How Should You Price Your Ecommerce Store?

Matt has reviewed a few pricing videos in the past, and today he is back with another one. This pricing video gives 4 tips for ecommerce stores specifically. As someone who has worked with thousands of ecommerce businesses, let’s watch to see if Matt agrees with any of these.

There are tons of people out on social media giving business advice. Some of it is good advice, but most of it isn’t good. In this series watch CapForge’s owner react to different advice videos. He’s an expert in all things business and has 20+ years of experience under his belt. Some of the things he reacts to might even surprise you!

Video Transcript: 

Business Advice Video:

If you’re in e-commerce, here’s 4 pricing tips to drive more sales. Number one, end with an odd number. So instead of $100, put it as 99 or 97. Tip 2, use a decoy. Put a third middle option between your lower ticket and your higher ticket options.  Number three, remove the dollar sign. The dollar sign just creates negative vibes for your customers, so scrapping it removes that anxiety. And number four, remove the comma. Having a comma just makes your price feel longer and therefore more expensive.

Matt’s Review:

Okay, so the first one, he’s saying 100 doesn’t look as good as 99 or 97. I would say that’s not because 100 ends with an even number, zero, and 97 or 99 ends with an odd number. That’s because 100 is three digits, and 99 or 97 is two digits. I don’t know that 99 is going to pull a lot more sales than 98 when compared to 100. So this tip seems a little dubious. The remove a comma, well, you’re only going to have a comma if your price point is $1,000 or higher. So at that point, I don’t know, does 1 0 0 0 look better or cheaper than 1 , 0 0 0? I’m not sure I buy that either. I think this is anecdotal at best, or opinion at worst, and not really data-driven pricing guidelines. I’m not sure about this advice. The real answer to this is if you run an e-commerce store and you are in control of displaying these things, dollar sign or no dollar sign, the best thing you can do is test it. Show half your visitors one way, half your visitors another way, and see which one works. There is some data and research around the three pricing model option. Where having two prices, people pick the lower one, but having three prices, you can drive more people to the highest one because of the way the middle is positioned. But again, it’s very specific to the kind of offer that you have and the product you’re selling and what each one offers or doesn’t offer. So I would say, again, the best thing you can do is test it. And while you’re testing, try testing higher prices. You may think that your customers are very price sensitive and raising prices even a little bit is going to drop sales, but you might be surprised. Back when I was selling software products years ago, I was pretty sure that $89 was a really good price, but I didn’t really have any data for that. I just thought, looking at some of the other products on the market, that somehow that would be good. Well, at a certain point, I decided I would try out 99. And you know what happened? Nothing. It made no difference. I had exactly the same sales as I did on $99 as 89. It turned out all that time I had just been giving up an extra 10 bucks for no reason. And then I tried it at $149 and sales did drop, but guess what? I  still was making substantially more at $149 even with lower sales than I was at 99. So I think a lot of times we get stuck on our own minds and we imagine we’re putting ourselves in our customer’s shoes, but we’re not really doing a good job of that. And we’re estimating or assuming that our customers are price sensitive and aren’t going to spend more and aren’t going to see the value or they’re going to go find and buy something else. And I’d rather have 89 bucks than not make a sale, but I’d rather have $149 and make a few fewer sales but still make plenty of sales and much more profit than leaving it at 89. So again, the best thing you can do is test it. Show a portion of people visiting the site at different prices, or all the customers visiting a site in a certain time period, different higher prices, and see what happens. And if it turns out that the sales at the higher price fall but not that much, or don’t fall at all, well guess what? You’ve just added money immediately to your bottom line because nothing else changed but how much you were charging for that product or service. So, absolutely you should experiment with pricing and try it and see what works for you. And you may find that you’re leaving a significant amount of money on the table for literally no good reason other than assuming you knew what the best price was without bothering to test it.