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How do you communicate to clients that their prices are too high?
I client of mine is a beauty brand and other retailers undercut them massively. Their prices on site are generally over 30% higher than competitors and they never run sales or promotions, while other retailers are offering promo codes extensively. Delivery is also twice as expensive and minimum spend for free delivery double than competitors.
They also run international campaigns and their prices are sometimes double that of international retailers, with delivery fees 3-4x as high (and much longer too).
What’s the best way of communicating this to a client? So far my attempts have been fruitless and the client seems to be skirting around the issue completely.
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1 Reply
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Show them the stats; low conversion rates, high bounce rates, etc. Show them certain examples, like for a certain keyword, how well your ad matches that keyword, how you pointed them to a relevant product, and lo and behold, still no sale. Then present your hypothesis by showing the competitor pricing.
Ask if they’ve done a pricing study, and ask if they could give you a discount code to use for campaigns in ad extensions (which, you can point out, would also help clickthrough rates and lower CPC).
If they still take no action, at that point at least you’ve done your due diligence.
I’ve run into this issue before and it will likely not be a surprise to them if you tell them they’re priced much higher than the competition, but it’s your job to show them how it might actually be hurting sales and wasting ad dollars.
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Why are the prices higher? Is the product and quality of the product better? Higher prices are not bad if the quality of the product justifies that increase price. Your challenge then becomes communicating that to customers and finding people who will pay that.
If you are running shopping ads, show them what SERP looks like. Part of ranking in SERP for shopping ads will be impacted by how much higher your prices are compared to the average of your competitors.
One thing you could do if competitors are on Shopify. Buy a product on a Monday. Buy again a week later and look at the order numbers on each purchases. Gives you an idea of how many orders they are making each week. Price won’t be the only reason but could show the client how much competitors are outselling them.
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High prices alone aren’t a cause for concern. Luxury brands routinely charge more than their competitors and make huge margins because of the trust and desire they’ve built in their target audience. Note this can be based on actual product benefits or just perceived.
Apple, Rolex, Mercedes, etc.
However, if they don’t have that competitive advantage and advertising isn’t working efficiently, then it’s worth having a discussion about the “why” for pricing strategy.
Also, just dropping prices isn’t necessarily going to fix anything as they may have very high COGS to cover.
I would ask your contact politely during the next check-in why their prices are much higher than direct competitors. Don’t be judgemental, just listen carefully to the explanation. Then you can start a dialogue.
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I think a lot of good advice shared already; there could be a strong reason for higher prices and if they’re in the business for quite some time, even after having higher prices, there’s probably a reason.
You need to understand what’s the benefit their customers would get, for paying a higher price. It’s possible, websites offering lower price for the same product are truly not their competitors. Their target audience could be entirely different than your client’s target audience – you’d need to define their target group, their persona, their preferences and explain them that, given they’re not competing on prices, there’s something else you need to talk about in your ads.
You may need to nurture audiences for longer, incentivize them a little like an in-store trial, for them to experience the difference caused by the price. That would need higher investment from the client.
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You will need to start making the case that this is a marketing issue, not an advertising issue.
In some industries you can pull up competitors and show their price points. Industries like auto are very easy to do this in, as dealers know exactly how many vehicles their competitors sold in a given month, so you can show that price point as being too high more easily.
If they are positioning themselves as being a high end brand and there is little interest then they need to focus on marketing their brand that way. Oftentimes business owners don’t understand the difference between marketing and advertising, so you’ll need to educate them on it.
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