Whether you’re in e-commerce or “bricks and mortar retail,” a lot of any business comes down to pricing, but there’s a catch. It really comes down to value…and all values, as well as all prices, are subjective. Aside from building visibility for a brand and promoting good customer outreach, marketers need to set value and explain to potential customers why they should pay a certain amount for products and services. But how?
Although it might not seem that way, in some senses, new digital marketplaces like eBay haven’t brought a lot of clarity to price ambiguity. There may be more data available on the Internet, but pricing for all of those items that one can buy over crowd-sourced Internet platforms also come with their own subjective price tags. A closer look at many markets shows the ‘softness’ of valuation and the subjectivity of prices that companies list for their products.
Are All prices Subjective?
People often point to real estate as an area of commerce that shows how subjective pricing can be. It’s true that property sales are unique in their capacity for dramatic price changes – just look at how many houses lost up to one half of their value in 2008 mortgage crisis and its aftermath. Clearly, the price of a house is simply what it buyer will pay for it.
Classically, experts would point to the more rigid designs of the retail world to show how retail products are more statically priced than, say, real estate. But a lot of other ambiguities lurk in other markets. These range from the collectible value of used items to issues around dealer invoice for storage and merchandising costs that retailers add to their product prices. This post from the Ludwig Von Mises Institute provides examples of price discussions around such vague metrics as collectible value.
All of this boils down to the idea that prices can always change based upon what the customer is willing to pay. To a lot of companies, the search for accurate pricing is a mad scramble in the dark. It’s fraught with all kinds of questions about their real value of products or services, and less proactive teams can sometimes find themselves behind the curve when it comes to setting good prices and promoting them as fair market prices.
How Do Marketers Show Value?
One obvious way to show value is to compare prices to those of competitors. This is something that retail giants do all the time, but it’s arguably less done in e-commerce and online sales. E-commerce sales tend to focus on quite another subject that is useful in explaining value to customers: in a nutshell, it’s the issue of ‘use value’ and convenience.
The value of use works this way: marketers show consumers how much money they save by purchasing a product or service. This brings that subjective issue of pricing into the real world and helps to actively show customers why it makes sense to buy something. E-commerce sales add the hope of convenience with shipping price concessions and other features that they hope will put them above the competition.
In addition, marketers might work in other themes or motifs into pricing, such as sentimental value. Traditional studies on pricing have explored sentimental value as a powerful part of overall valuation. Appealing to someone’s personal style or desire for a certain kind of lifestyle is a kind of sentimental value strategy that a lot of e-commerce marketers use – the golden rule here is to take that idea of sentimental value and apply it to what is being sold. In setting up prices, companies should be able to “leverage” that consumer sentiment and use it for profit. And that’s how marketers are aggregating all of those subjective ideas to build value, and set prices.
