Avoiding the Price War
By Amy Kendall, Research Education Specialist
Imagine—you’re happily going along, you and your competitors seem to have struck a balance within the market and you’re comfortable with where you profits are hovering. However, before you know it one of your competitors drops his or her prices, and what are you left to do? Do you follow suit and drop your prices too, and end up with a price war?
Price wars are based on the fact that “All things being equal…the lowest price always wins the war,” and while some businesses can successfully compete by offering the lowest prices in the market, it isn’t the ideal position for all businesses. Unfortunately, a price war can often seem inevitable. So, how do you make sure your products remain priced where you want them when all your competitors are dropping their prices?
Believe it or not, a price war doesn’t have to be your only option. The key is to differentiate your product.
In biology, cellular differentiation is the process by which less-specialized cells become more specialized. This property of differentiation is the reason there is such interest in stem cell research. Stem cells are so general and un-specialized, that they have the ability to become any specialized cell in the body through the process of differentiation.
A seller on eBay can use the same process to avoid a price war. If we look at our “price war axiom” a little closer we can see why differentiation works. “All things being equal… the lowest price wins the war.” The reasoning behind our success strategy lies with that phrase—all things being equal. If we make things unequal, or differentiate our product, we’ll be able to avoid potentially damaging price wars.
How to Stand Out From the Crowd
Differentiating your product, or describing the differences between your products and services and the offerings of others, makes it clear for buyers the value they get from your listing. And in the end, value, perceived or real, is the only thing that separates one product from another.
Value is actually just a perception of your product, and it is often subjective and unique to each buyer. But through your process of differentiation, you illustrate for buyers exactly why your product is more valuable. For example, if everyone else is now selling your product for $1.00 and you’re still listing at $2.00, your price is too high—unless you can prove that you deliver a dollar’s worth of additional value!
Now, it’s important to remember that customers are rarely making their buying decision based solely on price, so as a seller you need to optimize opportunities to add value. HammerTap makes it easy to discover ways to add value in two ways.
- It is a powerful and efficient tool for conducting a competitive analysis.
- It allows a seller to know which areas of differentiation (bold, highlight, start price...) are important to the current eBay buyers within the market for a given product.
A strong competitive analysis can be a great tool as we search for ways to gain advantages over the competition. By closely examining our competitors we can decide our own competitive strategy, and an effective strategy will ultimately allow us to pull ahead of our competitors and avoid a price war. But we can only discover what will work for our product after a careful examination of our competitors and our market.
Let’s take a quick look at these stuffed animals markets and see what we can find.
Disney Stuffed Animals
Fisher Price Stuffed Animals
Gund Stuffed Animals
From these searches I’ve run for different stuffed animal brands, we can quickly draw a few conclusions.
- Fisher Price has the highest listing success rate at 44%, compared to the other categories at 31% and 25% respectively.
- Gund has the highest sales price, averaging $14.08 per listing.
- Disney has many more sellers in the market with 1,032 sellers making a sale within this period.
Now, what can we do with this information? Obviously, we would want to drill down deeper, but the information we’ve gathered here can point us in the right direction.
We know that Fisher Price stuffed animals have the highest listings success rate, which means they are selling most often. A successful strategy within this category may revolve around marketing to new audiences. For example, if I had been doing well with Elmo stuffed animals in this category, I may consider expanding my product line to other Sesame Street toys because I know customers are buying at a higher rate within this market.
Within the Gund market, stuffed animals are selling at the highest prices. This market may be great for a strategy that offers more value, such as offering a small children’s picture book along with the stuffed animal character, because these buyers on average are already willing to pay slightly higher prices.
Finally, we noted that the Disney market has the highest number of sellers. This observation could lead us to the conclusion that a specialty strategy would work well in this market. With so many sellers it is especially important to stand out, so pointing out to your customers why you are unique or special could be a great way to attract their attention.
Now, like I mentioned before, we would want to dig a little deeper into these individual markets before we made any concrete decisions, but these search results are a great place to start and they give us some valuable directions. In our Advanced Webinar we’ll go deeper into conducting a full competitive analysis, so be sure to join us!
HammerTap not only helps us in our competitive analysis, it can also show us which listing features, or areas of differentiation, are important to current eBay buyers within our market.
Let’s take another quick look at our stuffed animal markets.
Listing Success Rate: Best Start and End Day
Average Sales Price: Best Start and End Day
From our results here, we can see that even within similar categories buyers have different preferences and behaviors, so it is absolutely crucial that our listing differentiation matches buyer behavior! We can also determine that a seller within the Fisher Price category may be able to optimize the time they spend since the starting and ending days are the same for both listing success rate and average sales price.
These charts show us the HammerTap analysis for these markets and help us determine when buyers are looking to buy stuffed animals in each of these markets. With this information we can tweak our competitive strategy by making sure our products are available exactly when buyers are looking.
It’s also very important to remember that this is only a small sample of buyer behavior. Options like starting price, bold, title keywords, etc. are all areas where we can further analyze our buyers’ behavior and differentiate our listing to match when and how they’re looking.
So, before you bring out the big guns in your price war and start digging a hole you may never get out of, consider the ways you could differentiate your product and make it more valuable in the eyes of your potential customers.
Now, we’ve just touched the surface today, and I’m sure you’re eager to learn more about strategies you can use to avoid profit-damaging price wars, so join me and eBay expert Jen Cano at our Advanced Webinar where we’ll have over an hour of live training on Avoiding the Price War!
Click here to view a recording of this Advanced Webinar!