Commodity Pricing

If you're a retailer, will you be the "low price leader"? That's tough to do unless you have some pretty good purchasing strategies that allow you to compete with companies bigger than you. Sales of computer hardware and software don't leave much of a margin for profit. PC Magazine awarded Microsoft FrontPage 2000 their Editor's Choice designation recently. ComputerShopper.com found 19 merchants that carried it. Here are a few of these prices as of 5/8/00. Each store has a well-thought-through pricing strategy -- or it won't be in business very long:

Buy.com has a price strategy of rock bottom cost plus very little, supplemented by banner advertising revenue. Will this pricing strategy allow them to stay in business? Only time will tell.

Dell is nearly 5% over buy.com, and leverages its huge buying power. I've bought products from CDW (11% over buy.com) and MicroWarehouse (6.5% over buy.com) and been pleased with their service. I've also bought from buy.com, Dell, and Page Computer with good results.

Most small businesses will die in this environment of razor thin margins. A better spot is to find a niche in the shadows of the bigger players.

Penetration Price Strategy

Ken Evoy's first product, an ebook entitled Make Your Site Sell! http://sales.sitesell.com , is a good example of a penetration strategy. His ebook on maximizing sales using direct marketing techniques on the Web was priced at $24.95 Canadian (US $17), substantially below many other marketing courses. His goal was to grow a loyal team of well-paid affiliates to help him market a whole series of products. So he deliberately priced MYSS! relatively low in order to get as many sales -- and quality affiliates -- as possible. Now with a list of many thousands of very satisfied customers he is beginning to launch several new products.

Make Your Knowledge Sell! http://sales.sitesell.com/myks is a comprehensive how-to book on creating, developing, marketing, and distributing information products such as ebooks, casette tapes, etc. The pricing for this product was scientifically determined through surveys completed by his army of affiliates. Though it has fewer pages than MYSS! the price is higher. $79 Canadian, and just over US $50. But he has determined what his customers perceive it to be worth, and it is selling very well -- partly because it delivers on its promise as the "Infopreneur's ToolKit". This certainly isn't the aggressive penetration strategy of MYSS!, but knowing Ken, I expect it's priced below the maximum profit point.

Make Your Price Sell! http://sales.sitesell.com/myps is Ken's latest product, a service that enables marketers to scientifically determine the best price for their products. He developed and used it to price MYKS! and is now turning it into a product in its own right. The price? In order to achieve strong penetration into the market, Ken is allowing users to pay what they think it's worth to them -- at least for the first few months.

Ken's strategy is not short-term gain but long-term profits. He is carefully developing a loyal customer base that appreciates the value he brings them. The initial product price may be US $17, but the lifetime value of these customers is many, many times that.

Maximum Profit Price Strategy

Here's an information product with a different strategy. Cory Rudl's Insider Secrets to Marketing Your Business on the Internet http://www.marketingtips.com/t.cgi/15267/ is priced at $197, an important price point. It costs about 11 times as much as Ken Evoy's Make Your Site Sell!, probably contains a similar number of words, and is arguably no better for its higher price. Rudl's greatest strength in this very practical book is how to do e-mail marketing, a subject that Evoy only comments on in passing. They are very different approaches to Internet marketing, and both very helpful. Is Rudl's course worth $197? In my sometimes critical review of the product, I conclude that it is. http://www.wilsonweb.com/reviews/rudl-secrets.htm Certainly Rudl has a different pricing strategy than Evoy, probably a maximum profit approach. He also sells two software programs at premium prices that marketers can make excellent use of:

Mailloop Business Automation Software http://marketingtips.com/mailloop/t.x/15267/ is a desktop program that helps marketers send out and track mailings to their customer lists, as well as manage newsletter lists. There's nothing quite like it in this price range, but at $379 you probably wouldn't think of it as a "bargain." Rather as an expensive tool that enables you to move your marketing to the next level. Pricing strategy is behind this.

AssocTRAC Affiliate Software http://www.marketingtips.com/assoctrac/t.x/15267 isn't inexpensive either. But at $677 the tool allows you to track, and therefore maximize the effect of, all your site's advertising and offers. Instead of just tracking click-throughs, the product allows you to relate a particular ad to sales directly generated by that ad, and determine return on investment for every ad on every site that you place. Not cheap, but an effective pricing strategy.

You'll notice the difference between pricing of Microsoft FrontPage 2000 and the proprietary products sold by Evoy and Rudl. While FrontPage 2000 is sold by thousands of dealers for various prices, Evoy and Rudl have exclusive control of their products and services. This enables them to set their own prices based on customer demand rather than reaction to pricing by competitors.

As you study prices on the Internet you'll find many examples to learn from. But don't take forever to learn. Use these lessons to set your own deliberate pricing strategy as part of your Internet Marketing Plan.