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Question from Readers: Is it enough for a discounter to show the discount off list?

By Ayo Ijidakinro

Image of an example of discount off list on the Jewelery and Watches website.
Currently JewelryAndWatches shows the discount off list on their website, but this isn't enough.

After viewing the video: Site Review: Online Bargain Hunting Website, a viewer sent this comment. The viewer made a good point which merits a response.


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Just out of curiosity did you click on any of the products on that website home page? If you had you would have seen that it is shown what the list price is and his sale price like the Cartier womans watch you pointed out in the video

"The #1 challenge for an online discounter is to prove that you truly provide a meaningful discount." - Ayo

List Price : $3,650.00

Our Price : $2,910.00

$740 dollars is a meaningful discount

If someone is shopping for a high end product like a watch such as Cartier they would already know what a good deal is since shopping for a watch of such a name is not an impulse purchase, like a $30 DVD player from walmart would be.

- DG


[Ayo's Response]

Hi DG,

Thanks for the feedback! Those are good points.

I did see that JewelryandWatches.org shows the list price on the product page. Unfortunately, to keep the video short, I wasn't able to talk about everything I looked at before recording it.

However, though the discount, I still felt JewelryandWatches.org should provide a more explicit comparison.

Here is my concern. As of today (March 7, 2008), if you search for "Cartier Women's Pink Santos Demoiselle Watch" in Google you basically find that all online vendors sell this same watch for the same price, $2,910.

Since there is no easily accessible online evidence that this watch is being sold for more than $2,910 online. JewelryandWatches.org can seize the moment, by telling us who exactly is selling this watch for more than $2,910. This will clear some of the customer's skepticism.

For example, if JaW (JewelryandWatches.org) could link us to the Cartier website and show the page on which Cartier shows the list price for this watch, that would be much more convincing.

The problem with list price, is that many list prices are artificially high. Many products are never really sold at list price. So in the customer's mind, selling a product below list price is no longer considered a discount.

For example, when a car dealership shows the list price (MSRP) on a car, let's say $25,000 and then shows the dealership price...say $23,000. How many of us really take the dealership discount at face value? Is the discount on list meaningful? Or is the customer more interested in the discount versus other dealerships? If all dealerships in the country are selling the car for $23,000, then this price is no longer perceived to be a discount.

Unfortunately, industries are so competitive, that we have come to expect real product prices to be below list prices. Thus, to the consumer a real discount is, not the discount from list, it is the discount below his other options.

If no other company on the web sells this watch for a higher price then $2,910 ceases to be perceived as a discount. Thus, JaW can benefit by telling the customer who exactly is more expensive than JaW's price. It's okay if that discount is versus a brick and mortar, JaW should just tell the consumer that. More information is better than less information.

Nevertheless, as I mention on my website the day after creating this review. If it is not possible for a company to provide a discount, it may be better to advertise another differentiator. For example, JaW's could say, "We've scoured Amazon and found the best deals on Amazon for you." Or JaW could say, "We provide a wealth of knowledge on Jewelry and Watches." The point is that, somehow, JaW needs to get the customer to buy on their website, and whatever their selling point is, they need to really convince the customer that it is a real selling point.

Again, thanks for that feedback! I'm providing only one perspective. It's definitely not the only perspective.

Best,
Ayo

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Internet Discounters: Do you really provide a discount?

By Ayo Ijidakinro

Picture of an everyday low prices sign.

Summary: If you are an online discounter, how can you convince customers that you really provide a discount? You can't expect the customer to trust you. You must provide the customer with evidence either by showing your prices versus competitor prices or by offering a deal so good the customer can't refute it.

"Super sale!!", "Only One More Left!!" These are phrases we hear all the time. But do customers believe those statements? After hearing overstated hype so often, customers are now skeptical that prices being advertised are really lower than average. If you can convince the customer your prices are good, you are many times more likely to win their business. You don't want the customer to just window show.

There are two principal ways to convince the customer that you provide a meaningful discount.
  1. Show actual prices of your competitors.
  2. Find one product you can sell so cheap, that customers don't question your discount.
Showing actual prices from your competitors is effective because such facts can't be questioned by the consumer. The key is that the company you use as a comparison does not need to be another discounter. You don't have to convince the customer that you have the best price on the web, you just need to convince the customer that you truly provide a discount. Therefore, if you sale an identical product as a premium retailer such as Nordstrom's, and you can prove your price is lower, by all means refer to the competitor explicitly. This evidence makes a far stronger statement than your merely stating you provide a discount.

Your second option to convince the customer that you provide a great discount is taken from Walmart's playbook. Do you remember November 28, 2003 when a Central Florida Walmart offered a DVD player so cheap ($30) that it caused a stampede? Sam Walton, the founder of Walmart, began Walmart's use of this technique to draw in shoppers.

Sam Walton realized that if he offered even one product at an unforgettable price, he could draw in shoppers to shop at his store at an incredible rate. Such outlandish sales accomplished two things. First, it generated publicity and drew in shoppers for higher margin products. Second, it gave Walmart a reliable reputation for low prices.

However, you may be worried that you can't profit by copying what Walmart has done with success, because while Walmart was selling more than just the $30 DVD player to visiting shoppers, your website tends to sell only one or two products in a single shopping cart.

That's a valid concern. Your best option here is to try and cross-sell higher margin products or services to make up for margins you lose on your sale.

Nevertheless, if neither of the suggestions in this article seem to work for you, you may need to consider another reality.

You may do well to ask yourself, "Am I really able to provide the customer with a discount?" Some industries are so competitive that it isn't possible to offer a better price than what your competitors offer. If that is the case, then can you really build a business based on discounting? Sometimes it is wise to consider another business model. For instance trying to be a premium retailer instead of a discounter, essentially becoming a Mercedes of your industry instead of a Kia.

No matter what you end up choosing, be honest with the customer. The worst thing you can do is tell the customer an untruth. If you offer a consistent discount, then by all means state this on your website. However, if you don't offer a discount, it is best not to lose the customer's trust by telling him that you, like Walmart, have "Always low prices."

By being honest and providing evidence that your website's prices are lower than the competition you will win customer trust, generate buzz, and have a consistently higher sales conversion rate for your website.

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[Video] Site Review: Increase Site Traffic and Sales By Using a Loss Leader on a Discount Website

By Ayo Ijidakinro



Summary: How can a discount website increase web site traffic and generate buzz rapidly? Sam Walton, the founder of Walmart, perfected the art of using unheard of discounts (a loss leader) to generate foot traffic and buzz. In this video review, we discuss how a discount website can leverage this strategy to increase sales.

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