Price Sensitivity & Online Shopping
Online buyers are far more price sensitive than offline buyers. That is, the price of the product is
much more important for the online buyer than for someone walking into an offline store. When
someone buys a product and has to select a particular merchant, they are “sensitive” to various
factors, such as these:
- The price of the product from that merchant
- The convenience of purchasing from the merchant
- The confidence they have in the merchant (whether the merchant “backs” the sale, for
instance, if anything goes wrong)
- The additional costs, such as sales tax and delivery
Price is only one aspect in the decision to buy. But on the Internet, the weight given to price
is much greater. This is a perfectly natural, and much predicted, state of affairs. Consider the
buyer walking into a brick-and-mortar store who finds a product he’s interested in:
- Many buyers don’t care about pricing much at all. They are more interested in
convenience, selection, location, and sales environment.
- Many buyers want the product now and don’t care too much about price, as long as it’s
“in the ballpark.” If the buyer finds the product, there’s a good chance the sale is made.
- Even if buyers are shopping for price, there’s a limit to how much driving around
they’re willing to do. Again, if the price is “in the ballpark,” price may be trumped by
convenience.
- Buyers don’t think too much about how much confidence they have in the merchant;
if the business can afford a storefront and take credit cards, they’ve already reached a
certain level.
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