Hi there,
We are heading into the holidays, which is typically one of the most lucrative times of year for cottage food businesses.
And depending on your business, you might be able to do a
simple tweak that could nearly double your orders! (and even if you can ship or sell online, stick to the end to see how this applies to you too)
As you might know, I
sell fudge during the holidays, and once
I could finally start shipping last year, I
experimented with different pricing models for two different launches:
Launch 1 pricing:
- $17 for a 1 lb box of fudge
- $8 shipping
- If ordering 2+ boxes, get a $1 discount per box
Launch 2 pricing:
- $20 for a 1 lb box of fudge
- $6 shipping
- If ordering 2+ boxes, get free shipping
Can you guess which pricing model worked better?On the surface,
the total purchase price is basically the same. Let's do the math:
Launch 1 total prices:
- 1 box = $25
- 2 boxes = $40
- 3 boxes = $56
Launch 2 total prices:
- 1 box = $26
- 2 boxes = $40
- 3 boxes = $60
But the results were vastly different!I made almost 3x as much revenue in Launch 2, but that's partly because I had more customers in the second launch.
In this case, the really
important metric is revenue per customer. Let's see the difference:
- Launch 1: $24.53 per customer
- Launch 2: $42.67 per customer
Wow, that's a
74% increase in sales per customer!As I mentioned, my total prices didn't change much from one launch to the next. So what changed?
I'll tell you:
FREE SHIPPINGDon't discredit the allure of free shipping!Offering
free shipping pushed my customers to buy two boxes instead of one. In fact, 86% of my customers took me up on the free shipping offer.
So as you head into this holiday season,
find a way to offer something for free when customers purchase a certain amount.
Remember, psychologically speaking,
getting something for "free" is much more rewarding than getting a discount!Until next week,
David