting their spend to value retailers and brands, and they’re looking for promotions and discounts. And the private label share of the market has increased very markedly in both the US and Canada as consumers buy cheaper, unbranded products.

But retailers are getting smart. They’re making a lot of promotions, but they’re not discounting very deeply. That means they can increase their sales without reducing their margin very much.

To make money out of the market right now, you’ll want to think about repositioning your products.

•            Can you market them as a way to economize, for instance selling products that can help reduce waste or save energy? Reusable and recyclable products can do really well. Or you could move your food containers’ main benefit from keeping the fridge tidy to storing food safely for longer.

•            Can you market your products as a substitute for more expensive brands or products? For instance, prosecco makers did really well in the credit crunch as they marketed their sparkling wine to customers who used to drink champagne!

•            Consumers have become risk-averse. How can you position your products as a ‘safe buy’? You might stress durability, your five-star reviews, your certifications, for instance.

Using promotions has become difficult, though, because of inflation. Consumers are looking for cheaper buys, but if you reduce your everyday price, you’re going to end up losing money.

That’s why you’ll want to be imaginative about your marketing. Hold multiple limited promotions such as coupons and competitions, weekend specials and lightning deals, maybe on Vipon, and you can grab the most price-conscious consumers. But don’t drop your regular price. Leave it to your competitors to do that, and hope it hurts them. In fact, you may end up seeing competitors leaving the market. There’ll be some disruption if they hold a fire sale, but you’ll inherit a bigger market share at your original price if you stick it out.

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Matching Your Product Price & Quality

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A key marketing concept is that your pricing should reflect the quality of your goods. Think of Hermes with its hand-stitched leather handbags, some of them costing thousands of dollars; a mass production handbag from Walmart obviously doesn’t have the same construction quality or branding. “You get what pay for,” as they say.

But when you’re selling on Amazon, how do you assess the quality of your products against the other sellers? (That is, assuming you don’t have an existing brand like Hermes, Louis Vuitton, Gucci or Dior.)

One way to do it is the way a lot of customers do it; look at the reviews. If you provide a backpack that looks pretty similar to two or three others, and it’s the same size, but your reviews are five-star and the other guys only get three or four stars, you can charge a higher price because customers are clearly saying it’s higher quality.

Since social proof such as customer reviews are the most influential factor on potential buyers’ assessment of whether or not to buy, this is quite a reliable way to look at your products.

Another way to do it is to look at whether your product provides more features. For instance, if you sell a camera with a bigger zoom than the competition, more megapixels, and so on, you can charge a higher price. (Though of course in marketing terms you should really be looking at the benefits to the customer – better and clearer photos, in this case.)

You can do some quite detailed assessment of competitors’ products just by looking at their Amazon product pages. But in some cases it might be worth buying the product to carry out a more detailed comparison.

There’s a twist to “You get what you pay for,” though, which is that people often tend to assume that a low price indicates a low quality product, or even a counterfeit (in the case of Louis Vuitton luggage or Hermes handbags). That’s a problem if you have good quality but you want to reduce the price to increase sales or to launch a new product.

The answer to that is to keep your headline price the same, but use discounts, coupons, two-for-one offers, or loyalty offers to give your customers a break. You’re presenting the discount as a gift, and you might want to limit in some way – to customers who have already bought from you, to regular customers, to customers who can collect a certain number of point or coupons, or to a single sale week. The more limited, the more special the gift is; a two-for-one in the supermarket is kind of boring, a “first five customers for the new Tesla pay nothing” promotion would make the headlines! (And, as you can imagine, it wouldn’t reduce the value of Teslas at all, because no one would believe that zero was the ‘real’ price.)

Many things in economics are quite rational. Prices aren’t. People actually believe that there’s a ‘right price’ somewhere – in the Middle Age it was believed that the ‘right’ price actually existed as part of the natural order. It can be interesting to ask people what they think is the price for a quart of milk, a gallon of petrol, a Manhattan apartment; chances are they will have a price in mind. It might not relate to the real world. Many of remember how much a Hershey bar cost when we were young, and for some people that’s half a century ago!

So remember that the price/quality equation for your products isn’t just about facts, or what the customer actually pays; it’s psychological, too. That’s why you need to give it real thought!

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