Tuesday, August 5, 2008

The Art of Pricing - Pricing auction items for profit without scaring away customers

The Art of Pricing

Pricing auction items for profit without scaring away customers

At what price should you start your auction items? There seems to be an abundance of opinions on the subject, plenty of which contradict one another.

For example, one school of thought recommends you start everything at $9.99, because your eBay insertion fees will be lower. (The $9.99 price is one of the thresholds for eBay's insertion pricing tiers: As I'm writing this article, an auction item starting at $1-$9.99 has an insertion fee of 35 cents, whereas an item starting at $10-$24.99 has an insertion fee of 55 cents). Using this approach, you hope market forces will give you a fair final sale price for your item.

Another common theory is to start everything at an even lower price, like $1, to garner your items more attention�and bidding. Again, you are relying on the ever-popular market forces to get you a fair sales price. You may also need to sell a high volume of items to make up for those items that fail to meet expectations and wind up selling at that disappointing dollar.

This low-price/high-volume strategy is one used by jayandmarie, the renowned eBayers who sell "1 Cent CDs." They start every CD at a penny; and some close at a penny, while others sell at more than $70.

�The best strategy is to start with a realistic price that is the least you will be satisfied with for that item�
Some sellers start listings at the highest price they think they can get from the get-go, figuring the elevated number will convey cachet to their items and make bidders wonder what's wrong with the cheaper stuff. You see this strategy in action, somewhat strangely, on amazon.com, where one used copy of a book is listed at a ridiculously higher price than the next-closest book on the list.

After listing hundreds of items and analyzing all the different starting and final sales prices, I've come to the conclusion that the best strategy is to start with a realistic price that is the least you will be satisfied with for that item. (Note that I said satisfied with). You have to take into account the possibility that your item will sell at its starting price.

In the best-case scenario, your item will get bid up higher and you'll make even more money. In the worst case scenario, the item doesn't sell at this go-around, but you can relist it at auction, or even send it to fixed-price in your eBay Store, where it can patiently await that right buyer.

There is also the scenario that the item simply sells at the starting price on the first go-around, which is fine, because you built your profit margin into that number. And, of course, you needn't worry about any more listing prices or eBay Store fees.

This lesson was reinforced for me when I found a unique designer belt with a wonderful coyote head buckle. It was highly collectible and I'd seen similar belts from that designer go for more than $100. But I started it at a very modest $29.95. Although it had five watchers, it wound up selling for that humble starting price, to my surprise. Later, the buyer admitted she thought the starting price was too low, and she would have paid more for it. I could have priced it higher and patiently waited for the right buyer to come along�and I am confident they would have. Lesson learned.

So, unless you are selling in volume and using very low-priced items as "loss leaders," protect yourself and put modest but profitable starting prices on your auction items. People love a bargain, but you can provide them with that without giving away the store.

1 comment:

  1. Hi, Julia. Thanks for this article. I think you are right - you need to evaluate each situation on its own merits and determine if a $9.99 starting price is warranted based on fees vs profit, etc. eBay is so gray - there really aren't any hard and fast rules. eBay selling takes research and time to keep the sales coming.