11.30.2010

Avoid Shopping Cart Shock (A Marketing Lesson)

I love handmade items. And I love natural products. I also love entrepreneurs. So being able to have all three things by supporting small businesses that sell natural hair and beauty products just makes my day. However, I have a pet peeve when it comes to shopping online, and that is Shopping Cart Shock.

We have all had a dose of Shopping Cart Shock. You peruse an online retailer’s site and pick out a goodie (or 5) that you want to try out. You add them to your cart, click “check out” and then you are shocked to find that your total is way higher than the cost of the items in the cart due to shipping and handling. A few weeks ago I was shopping online on a natural products site for some new products for my hair. The cost of the product I wanted was $11.00. I added it to my cart, went to go check out, and saw that my total cost was $17.25! Shipping charges were $6.25, adding another 57% to the cost of the item I wanted. I had expected to pay some shipping, but not over 50% of the price of the item. So I closed my browser window, got in my car and went to the department store to buy some Carol’s Daughter products where I knew exactly how much I was paying when I walked in the door (though I used to not buy Carol’s Daughter products for the exact same reason). Some may choose to go ahead and pay the cost, but at that point I typically abandon cart. It makes me feel deceived, like I would lead to believe that I would be paying one amount but now—GOTCHA!—there is a catch. Shopping Cart Shock is not a problem exclusive to natural products retailers, but one that is very prevalent amongst these entrepreneurs due to the high cost of shipping liquids.

First, let me disclaim that I do not think you have to have a business degree to run a successful business. But there are some principles of business taught in business courses—specifically marketing—that every business owner, big or small, must be mindful of. The first things you will learn in any marketing course are the 4 P's: Price, Place, Product, Promotion (also called the Marketing Mix). One of the trickiest of these four elements is Price. Not only is price made up of cost of goods, profit margin and supply and demand, but there is also a huge psychological component to pricing products. Price communicates not just how much it cost you to make the product, it also communicates quality (how good your product is) and value (getting a good deal) to the customer. It is the reason why people will buy brand names over generics for the exact same products (often made by the exact same manufacturer) and why luxury items are so much more expensive than average goods and people willingly pay that premium. When it comes down to it, marketing and pricing is a mind game that you play with consumers. And some small business owners out there are not playing that game very well.

I know this may sound bad, and may be an oversimplification bordering on hyperbole, but consumers like to be lied to. They like to believe that they are getting the best deal and the best value possible. I am not saying that you need to deceive customers, but you must be mindful of the psychological aspect of the shopping experience. I brought this topic up on Twitter and got several responses from natural products sellers saying that shipping is expensive and that they need to make money, too. And I wholeheartedly agree. I am not saying that retailers should eat costs. That is just not good business.  And I am all about good business and prosperity.  What I am saying is that natural products sellers need to take a different look at how they price their products.

It is not just about sellers covering costs, it is also making customers feel like they are getting a good value. The cost of goods includes everything it takes to get your product to your customer. So not only should you include the cost of the plastic jar, shea butter, essential oils, labels, ink to print your labels, etc., but also the cost of getting those goods to your customer. If you have a $10 jar of shea butter, but your shipping is $5, all the customer cares about is that they are coming out of their pocket $15, 1/3 of which has nothing to do with the product itself. Here is another option, though: Charge $12.50 for the shea butter and $2.50 for shipping. Build some of the shipping cost into the base price of the product so that the Shopping Cart Shock is not as great. The seller’s costs are covered, but the customer feels like they are paying for the product more so than the shipping and that they are getting a better value with their purchase.

And remember what I said about price conveying perceived quality? If you have a really good Product that you Promote and Place well, people will not mind paying a higher Price for it because they will perceive it to be of better quality. Another personal shopping example: I was on eBay looking for some nag champa body oil. There was one retailer selling nag champa dry oil spray for $5.99, and another selling it for $10.50. The obvious choice seems like the former, right? Wrong. The shipping on the first bottle was $3.99, while the other one had FREE SHIPPING plastered across the listing. The $10.50 bottle also had a better label and said it used “high quality jojoba oil and vitamin E”, while the other said nothing about ingredients. So I bought the $10.50 bottle, with this being my consumer thought process: 1) “FREE!! I like free!” 2) “Why is the first one so cheap? They must use inferior ingredients, especially since they didn’t list them.” 3) “Well, they’re about the same price total, so I’m going to go with the slightly more expensive one just to be on the safe side.” I know good and damn well that the price of the shipping was built into the second bottle and that they could have bought their jojoba oil from a hobo on the street and I would have no way of knowing. But when I allow myself to turn off my marketing major brain and go into regular consumer mode (yes, I can split my personality at will), what I saw was “FREE” and “higher price must mean better quality.” I may have paid more, but I felt like I was getting a better value by paying for the actual product and not for the shipping. I was not so much deceived as I was appeased, and that is the key to attracting and keeping customers. The goal of successful marketing is creating a win-win situation for everyone.

2 comments:

Beatrice said...

nice post dear :) as always i look up to them hearing from u :)

jen said...

Great article and so true about the price conveying perceived quality.

So glad issaino posted your link at Etsypreneur. :)