Hit More eBay Home Runs!
By Amy Kendall, Research Education Specialist
You've got to know how hard to swing. Watch any little league game and you'll know what I mean. A kid steps up to the plate with determination on his face. This time, he's going to hit a home run.
Hey, Batter, Batter, Batter… Swing!
The pitcher throws the ball. The youngster swings with all his might… and misses. A second time, he swings as hard as he can, missing again. Finally, he decides to play it safe. He slows down a bit… and connects. What happened?
Babe Ruth was the home run king for a long time. What people forget is that he was also the strikeout king. Putting everything into every swing will either knock the ball out of the park or send you back to the bench.
So What's Baseball Have To Do With eBay?
eBay auction starting prices share a lot of similarities with hitting a baseball. If you begin with too high of a starting price, it's like swinging too hard. It's likely you'll strike out and never sell your product. If you do sell it, it's like hitting a home run. You make a lot more money.
Swinging with less energy increases your chances of connecting, like starting your auction with a lower start price. However, if you don't swing a bat hard enough, the best you can hope for is a single. You risk never making even a double, much less a home run.
Hit A Homer Or Take First Base?
So where's the balance? Is it worth starting with a higher start price for the chance at making several times as much money as you would with a lower start price? I'll give you an absolute certain “maybe” as an answer.
Every product performs differently when listed. With some products, a higher start price can actually add the perception of value. From childhood we hear, “You get what you pay for.” Some people still cling to this belief and pay too much. Especially when we don't know the product well, we tend to think more expensive products must be better quality.
Other products sell for more when you start lower and start a bidding frenzy. How do you know which is which? You must have data and the means to make sense of it to consistently predict what will work for your product on eBay. So where do you find data like that? Let me show you.
How Do I Know Where To Start?
Begin with research. You can get your data from one of three sources:
- Trial And Error: Although this is the costliest method of research in the long run, most eBay sellers start by just trying different price points. Each time they sell something (or don't), they, hopefully, learn something. Time and money are the biggest downsides to this method. It may take weeks using the trial and error method to learn very much, and during that time you may have lost a lot between listing fees and lost profit. With trial and error, you only learn from your own experience, with no way to benefit from what others have tried. There must be a better way.
eBay Closed Listings: You can go to the eBay Web site to compare selling prices to start prices. It won't take as long to learn something as the trial and error method, but you will invest a lot of time working this way, manually reviewing auction after auction.
Note: Just in case you don't know how to search closed eBay listings, go to www.ebay.com. Select the "Advanced Search" link (right by the “Search” button) and then click the "Completed Listings" checkbox (under the “Search including” heading).
- Market Research Tool: A research tool like HammerTap distills the data from hundreds or thousands of auctions. It creates a Findings report with graphs and charts that you can learn enough from to take immediate action. Better yet, you'll accurately predict the best starting price based on facts. You don't have to rely on a gut feeling. And it takes just a minute or two.
Whichever method you choose, if you want to consistently and predictably make money on eBay, it starts with good, solid research. Without it, you're just trying things without a clear direction. And that's the most costly way of all. Without it, you are likely to lose a lot in listing fees before you stumble upon something that consistently works.
Bidding Frenzy or High-Paying Buyers?
Below, I'll show you how to pinpoint your most profitable starting price. But first, let's make sure we are on the same page by identifying our main goals. They are:
- Start with a price which attracts the most high-paying bidders (not just the most bids).
- Use a start price which results in the best possible selling price.
Goal two is a given. You might wonder about the first goal, however. Don't more bidders mean a higher selling price? That's what I used to think. The research proved me wrong.
I researched a product to find similarities among higher closing priced auctions vs. lower closing ones. Here's where I discovered the error in my thinking.
Where I Went Wrong
More bids don't always result in the highest selling price. I often found that auctions with the highest selling price had few bids. I was shocked. This flew in the face of common wisdom, so I dug a bit deeper. Let's take a look at a sample auction to illustrate what I mean.
Start Price In Action
Let's take a look at auctions for modern art prints on eBay.
For this example, I narrowed my research to Robert Bateman prints. The examples below demonstrate how the highest number of bids doesn't always mean the highest price. (To get this information, I simply went into HammerTap’s Listing report and sorted my data into this format by dragging these columns into the top row.)
Figure 1: More Bids, Lower Price
Figure 2: Less Bids, Higher Price
Figure 1 shows a starting price of one penny. Its low starting price stimulated a lot of bids. But what we care about is profit at the end of the sale. Did the bidding frenzy result in a higher purchase price? No.
Maybe what we see here an example of people believing they get what they pay for. Let me illustrate with an example. Recently I purchased a used high-end Mercedes sports sedan for about half its value. I got it for less than I intended to pay for a simple commuter car. It sat for some time at the dealership at a very fair price, but the dealer couldn't sell it. Why?
Perception is Reality
When people saw a much lower price displayed in the car's window than they expected to pay, it may have prompted them to say, "What's wrong with it?" The only thing wrong with it was its price (from the dealer's perspective, at least). Oddly, if the dealer raised the price, it would have also raised the perceived value. He probably would have sold the car quicker at twice the price.
Figure 2 shows a starting price of $599.95, almost 60,000 times higher than the starting price in the first example. The higher start price didn't attract as many bargain hunters. Just five serious bidders got into that auction. But as a friend of mine in real estate says, "You don't have to sell a house to everyone. It only takes one (at the right price)."
In this case, the difference in perceived value made a difference... $639.01 to be exact.
Different Products, Different Research Results
So we conclude that the higher the start price, the higher the end price. Right? Unfortunately, it's not that simple. We can say that for this specific product, research shows a higher starting price resulting in a higher closing price. Just don't try to apply that generalization to other products. You might get burned.
Let me stress again how each product behaves differently on eBay. Different kinds of products are purchased by entirely different types of buyers. Rules of thumb for selling one product simply do not apply to other products in many cases. That's why it's so vital to your success on eBay to arm yourself with the facts.
In contrast to art prints, for iPods you might actually get a higher selling price by starting with a lower start price. How would you know? Again, do a little research. How little? Using HammerTap, it took two minutes to do the research in Figures 1 and 2.
Analyzing Results Across Multiple Auctions Produces More Reliable Data
In the example above, we looked at two listings for the same product. But what if one of these was a fluke? Purchasing one lottery ticket can make someone rich. But most of the time, you just lose your money. We want to reliably predict what profits our listings will give. Averaging the results of many auctions helps remove extreme examples.
Figure 3 reveals how the starting price affects Average Selling Price (ASP). The first row of data in the chart below shows that for Robert Bateman prints, the best start price is between $946 and $1,031.99 if you want the maximum closing price.
Figure 3: Start Price and Average Sales Price
In the graph, as we move to the right, the starting price grows. Each green bar represents the closing price of the auctions in the range indicated below it. Notice how as the starting price grows, so does the closing price. So we conclude that for this particular print, begin with a starting price between $946 and $1,031.67 and you'll make the most profit.
Note that we find gaps between the green lines. This indicates one of two things:
- People listed in these price ranges, but they didn't sell
- Nobody listed in these price ranges
This graph speaks to what worked. It says nothing about listings which didn't result in a sale. You care most about successful auctions, since you want to emulate what works.
HammerTap research helps you avoid problems. It shows you what worked in the past and helps you predict what will work in the future with greater accuracy. There's no eBay crystal ball; and until there is, HammerTap is the next best thing!
Make the most of your listings with research!
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