It is not the lowest price that increases sales, but the most intelligent one.

Last week we talked about how difficult it is to determine the right selling price for a product. Calculating the costs and adding a profit margin is not enough; rather, you must consider your target market because those who buy online compare prices and these vary over time.

Let's go back on this issue by analyzing a real case to understand what may a significant price difference be.

Two identical smartphones are sold on competing sites, and the price difference between them is € 6, i.e. about 2% of their average value.

As you can imagine, while one of the two prices is lower and can attract potential customers more, it won’t be this small difference that determines the sale.

compare_price

If the difference in price was € 30, things would change. A difference of 10% is perceived as a significant discount on an expenditure of € 300, even if it entails a longer waiting time or more complex purchasing procedure.

There is no percentage threshold that determines an increasingly significant price difference: for two apartments for sale in the same neighbourhood it could be a 2% price difference that influences the choice, just as 2 bottles of wine priced € 15 and € 20 may have identical volumes while having a 20% average price difference.

If you compare more than two products, as occurs most of the time when you search online, it won’t be the difference in price that is decisive, but the deviation of the price from the perceived average. If the price of a product is too high compared to the average of the competitors, this won’t even be considered; if it’s too low and the offer is not justified by other factors, the effect will be the same.

This is the reason why, when the Competitoor consultants assist their clients in the analysis of the collected data, they manage to increase earnings without lowering prices too much but rather keeping them on average. It is important to have competitive prices but other factors have to be considered to convince the user to become a customer.

What are these factors?
We have already talked about it, but we’ll do so again next week.

compare_price_2