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Advice for pricing strategies

 
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  #1  
Old
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Join Date: December 20th, 2011
Posts: 7
Advice for pricing strategies

Hi,
I was just wondering if Psychological pricing or other pricing strategies actually work. Personally, when I see $9.99, I automatically turn it to $10. When dealing with sales does Psychological pricing work? Also, which is better, $9.90, $9.99,
$9.80, (etc)?

What other strategies would you recommend?

Thanks!
  #2  
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Join Date: April 5th, 2005
Location: Park City Utah
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Are you selling your own products? Otherwise you have to follow the merchants pricing.
  #3  
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Join Date: January 22nd, 2007
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As a consumer, I absolutely detest so-called "psychological pricing".

As an affiliate, I hate it even more, especially with merchants who think they are being soooo smart and inventive by continually changing prices from $9.99 to $9.89 to $9.95 etc, creating time-consuming unproductive busy work for affiliates and confusing prospective customers.
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  #4  
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Join Date: December 20th, 2011
Posts: 7
I was just asking because according to a blog post (I don't know if I'm allowed to post link), it states " ...that by using a simple, yet powerful psychological pricing trick called Odd Pricing can miraculously raise orders up to a shocking 9-34%? It's factual, test-proven and it still works as effective today. It will never fail to achieve that natural illusion". This made me wonder as I always round up
$9.99 to $10 and this pricing strategy doesn't seam to work on me.

Chuck Hamrick, I am now looking to buy products and sell them to consumers for a higher price, not much to do with Afiliate marketing but I still posted on this forum because I know I got help last time. Consumers place a order and I 'forward' this letter to a wholesaler. I get paid and when I place the order, the wholesaler gets paid too. I don't think I have to follow their price, do I? Also, thanks for helping me out again .
  #5  
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Unless you are the merchant you have to explicitly follow the pricing. One big complaint about merchant is that affiliates don't always update their sites. If its due to an outdated datafeed then its the merchants fault.

There have been studies done over the last 50 years that show that sub consciously $9.99 seems lower that $10.00. If I come across one I will post a link here.
  #6  
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Member
Join Date: January 13th, 2007
Posts: 118
Hi AdVi,

Sounds like you're looking to get into drop-shipping - which i did for a while back in 2004. For pricing, what will happen is this:
- You'll get your wholesale pricing, which will be your cost of goods.
- You will most likely get a MAP (Minimum Advertising price) from the Merchant
- You set your pricing based on your profit margin. You are free to set this to whatever you want, although you should not go above MSRP. (Manufacturer's Suggested Retail price)

There's a couple things to be careful with. First, understand and follow the MAP. This is instituted by Manufacturers to ensure that online websites do not cut the margins so low, and advertise these prices, that the retail brick and mortars suffer. This is why on Amazon you sometimes have items that you have to add to your cart to see the pricing - it's because they are selling under the MAP. You can sell under MAP, but you can't advertise those prices on your website - you have to do it like Amazon does and hide until in the cart.

Second, this is a really, really hard area to get into as a small business owner. You may find, as I did, that other websites are selling at 1% to 2% over wholesale pricing, or even lower than your wholesale price because they aren't drop shipping and have a lower wholesale price than you can get. You have to make sure your Price Margin is enough to cover drop-shipping fees, your own overhead, and still make a profit. Standard rule of thumb is that Retail is approx a 30% profit over wholesale, although some items can retail for about 50% above wholesale. I quickly found I just couldn't compete with these other websites selling so cheaply, and had to bow out gracefully.

I did find, however, that using 5 instead of 9 converted better for me. So $9.95 instead of $9.99. The "use a 7" was a complete bust - i.e. $9.97.

I also found it depended on the item. I drop-shipped musical instruments for a while, and these converted better if the prices were rounded to whole dollars - more of a luxury item. The add ons, like strings and picks, had to stay in the $9.95 category - or people thought it was ridiculous. Interestingly, musical instruments are one of those items that are 50% over wholesale routinely, yet the wholesale and dropship fees coupled with these other website selling so cheaply drove me out of the market.

I'd like to jump in for a second though and offer another option. If you'd like to build a store - perhaps consider building an affiliate store. You can do this for a single merchant like Amazon, or use something like PopShops for a store with products from different merchants.

With drop-shipping, you still have to place the orders from your customers, and you still have to handle a lot of customer service issues. And with purchasing, it's not like you can let an order sit for a day or two because you have a personal emergency. It's a lot of pressure for a small business owner.

I did love having a store for sure, it really was something I enjoyed - but drop-shipping just wasn't profitable for me. Recently, I'm rediscovering the fun of creating a store using the affiliate store method and Amazon products. Other's have been really successful with affiliate stores built on Pop Shops.

Hope this help, and Good Luck!
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  #7  
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Join Date: June 24th, 2005
Location: Brighton, CO USA
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Personally, I believe this pricing structure is dated. Price comparison websites and services allow a shopper to sort from lowest to highest price - including their delivered price (applicable shipping/tax) without ever visiting the store.

On our drop ship stores we build for our customers no "psychological pricing" is used. Our customers can use the MSRP or a fixed percentage over wholesale or retail pricing. So prices rarely end the same. IE: $xx.42, $xx.63 etc.

However, there are definitely shoppers that can be easily influenced by pricing and even terms like "25% more" on the box. The same folks who drive around spending $5 in gas to "save" .02 / per gallon...
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  #8  
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Join Date: December 20th, 2011
Posts: 7
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Quote:
Originally Posted by housebg View Post
Hi AdVi ... Hope this help, and Good Luck!
Thanks for the long and informative article. Definitely something I'll refer to in the future. I know this is a bit far from the question I asked, but how did you go about advertising your business? Forums, websites, (etc)? Also, could you tell me how much I should expect to spend on advertising?
  #9  
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Join Date: January 13th, 2007
Posts: 118
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Quote:
Originally Posted by Convergence View Post
Personally, I believe this pricing structure is dated. Price comparison websites and services allow a shopper to sort from lowest to highest price - including their delivered price (applicable shipping/tax) without ever visiting the store.

On our drop ship stores we build for our customers no "psychological pricing" is used. Our customers can use the MSRP or a fixed percentage over wholesale or retail pricing. So prices rarely end the same. IE: $xx.42, $xx.63 etc.

However, there are definitely shoppers that can be easily influenced by pricing and even terms like "25% more" on the box. The same folks who drive around spending $5 in gas to "save" .02 / per gallon...
Good Point! That store was live back in 2004 and a LOT has change since then.
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