In our most recent Tips from the Top column, we discussed general pricing strategies for your online business. Today we’ll take an in-depth look at “deal of the day” pricing options, best practices when using coupons and various ways to help you develop a successful growth strategy.
In part two of our Q&A, Cris Angelini, our Director of Revenue Development answers more of your questions about how to beat your competition with pricing.
When should I use “Deal of the Day”?
You should use the “Deal of the Day” feature as you would with any promotion. Because “Deal of the Day” is a promotion that you’d offer for a limited time, its main advantage is that it creates a sense of urgency for the customer to purchase, rather than having them delay the buying decision, potentially creating a lost sale.
If you’re going to use “Deal of the Day,” make sure that you have significant product exposure. You’ll also want to make sure to update your inventory and disable backorders so that you’re not overcommitting yourself. For example, if you sell hand knitted scarves you wouldn’t want an order for 1,000 of them in a day (unless you’re a really fast knitter).
Is it a good idea to offer discounts for new products?
It depends. If you’re selling a product with a high demand, I would shy away from offering a discount, unless it’s for competitive purposes. Look at the tablet market where, for example, Apple doesn’t discount new iPads, and they generally make a healthy profit margin as a result. The Kindle Fire, on the other hand, is being sold at or slightly below cost, because Amazon is trying to break into the tablet market. Amazon also has the added benefit of knowing that once a user owns a Kindle Fire, they’ll likely purchase additional content in the form of apps, movies, books and music at full price.
What’s the best way to develop a successful business growth strategy?
If you’ve selected a good market segment and have taken the right steps to start your business, then the most successful way to grow your business is to reinvest in it. These investments s would likely include: purchasing additional products to sell, redesigning your website, starting a new advertising campaign, hiring additional staff to help ship orders and manage returns, etc. It can be difficult for an entrepreneur to run and grow a small business, so my advice is to only grow as much as you’re comfortable with.
Is it better to offer a dollar off amount or a percentage discount on products?
When setting up either of these discounts, be cautious when selecting the categories that they can be applied to. You may have a product with a 30% margin and another product with a 5% margin in the same category, so you wouldn’t want to lose money on the lower margin product if, for instance, a 20% off coupon was used. The same applies for the dollar off scenario.
When do I know which one to use?
This is a matter of personal preference, but ask yourself, “Which sounds more attractive?” If your product is $10, then $5 off doesn’t sound like a great deal to customers, however 50% off does. Similarly, if your product is $1,000; $10% off doesn’t sound as good as $100 off does, so make sure you’re promoting the offer that will be the most appealing to customers.
How can I ensure that the discounts I’m offering aren’t taken advantage of?
As mentioned above, the first step to ensure that your discounts aren’t being abused is to set them up properly. Determine if you want to offer a coupon on certain products or the whole order. It’s hard to believe, but some ecommerce providers don’t allow you to limit coupons at the product or category level, forcing a discount on the entire order. Make sure to set order minimums or minimum product values and determine if it can be applied with any other coupons. If you’ve done these things, then you should be fairly well protected from being taken advantage of.
That wraps things up here! Are you pumped about offering your customers amazing discounts that’ll boost your online business? We hope these tips will improve your pricing strategies without breaking the bank.
For more helpful tricks for online success, be sure to stay tuned for our next edition of Tips from the Top!
-Lauren Hill, Social Media Associate, Volusion
Cris Angelini, Director of Revenue Development is primarily responsible for the ideation and implementation of projects designed to maximize the long term profitability of the company as well as execute plans to ensure that quarterly revenue goals are met.
After a successful career in sales, most recently online advertising sales at Citysearch, Angelini joined the Volusion team in 2006. His past responsibilities cross almost all of the organizations lines of business, overseeing services, business development, sales and merchant services organizations as well as a stint in the early days of the marketing department. He has received numerous awards for his service to the company including the Team Player Award in 2008 recognizing the best manager in the organization for his service managing the sales team, and the Trailblazer award the same year acknowledging his efforts helping launch the Merchant Services division. His experience in all aspects of the organization as well as his knowledge of the industry have allowed him to implement many new processes and give him a unique opportunity to serve the company in his current role.
Angelini is a graduate of the University of Texas at Austin’s McCombs School of Business and holds a BBA in Finance.