One of the best ways to spend money promoting your Web site is to lower your prices. You
can't lose. When you spend money on a banner ad, you have to pay for everyone who sees it,
whether they buy anything or not. But when you "spend" money by charging less,
you only have to pay for the people who actually place orders. So you never pay for this
form of promotion unless it works.
Security concerns are not what prevent people from ordering online. The real problem is
that online shopping is just not a regular part of people's lives yet. Most people have a
collection of physical stores and mail order catalogs that they buy from regularly. But
online shopping is so new that most Web users haven't yet found their regular Web stores.
This is good news for you. It means that there is room for you in their list of regular
online stores. But you need to nudge them into ordering from you, if you want to become
part of their regular routine. And there are few more effective nudges than the prospect
of getting the very cheapest price for something.
The emotional satisfaction of getting something at the cheapest price is almost like a
drug. People will go to any length to get it. If you want to see online commerce happen,
take some commodity item like a Sony Walkman and offer it for sale on the Web for $10 less
than people can get it anywhere else.
It will be worth it, believe me, if you can establish yourself as one of everyone's
regular stores. Amazon Books has done that, and now they have every prospect of being the
place to buy books online. If Borders and Barnes & Noble are not panicking, they
should be. They waited too long. Someone else has occupied the space they thought was
reserved for them, and it's going to be very expensive, and perhaps even impossible, to
dislodge them.
If you use lower prices to make your site a habit with some group of consumers, you can
likewise lock up a valuable piece of real estate. (Hint: start today.)
Lowering prices is not just a good trick to jump-start sales. It also makes economic sense
in the long run. It's much cheaper to sell on the Web. If you split the savings with the
consumer, you both win.
Store users are catalog companies, and they tell us it costs between 40 cents and a dollar
apiece to print and mail catalogs. The percentage of people who order from your catalog is
called the conversion rate. You're lucky if you get a conversion rate of 3%. A 3%
conversion rate means that 1 person out of 33 orders. So that 1 person has to pay for
printing and mailing 33 catalogs! If the catalogs cost 70 cents each, that's $23 right off
the top of the order.
Under conditions like these, it is a testament to the drive and ingenuity of the catalog
companies that they can make a profit at all. And those who do make a profit are totally
at the mercy of postal rates and paper costs. If you can convert a substantial fraction of
your consumers to the Web, you can not only increase your profits, but also decrease your
vulnerability to factors like paper costs, which are outside your control. From this point
of view, lower prices are a strategic investment. |
