MBA1730 Q&A Wednesday: Do I Need To Lower My Prices?

Thy ticket, lady Jennifer of Coolidge.

Well, many thanks, good sir. Here is my Discover card. They accept Discover at Renaissance Fairs? Yeah, they do here. Discover is accepted at the places I love to shop. Get it with the times. With the times. You're playing the loot. Yeah, and it sounds pretty good, right?

Discover is accepted at 99% of places that take credit cards nationwide, based on the February 2025 Nielsen report.

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Foreign. Welcome to the $100 MBA show, the business podcast that delivers practical business lessons every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher, Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company that I started with my partner back in 2014. And today's episode is a Q and A Wednesday episode on our Q and A Wednesday episodes. I answer a question from one of our listeners. If you have a question you want to ask, just go ahead and email me over@omar mba.net Today's question is from Gary and Gary asks, do I need to lower my prices? I have an e commerce store where I sell designer caps and and sales have slowed down. I'm not sure if I have a marketing problem or if my products are too expensive and people are not buying. My caps range between 20 and $40 a piece, so I'm not really sure if I'm deterring customers because of the price point. Any insights would be really helpful. Thanks so much. Love the podcast, Gary. Great question, Gary. And we're gonna get into it. I'm gonna ask you some questions. I'm gonna share with everybody who's listening what to look for so you can find out are too high and you need to lower them or if it's a different problem and if so, how to solve those problems as well. So let's get into it. Let's get down to business. Thy ticket lady, Jennifer of Coolidge.

Well, many thanks good sir. Here is my Discover card. They accept Discover at Renaissance fairs? Yeah, they do here. Discover is accepted at the places I love to shop. Get it with the times. With the times. You're playing the loot.

Yeah.

And it sounds pretty good, right?

Discover is accepted at 99% of places that take credit cards nationwide, based on the February 2025 Nielsen report. So Gary asks in Q and A Wednesday if his prices are too high. Does he need to lower his prices for his e commerce store, for his designer cap business? Whenever we have questions like this in our business, one of the things that really shines a light and gives you clarity is data information. You need to gather hard numbers so that you can make a real informed decision on whether you should lower your prices or not. The first thing I want to point out is that Gary says that he had some sales and then things slowed down. So he's not sure if they've slowed down because people just don't want to pay for his caps at the price he sells. So the first hard number we're gonna look at is look at your website traffic. You should be tracking the number of visitors that are coming to your website on a daily basis. You could do this for free with Google Analytics. You subscribe to this podcast, you can search for several episodes that I go through in detail. How to use Google Analytics. Just search Google Analytics on the 100 LMBA show, but with Google Analytics, you can take a look at how much traffic you're getting to your website. When sales were good, what was the traffic light? And what about now? If you have less traffic now, it's not a price problem, it's a marketing problem. You don't have enough people going to your store. You don't have enough people walking by and looking at your product. And it's very common to see less sales when you have less traffic. This is why people try to get more and more people to their website. They do Facebook marketing, they do content marketing. They try to get people to to know about their brand so they can visit their website because they know more visitors equals more sales. So this is the first number you have to look at because this will tell you, hey, wait a minute, maybe my prices are fine, but I need to increase my traffic. I need to get my customers at my store. So one experiment you could do is run some marketing campaigns. Whether it's content marketing with some blog posts, whether it's through social media marketing, whether it's paid marketing, through Facebook, Instagram ads, whatever it is. Get the traffic that you used to get when sales were higher and see if the sales match. See if you get more sales with that traffic. Now, of course, all traffic is not created equal. You want to try to target the right people that would love Your product. So this is really important when you're thinking about how to market market to the people that would most likely buy. So if you run that experiment, you can run that for a few weeks. You could see, okay, sales are picking up because more people are coming. So it's a marketing issue. It's not price issue number two. And these are not in any particular order. But you really need to look at your numbers, your profit margins. Some of us, we think, oh, maybe I need to lower my prices. But especially when you're in retail, that may not be an option. Okay, you need to make sure that you're making healthy profit margins. You can't lower your prices if you're not going to make a profit or a reasonable profit to make your business worth it. I know this firsthand because I used to run my own E Commerce store over a decade ago. I used to run a clothing line and I knew my margins. I knew I couldn't lower certain items past the point because then it's going to be breaking even and I'm not making any money. For example, if you sell a cap for $30, but it costs you 15 to create and ship and deliver to your customer, total cost, you really can't discount much. Maybe you can go down to 25, but then you're really getting thin margins because there are other costs. You have your own labor time, you have your website costs, inventory and stocking costs, all these running costs that run your business. This is why the numbers are so important. You need to know how much your business is costing you. This is why a lot of E commerce businesses get in trouble with their finances or with the financing of the business or the numbers of the business. Because it's not like they're selling one product at the same price. They can't just say, here is the total cost. Let's divide that number by the number of products I have, and this is the price it should be so I can be profitable. Every product has a different price. Every product has a different profit margin. So this is why your margins have to be pretty fat to cover any discrepancies and make sure that when you sell your product, you're giving back to your company to pay for expenses and then some. I'm very cautious about discounts. I do not recommend people to make major discounts or major sales where it cuts into their margins, especially in retail. But if you do want a discount, you have to encourage people to spend more. Those are the best ways to run sales or promotions where you say, you know you get 15% off when you spend $100 or more. This encourage at least the customer to buy more product. And I know in retail this is so important because you want to get things off your shelf because it actually costs you money to have it in inventory. Another way to do this is to have some sort of rewards program where they can get a voucher for every X amount of dollars they spend at your store. So if they spend $250 to get, you know, a $20 gift, again getting them to come back to the store and use that certificate on a purchase. So you got to make sure that it makes sense for you to even change your prices. Next, in every market there is a no man's land zone in pricing, okay? It doesn't matter if you're selling caps or T shirts or software or service. It's very hard to run a business when you're in the middle zone of pricing. Let me explain. Walmart, very, very successful company because they know their zone. They are on the low side, they're high volume. People go there for inexpensive goods. On the flip side, Louis Vuitton, they are on the higher side, okay? They are expensive. Their profit margins are huge. They're not going anywhere because they know this, they're a premium product and people will be willing to spend that kind of money. Some people just like buying expensive stuff and that's the market they play in. Low volume but high profit margins. The people that really struggle are the ones in the middle. If you follow the news, if you watch over time, a lot of companies like Sears, like Macy's, that are not cheapest chips and they're not super, super expensive, these are the ones that really struggle. So make sure you're not in no man's land because over time it's hard to sustain, okay? Because you're getting a clientele, you're getting an avatar customer that is still price sensitive, right? But you're not actually giving them the value of low cost goods. You're not giving them that because you just don't have low cost goods or you're selling actually good cost goods, you know, good value. And then those who come to your store that are value sensitive or you know, they don't really care about prices, they don't even look at prices. When they see your prices, they actually get turned off. They're like, this can't be good if it's this price. And by the way, that mentality has nothing to do with finances. There are people that are living paycheck to paycheck that don't buy things on sale because you just think that it's cheap. You may not know these people, but they exist and there are plenty of them. So be careful about where you position yourself in the market. You know your market best, you know your competitors. Where do you fit? Are you in the middle there? Make a choice. Lower the actual quality of your product and be a cheaper version of your brand. That's an option. Or go upscale and be an expensive cap company and understand your numbers. Understand I need this much traffic to get this much sales and this much profit because of the actual units that I'm selling if I increase my prices. So increasing is actually something that you may want to consider. But I'm telling you, you should check out your market, make sure you're not in that no man's land zone. I'm not saying it's impossible to live in that zone, but it's a struggle. It's not easy to run a business like that. To wrap up today's lesson, today's Q and A question from Gary. Should he lower his prices? Well, I mentioned I ran an e commerce store, a designer men's clothing line over a decade ago. It was called Zenum Designs, and I had to make several pivots during this business. One of the biggest pivots I made is I went upscale. In the beginning, I was scared to have expensive prices. I thought that it'd be a deterrent. I thought it'd be easier to sell sell products if they were cheaper. But then I realized it's actually harder sometimes, and it was expensive for me to produce these custom items that I was selling. So I decided to kind of do a refresh. I created a new design to my website, a very premium design, and I literally tripled my prices. I went super high. For example, I used to sell men's dress shirts for $20, and now I was selling them between 60 and $80. I had to just trust the fact that I had a great quality product that was worth this much. Okay. Plus, I really invested in the packaging and the delivery and the whole experience of buying my products. So when I launched my new rebranded business with a higher, much higher price point, I got less sales, but I made more money. I had double the profits because of the price jump. I remember before I rebranded, I was getting like 50 to 60 sales a day. After the rebrand, I was getting around 25 to 30, so half the number of sales. But I was making three times as much on each sale. So I was ending up being more profitable and the sky was the limit. From there. What I found is that people that are willing to spend more will buy more. So I actually saw an uptick in the number of products each customer would buy. Checkout purchases like cufflinks and accessories and the actual average order, that number went up the actual dollar amount in the cart. So that helped me tremendously. Now this is what worked for me and my market. You need to study your market and figure out if that's worth you experimenting with. But in my case, raising prices is what helped my business grow. Thanks so much for listening to the 100 Alumni show and thanks Gary for asking today's question on Q and A Wednesday. Again, if you want to ask a question, go ahead and email me@omar NBA.net and I'll make sure to answer it right here on the show. Don't forget to hit subscribe and get our next episodes automatically. As you know, we're daily Monday through Friday. Many of our listeners, they subscribe and when they have a chance to catch up during the week, they listen to each episode back to back because it's already downloaded automatically because they're a subscriber. It's absolutely free and you can subscribe on any podcast app like Apple Podcasts or Spotify or Stitcher Radio or Himalaya. We're on them all. Before I go, I want to leave you with this look at your own spending habits. Where do you spend money? Where do you throw caution at the wind? At certain things. You might be very frugal with your own groceries, but when it comes to your vacations, you like to spend. So you can even see the patterns in yourself that sometimes money is not the number one factor, it's the experience for you. In certain areas, you always have to put yourself in the consumer's shoes. Not everybody is price sensitive when it comes to buying things for themselves or buying for others. And when you lower prices, you're gonna have to play the volume game. You're gonna have to try to push as many units as possible, and that's a tough game to keep up with. So just keep that in mind. Thanks so much for listening and I'll check you in tomorrow's episode where we discuss the more you grow, the more you need to say no. Until then, take care. Of sam.