6 Pillars of Profit:
# 2 – Price
There is a huge difference between men and women when it comes to prices!
My wife will drive 3-5 different places around town in the hot sun to find the right price on a certain item. For me, I head to the first store that I think will have the item. Once there, I will look for what I want and if I find it I buy it!
Simple, straightforward, no fuss, no running around in the hot sun trying to save 10 Thai baht, (about $.30)
However, if you are a woman, you take great joy and pride in saving that little bit of money, perhaps it feels like you have fought and conquered the giant called, “Economics!” On the other hand, if you are a man, you want to point out the pragmatic economics of how much it cost to save (in time and fuel) that little bit of money. In defense of womanhood, there is a sense of contentment and satisfaction that effort has been spent in defending the household budget! Now, I don’t want to type-cast the males or females, for these roles could easily be reversed.
Now, in our subject, “6 Pillars of Profit,” the next element of any business or enterprise is “PRICE.” We will need to look at the different kinds of pricing. These are:
- Manufacturing pricing
- Wholesale pricing
- Retail pricing
- Perceived value pricing
- Convenience pricing
- Barter pricing
- International/Domestic Pricing
- Closeout/Auction/Bankruptcy Pricing
(I will not bore you with a lot of economic theory and details, so I will try to be as brief and clear as possible. There is not enough time and space to include a comprehensive discussion about pricing theory and practice.)
Now, most of these are not relevant to us as general Affiliates – largely due to the prices already being set for the products. After all, we are not manufacturers or producers, we do not have a barter system, we are not promoting products that are wholesale priced, and we are not bankers trying to foreclose on a bankruptcy. The pricing structures we are most interested in and affected by are: Retail, Perceived value, and Convenience pricing.
Now in a small nutshell . . .
Retail pricing is a price based upon the cost of production, plus overhead and profit margin. Perceived pricing is what people think the value is, in respect to social fads, cultural nuances, status and demand. For example, a Lamborghini car is made out of the same basic materials as a Toyota, Nissan, Ford or Chevy. So what makes them so expensive? It’s true that design, features and specifications have a lot to do with it, but much more the buying public’s “perceived value” of who made the car, how that car is made, the quality of materials, and the social status owning that car will bring to the buyer. While I love Germans and their ability to make great cars, you have to admit that a Lamborghini is much cooler looking than a Volkswagen!
Convenience pricing is the price a customer will pay to have any product delivered to their current location, home or place of business without the customer having to make an effort to receive it.
This can be explained with the Pizza Home Delivery Business. When you want to eat Pizza, sometimes it’s not convenient to get dressed, start the car, drive to the Pizza Place, wait for the pizza to be cooked and then return home! Much more “Convenient” to place a phone call, wait 30 minutes and then pay the delivery person for the Pizza and their tip! Generally at a higher price than going and getting it yourself!
This is why E-Commerce is taking off like a rocket!
People are looking MORE for convenience than a competitive price. This is why “CYBER MONDAY” brought in MORE revenue than “BLACK FRIDAY” in the US. This is why Online Sales are on target to TRIPLE in the next 5 years. This is why many “Brick and Mortar” stores are struggling and closing.
This is a huge opportunity for Affiliates! Many may complain about the prices on Amazon, etc. – how more expensive they are than buying locally. However, the difference largely can be determined by “Convenience Pricing.” If you see a product you like on Amazon, you are more likely to pay a higher price for it, especially if it is delivered in good time – right to your front door! No time standing in line, no time sitting and waiting in traffic, and no frustration from having no place to park! Convenience!
It is important to remember the cost of shipping plays one of the largest parts of the overall cost of goods bought on the internet! You may find product A with one company has a higher commission payout (direct commission) than the same product A with a different affiliate company. This will then help you make a decision as to which product from which company you want to promote and sell. Each affiliate company or platform has the option of setting the commission pay-out from a minimum of 15% up to 50%. The larger the percent, the more commission you will make when you promote and sell this item. Higher commissions = happy Affiliates!
Check this comparisons out:
If you begin to compare apples with apples, then price will come into play. Customers are not idiots or stupid!
If a golf ball in the US and a golf ball in Canada are advertised at the same price, the customer will probably purchase the one having an overall lesser total amount. Notwithstanding name brand items will more often win out over generic brands – due to the perceived value of that item.
Conclusion of it all. How concerned should Affiliates be about pricing? That is up to you! Do you want to make pricing a big issue? Do you want only to promote products that are the least expensive and have the highest commissions? One Affiliate can promote Product A for $10 USD and sell many. Another affiliate can sell the same Product A for $25 USD and sell just as many. Much of this difference is how much the customer trusts and believes you. The trust factor is one we will discuss again in a later lesson.
For more clarity on Price, take another look at the video George McBride and I made as the introduction to 6 Pillars of Profit.
CLICK HERE to watch the video again!
Keeping your finger on the pulse of your community, your customer base, your potential clients, and prospective buyers is hugely important – probably more than the product you choose and the price.
Price becomes relevant when based upon ones financial and economic position or status. If you have money to spare, paying $10 for a Hamburger may be pocket change. However, if you are struggling financially, a package of Thai Mama Noodles may be all you can afford.
We need to consider who our customers are and then provide them with products, at any price, that solve their problems and make their life more convenient! After all, we are selling convenience, aren’t we??
If you’ve located and researched products you like and can get excited about, then start using these lessons as a guide to get some advertising in front of potential customers.
They are the ones who will buy your children’s next pair of school shoes, help pay your upcoming electric bill, or fund a portion of your next vacation!