Trying to determine the difference between price and value might seem difficult at first, but in reality, it’s something we’ve understood since childhood.
Let’s say you purchased the last bag of Peanut M&M’S from the vending machine. It only cost 50 cents, according to the vendors who selected that price. However, your friends Carlos and Alexa really wanted Peanut M&M’S and are now bartering with you for the candy.
Carlos says he’ll give you his plastic Mega Man toy (priced around $7) in exchange for the sweets. Meanwhile, Alexa offers a pack of Pokémon holographic stickers (priced at $2).
While the price dictates the plastic, toy is worth more than either the stickers or the candy, it’s up to you to determine what is most valuable to you.
Will you keep the candy? Or will you trade it for the toy or the stickers? It really depends on the set of values you employ.
The same thing can be said for the ecommerce industry. The difference between the price and value of your offerings will have a definite effect upon the success of your business. Here’s what you need to know.
Big Ticket Items Don’t Necessarily Lead to Big Profits
Warren Buffett summed it up nicely when he said, “Price is what you pay, value is what you get.” Some ecommerce entrepreneurs might be under the assumption big ticket items necessarily lead to lucrative payouts. This can be a very costly mistake. For now, most customers still prefer to make big purchases in person rather than online.
There are a few reasons for this, including the increased cost of shipping. The primary rationale is that online purchases still tend to be impulse buys. Just because you can sell 100 t-shirts to your customer base, you can’t expect to sell 100 TVs.
Those are bigger products with a longer sales cycle and fewer sales in general. So just because a television is objectively pricier and more valuable than a T-shirt doesn’t mean it’s a better product for profits.
Novelties Are Valuable to Buyers & Cheap for Sellers
Exploit the differences between cost and value can be very lucrative. Which do you think will fetch a higher price, a plain old baseball or a baseball signed by Hank Aaron? Obviously, the signed baseball will be of greater value, even if the materials are essentially the same.
This same rule is applicable across any number of products. Funko Pop! figurines are a perfect example. The plastic to create these toys is likely dirt-cheap. But since the figurines are popular collectibles, these limited-release novelties tend to grow in value over time. So, how can you leverage enthusiasm at minimal costs? Find a way to apply this concept to your chosen industry.
Being Seen as a Valuable Brand Goes a Long Way
Value frequently applies to brands. If you sell artwork online and have a strong fanbase, you might be able to charge more for your artwork over competitors. Even if other brands sell cheaper pieces with generally the same quality, people associate more value with your reputation.
To strengthen accomplish this, you’ll need to establish a positive brand identity across your marketing materials. This includes matching your ecommerce theme, your social media postings, your email newsletters, your logo to a coherent and cohesive persona. When these efforts resonate with consumers, your e-store’s overall value will rise.
As you can see, the difference between price and value is nuanced. But that doesn’t mean it’s a mystery. It’s all about being able to determine what your customer base really wants, rather than what you think something is worth.