I got busted for selling golf balls

I don't agree.

Competing on price is an uphill struggle in my experience. Sure, it works for some companies, but it's not always the best way.

I'd rather just be the best and charge what I want (within reason).

There's no benefit in undervaluing your own services/products. Having lower prices than competitors also gets you clients who only care about price and nothing else. These people are a nightmare to deal with and can take up a lot of your time.

It's fine when you're a kid hustling for a few bucks selling golf balls, but I don't think it can accurately be applied to all businesses.

Hey Caleb,

Nice story, but attributing your success on a race to the bottom leaves out a few details that would have made this a great story.

Had you tested the price, $1 vs $1.50, as an example, you may have found out your success was related as much to being at the right place at the right time as in being in front of targeted traffic more than just having the lowest price.

The reason I mention this is due to people's instinctive reflex to attribute an idea they have about a given success to something that makes sense to them without really getting to the root cause for such a success. Testing a higher price in this instance perhaps would have led you to a different conclusion had $2.00 for a pristeen ball worked out.

~Bill

Your marketing strategy should never focus on price point. As a consultant, this is one of the biggest mistakes most brick and mortars make that hurt their bottom line.

(woah - there were no posts when I started writing. Hopefully this still flows with the thread.)
Beating the competition on price is one way of creating demand but you have to realise you can't always 'go cheaper'. You have to take your profit into consideration.

Sure, you were selling more balls but were you making more money? How much time did it take you to find those balls, clean them up, find people to sell them to? At the time you were pretty young and pocket money is more important when you have all the time in the world but in the business world time is money.

Digital products can be a bit different: books mainly. Software and services on the other hand the larger number of sales can be detrimental if you don't have the profit margin to support them. Charging a bit more to get the same turnover from less customers can be a better choice time wise.

You also have to consider how you want to be positioned in the market. Great value I personally think is the best balance. YOu want customers who are happy to pay the price they are for the product they are getting. Pricing low can train your customer into only buying cheap products. This is fine if you can crank up the product creation and continually find buyers for those new products but a premium product often finds premium buyers. These buyers still want value for money but they don't shop on price. This allows you to spend the time to create amazing products that never dissapoint.

Apple is one of the best examples I can think of that don't create products based on price. They focus on creating a quality product that the market is willing to pay for. Sure, you can find other phones for cheaper but what are the profit margins like? Will they be around in the long run?

The Plasma/LCD (and other consumer electronic products) is one market where competitors tried to use price to increase sales. This race to the bottom left the companies with the biggest bank balance sitting at the top. Many long running large companies with superior products failed in this race because quality become secondary and they couldn't maintain the profit margins.

I think you should focus on offering value for money in a market you can compete with and create unique selling points that are solely based on price.

So you stole golf balls and sold them for a small fee? Or am I missing something lol.

My opinion is that decrease pricing is a good way to gain customers, provided if the customers know exactly what are the market prices and are price sensitive to it.

When applying to digital products, it might not be the same. It depends on where you get your traffic from. For WSO, chances are the warriors know the price very well and to win them over, you can play with the pricing to gain the customers.

But chances are, when you play with pricing to do so, you need strong backend to make tons of $$. Otherwise you may only be stuck to a certain level?

My opinion is that decrease pricing is a good way to gain customers, provided if the customers know exactly what are the market prices and are price sensitive to it.

When applying to digital products, it might not be the same. It depends on where you get your traffic from. For WSO, chances are the warriors know the price very well and to win them over, you can play with the pricing to gain the customers.

But chances are, when you play with pricing to do so, you need strong backend to make tons of $$. Otherwise you may only be stuck to a certain level?

It is a good plan, I would much rather sell 300 items at $7 than 50 at $10...

I really enjoyed the story, and I won't exclusively say that price-war tactics doesn't work but let me put in my 2C based on my experience about price and buyer's mindset.

Some Key Points

1) Quality of competition - The assumption that $3 vs. $1 is flawed because you're comparing brand new vs. used. That's like "I'm sure I'll sell a 2010 BMW M5 easier because the 2011 M5 cost 20K more!"...
2) Your profit margin requirements
3) Perceived value of your product.

With your example, you're basically selling, for the lack of a better word - junk with value. Junk being the fact that you have virtually no up-front cost other than to scavenge the said items. There's no difference between pro-grade golf balls and recycling beer bottles. You picked up things that others left behind to sell. Those beer bottles may fetch you a dime in recycling credit, but you don't get the beer, right?

A lot of recyclers do the same thing with appliances, they scour for refs, washing machines, etc in dumpster lots and picks them up, do the required repairs and sell it for a profit.

Stigma of Low Price

Going for low prices indicate a couple of things for the most part:

1) You have a really good acquisition process such as big discount from your suppliers, in your case, bad golfers slicing their balls.
2) Your product is cheap (they are since they're used). Most pro-grade, soft-cover balls don't wear that well, a couple of bad hits can tear the jacket.
3) Your competition is the pro-shop only, which sells brand new items at retail price. Now what if there's another kid in town doing the same thing and sells his scavenged golf balls for 80cents?

Personal experience tells me that just like Apple, if you market and package things a certain way and target only your preferred demographics, they'll come to you REPEATEDLY even if you're priced higher than 90% of your competitors. A lot of people don't like CHEAP, price is not a main consideration unless they know there's little value to the product they'll purchase.

Keeping price low sets a LIMIT on how high your margins can be and limits your profit potential unless you get more VOLUME...

I understand that your example was merely for a kid looking to make extra bucks, and I HONESTLY admire youngsters who think that way and actually take action, but such tactics will not work long term unless you're like Walmart and have the leverage to play the volume game.

My Case Study

To give you an example, my partners and I own a chain of auto-detailing stores in the Philippines. Now the city is literally filled with car wash shops spaced less than 1KM apart. No exaggeration! You cannot go through a block without seeing a make-shift car wash around.

They all work with the assumption that with such a high concentration of cars in the city, and the amount of dust/dirt that floats around, there will always be someone coming in for a wash.

Practically all the shops back in the early 2000s started with a Php200/wash price point, then more and more shops popped up and today, the average rate drops to P80/wash!

Factor in rent, labor, time, supplies, that's a crazy low margin to work with.

Tons of these hole-in-the-wall stores closed down. Some thought about ADDING detailing services to increase income since detailing services, unlike car washes, charge in the hundreds, if not thousands per job.

The funny thing was, they're still copying each other and trying to beat each other's DETAILING prices! The normal paint detail price started at around P2,000/car, then now it's down to P1,000/car, and even the bigger stores are doing the same thing!

Our store started with one targeted goal, to be the only PROFESSIONAL DETAILING shop in the metro and car washes are merely "we have to do it anyway to render our main services".

We offered detailing services at 30% higher price point than any shop out there, even our car washes rate are hovered around P200-P400/wash, for example, and for the last 5 years, we still do not have a direct competitor and our customers keep coming back despite our price increases.

In my experience, selling quality and image is more profitable than operating on price wars alone. I strongly feel that customers who shop by price point only are low-value customers that you'll have a hard time retaining for future repeat sales. In short - short-term potentials only.

You'll work so hard if you keep chasing volumes all the time, and when it comes to physical products, you're bound to hit a brick wall when someone finds a more efficient way to get volume orders (like Walmart, or a bigger scale - China) to beat you down.

its called lowballing the market... not a good strategy because it wont last...

I don't tend to participate in pricing wars. I imagine it's great fun, but I like to keep prices high and over deliver on high value.

OP having the lowest price is not the only way to guarantee better sales than your competitors. In fact, it can actually hurt you in the long run for multiple reasons. When it comes to the consumer you have many different types; people who want a deal, people who want quality and people who want both (as an example).

There are many consumers who will look at a higher price tag as higher quality (Take Apple computers for example). Also, when it comes to online marketing and creating a list of consumers for your product; do you want people 50 people that will buy a $40 product or 25 people that will buy a $80 product? I will take the higher paying consumer any day. Instead of focusing on lowering prices people should focus on increasing quality.

I'm confused, where did you get all these Pro V1's from so that you could sell them?


Also I think your lesson is wrong. I'm not allowed to post links yet, but Google 'How I doubled the price of my software product and sold ten times as many copies.' There is something called perceived value. When something costs more people assume it is better, and when something costs less people assume it is worse. In fact, if you offered many consumer two identical products that cost different prices, many consumers will choose the more expensive product because they assume it's better.

Hi Caleb,

I do agree that keeping prices low is very important but quality cannot be under estimated. I know plenty of cheap shops but i won't go and buy anything because the quality is so low. you had no over heads and 100% which meant you could vary on your price. It can work but only in certain industries.

When I was 16 or so I was big into trading cards. I would buy them off other kids for 50% or less of whatever I could sell them on eBay for. I was totally guilty of the "price war" thing too. Since, I decided that was the easiest, and best way to move product, and I was still making the mark up that I wanted.

Though, usually they would be an auction. So, I would start the price below whatever the cheapest listing was for that particular item. The final price almost always ended up being higher than those original items I was trying to under cut though.

I can see how price cutting devalues an industry. Which it would if I was selling a new product like the actual packs, but the individual cards had a big audience with a lot less competition. It was too time consuming, and too much inventory for the big pro stores to stock every individual card.

Awesome post Caleb!

Just shows that entrepreneurs start young

I also used to sell stuff from this auction site in NZ, buying stuff from Ebay. People used to pay fairly high prices for electronics and novelty items, so I acted as a "middleman". Anyway, these ideas continued to come in high school and eventually I gave the job of managing it to sister for $10 a day lol

Ansar

Oh yeah Caleb - I forgot to mention - when I was growing up I was not allowed any where near the golf course - some kids had died being hit in the head by golf balls and my parents would have killed me if they heard I was anywhere near there!

Bottom line is, OP had a 100% markup on those golf balls.

Before anyone says "Well yea, but his time is also worth money", you can look at it another way. I'm sure Caleb got a decent workout collecting golf balls considering the perimeter of a golf course would translate into a lot of walking (exercise).

So, he got free exercise while earning money from a 100% markup, not a bad return regardless of the individual golf ball price.

I couldn't agree more . You lower your prices if you don't know what you are worth .

If you have something that works like a miracle , would you sell for it pennies?


How are you suppose to be rich if you selling at $1 . You might not get a lot of refunds but it is just a lot of work selling a million $1 product compared to forurty $25k product and giving the best value for their

What is the point of being an expert in your niche if you are only going to compete with beginners on price ?

You can't always have lower prices, especially for physical products. You were able to offer lower prices on the golf balls because you essentially stole them / got them for free. This isn't the case in the real world. Sure, you can sell info guides for less, but that's about it. And believe me, cutting into your price margins to beat out your competition can definitely work (look at Walmart), BUT that's not always the best way to go about things.

I think it's better to offer a very good service and charge a crapload for it. This is called prestige pricing and allows you to make more money with less work overall. It's better for smaller businesses IMO.

If I was the owner of the course I would of worked a deal out with you to buy them all from you. Would f been a no brainer for them to work like that with you. That way they could o resold them for $2 and still walk away with a profit.