Online is a lot cheaper

Ask an average Dutch person why he or she would rather buy something online than in a physical store and 9 out of 10 will say, "Because it's a lot cheaper there." An excellent answer, of course. Or rather an excellent customer perception. But of course, as a merchant, you don't have to be a thief of your own wallet. After all, wouldn't the customer order online if the product had the same price or an even higher price than in the physical store?

Price need not be 'unique buying reason'

The answer to that question is "no." Pricing has taken on a life of its own in e-commerce. For many webshop owners, the Unique Selling Proposition (USP) has become No. 1. Some don't even use any other USPs. Everyone focuses on a low price or even the lowest price. I am the last one who will deny that a low price is incredibly important in certain industries. Branded clothing, electronics, airline tickets and fragrances differ quite little to nothing in terms of product by provider, but even then price need not be the unique buying reason for the customer. And so even then, it need not be a reason for the merchant to charge bottom prices and margins that are too low.

A low price is often compensation for something in which you do not excel or even fall short compared to other providers. Let me clarify with an example. Impact Retail had three electronics chains; It's, Modern Electronics and Price Stopper. It's was the service chain with a wide selection, good advice, lots of service, great in-store demonstrations, etc. Modern Electronics was your neighborhood electronics store, where you could get the stuff you needed. They were not huge stores, but they were located close to consumers who did not live in the center of a big city. Pricestopper had a small selection, a cheap layout (everything was still displayed on pallets) and was a typical box store.

Pricing Strategies

Having different prices for the same products, why would companies use different pricing strategies? Simple: to serve different types of buyers. People who want good advice and extra warranty with a cup of coffee and someone to come and install it at their home want a lot of service and therefore don't mind paying a little more for the product. But there are also people who know exactly what they want and prefer to lug the product around right away and install it themselves. These buyers may go for the lowest price. That's the difference between an It's and a Price Stopper customer.

After a while, It's's service diminished, its stock and assortment shrunk, and more and more budget brands were added. Prijstopper moved into larger premises, got a wider assortment and prices came up to the level of It's. Modern's stores were also given an It's or Prijstopper label. Eventually, the three chains looked much alike and no longer each appealed to a distinct group of customers. Competitor MediaMarkt, meanwhile, was growing like crazy. Because it had and has a better approach in many marketing areas, not only in terms of pricing and promotional offers but also in terms of stock and with a huge assortment and every kind of side sale you can think of.

It's and Prijstopper began to stunt more and more with super-sharp deals, but the uniqueness of both chains had disappeared. Trying to compete without a distinctive aspect against a chain that could buy internationally, was capital powerful and did a lot of marketing was an unwinnable battle. Consequently, in January 2010, Impact Retail's parent company went bankrupt.

Price as USP in a battle you won't win

The battle with price as an obvious USP is also unwinnable online. Or very difficult to win, for example when competing against a Bol.com, Wehkamp, Zalando and Amazon. Still, many web shops stubbornly try to use price as their only USP. While you can offer customers many more unique buying reasons than just that last resort: price. I will briefly discuss a number of aspects that seem less obvious today but that do ensure distinction, customer preference and purchase.

Look at some of the most successful companies in the world: Apple, BMW and Coca-Cola. None of them are price stunners. They offer experience, taste, ease of use and pleasure. They fulfill an expectation, a feeling and they give you social recognition. You are proud when you drive around in your new BMW, you enjoy a cold can of Coca-Cola on a summer day, and you are happy to be rid of Windows and have a beautifully designed Mac instead. With any of those three brands, do you at any point think, "If only I had looked around a little more, maybe I would have been a few dollars cheaper." Probably not.

The price seeker does not return

So whether you sell consumer products or b2b products, you don't have to kill your margin to attract customers. There is an even more important point about why you should not focus on being the cheapest. Customers who are looking for the lowest price will continue to look for the lowest price. If they buy a television from you today because you are the cheapest today, they will also look for the cheapest for a speaker set. They won't care if it's you or someone else.

The customer looking for a company with good service, fast delivery or perhaps extra service in the form of a trial goes for that service. He or she wants a reliable address where the reasons why he or she buys something are fulfilled. The service given then is there now and probably still there in a month or a year from now. And that provides security for the customer. A customer who buys a television and is satisfied with you (note: not with the price) will probably come back for his speaker set. At the very least, he will come and see you.

Service creates higher customer value

So with services, you also create higher customer value. Because your customer comes back to you more often, pays a better margin and may also buy more related items. In the case of the television, for example, cables, a mounting bracket, cleaning spray, etc.

So why would you necessarily want to be cheap or the cheapest yourself? Choose a product with a good margin, which is not already 100,000 competitors are also on the market with. Differentiate yourself in many ways. Thank your customers for their purchase and offer free shipping because shipping costs are often a very annoying barrier in the checkout process and 'quitter' number one. Then your product is a bit more expensive, but you'll bring it to them for free. Even better, if your customers order multiple items during one order, your profit is higher.

Quality, service, design, originality, good ancillary sales; these are winners. Not the price! Of course, you can very easily test the effect of price adjustments in practice and adjust prices relatively easily. It will be clear: price is certainly not the only purchase reason for the customer and has a number of dangers. I wish merchants much creativity to make the best use of the various marketing Ps!