The Untapped Gold Mine Of Ecommerce Pricing

The Untapped Gold Mine Of Ecommerce Pricing

eCommerce Fastlane Ep. 118 Featuring Pricestack

Podcast Transcript

Steve Hutt (00:00):

Welcome to season three of eCommerce Fastlane Episode 118.


Steve Hutt (00:05):

Welcome to eCommerce Fastlane, the podcast show to help you build, launch, grow and scale a wildly successful e-commerce company. Listen to real conversations with proven practical strategies and success stories. Learn how to generate more traffic, more sales, more profit, and customer lifetime value for your Shopify store. And now your host and e-commerce entrepreneur. Steve Hutt.


Steve Hutt (00:40):

This episode is brought to you by Grin the number one influencer marketing software solution. That's built for direct to consumer brands on Shopify. They're an all-in-one relationship management platform that helps you cultivate an authentic influencer network and a more valuable brand from discovery and outreach to campaign management, Grin streamlines your workflow, removing the busy work while giving you the tools to help you grow and scale your program from influencer recruitment, communication, product seeding, discount codes, and affiliate links, including content and rights management, sales and tracking and influencer payments. Grin helps you do it all. Smart brands truly understand that creating an emotional connection with your consumer drives up lifetime value because what you end up doing is building a stronger brand. You create diehard fans who come back and purchase from you again and again. It started today with Grin and makes the most of your influencer marketing program with the all-in-one platform that's designed to help you build more authentic brand boosting relationships. So go check them out at Grin.co


Steve Hutt (01:51):

Hey, there it's Steve. And welcome back to the E-Commerce Fastlance podcast. Now this is your first time listening. This is an e-commerce show where we have honest and transparent conversations about building and thriving with your store powered by Shopify or Shopify plus new episodes are available each week with your favorite podcast player through Apple podcast, Stitcher, Google play, and Spotify, or you can also sign up online at E-CommerceFastlance.com to be notified when a new show is being released. Now, my guest on today's episode is Brecker Brees who is a co-founder and Chief Service Officer from Pricestack. And they're an AI-based e-commerce pricing platform that analyzes behavioral data and suggests optimal prices to earn Shopify merchants more revenue and profit. Who doesn’t want to earn more profit right now? Right? If you've always wondered if your store's products are priced correctly to maximize revenue, lifetime value profit today's show will definitely be an eye-opener. So, hi, Brecker welcome to E-Commerce Fastlane.


Brecker Brees (02:53): Thanks Steve. Thanks for having me.


Steve Hutt (02:55): So I mentioned a tiny bit at the top of the show, but what does Pricestack do and what problem do you aim to solve for Shopify store owners and brands?


Brecker Brees (03:04):

So, Pricestack uses a merchant's own behavioral sales data to detect whether or not the current price that they're charging for a product is optimal. So if it isn't, meaning that money is being left on the table, Pricestack’s AI suggests that perfect ,optimal price. So behavioral price optimization does more than just increased profits. Actually, it can help with things like customer lifetime value, average order value, and really our favorite one is helping merchants reduce rates of shopping cart abandonment with price optimization.


Steve Hutt (03:39):

And, you know, one thing that I find interesting is when I talk to brands about pricing, you know, the typical conversation is all about cost of goods and thinking about shipping and thinking about, you know, what their competition is doing, and then maybe deciding on a reasonable margin and just kind of upcharging accordingly in a spreadsheet. And that's just kind of how they manage it. And I think that this episode is going to be significantly eye opening because I think there's a lot more to it than just the way, maybe the old school way, of just being okay with an acceptable amount of margin. You're looking at it from a different perspective saying that there's ways of optimizing, as you mentioned, lifetime value and average order value all based on price, because price is a very important part of it. It's not the only part, but it's interesting you’re able to analyze the first party data inside Shopify and then help make some decisions about better pricing options to maximize all of these KPIs. So that's really exciting. So let's talk a little bit about the founder's journey, cause I'm always fascinated like with you know, why people build what they build. Are you able to talk about what uniquely positions you and your co-founder, I guess in two points, number one, to have the desire and number two, to have the expertise to want to create this platform?


Brecker Brees (04:47):

Yeah, definitely. So my co-founder and I, Ian McCue, we both studied economics in college, and we were always both really fascinated with price and especially what was going on in the economics world, in academia studying price and behavioral economics. I have a research background and studied in an economics program that was very heavily into experimental economics, mainly in the behavioral field. And I was surrounded by some fantastic economists that really sparked my interest in the economics surrounding price and how behavioral and psychological it really was. So Ian he's also a trained economist, but he's also a self-taught developer and a really good one at that. And he started a previous successful business that employed a handful of technology experts to teach kids tech skills like coding, graphic design and he's really always been up to date on cutting edge technology in this space and has really always been an early adopter even with his previous business and what's going on in AI and machine learning. And we really just wanted to take his expertise in that and both of our knowledge and expertise in economics and what we'd been seeing going on in the lab and introduce that to e-commerce.


Steve Hutt (06:09):

So let's talk about price optimization I think, I think you're going to correct me on this, and I always think about price. I always talk about the competition. What are others selling? Let's say you're selling coffee now. As unique as you believe you are in your blend of coffee, you have to go and look at the market conditions going “what's fair and reasonable in my market”, and then price it accordingly. And then if you're not making as much margin based on the competition in a similar sphere, then maybe your cost of goods is too high. And so maybe we need to find a different supplier or different process. So I'd love to hear from you about how price optimization can be having a better frame of mind around it


Brecker Brees (06:52):

To address that, that example specifically, we say, you know, if you really want to know how competitive your market is, you know, what's reasonable to charge for a certain product, let your customers tell you, and let them tell you through your behavioral data. You know, price optimization is really a process of using data analysis to understand how customers will react to different prices for any given product, with the goal of determining the price that maximizes revenue profit or a combination of the two. So really what's reasonable and what's not reasonable is really coming straight from the customer. In essence, that's what that process of data analysis is really trying to determine. So in other words, price optimization is the process of finding the most optimal price for a product that will yield the best results and behavioral price optimization is a type of price optimization that Pricestack utilizes that utilizes merchants onsite sales data to analyze customer behavior.


Steve Hutt (07:56):

Price optimization. Then is it the same or different than AB price testing? Because I know once again, do recommend a lot of the brands that I manage, you know, use like a, I don't know, an app like Theme Scientist, or, you know, Google Optimize and going in and making some price changes dynamically, and then seeing which experiment actually wins. Is it, are we talking about similar things or are you going by it by a little bit different angle?


Brecker Brees (08:23):

So price optimization is actually really different from AB testing. AB price testing is really a trial and error process that is very statistical. It can work in some instances, but it's still very statistical. Now behavioral price optimization requires no testing. Pricestack does not test any prices. Pricestack’s AI is able to determine units sold at different prices, calculate how optimal that current price is that the product is currently being priced at and suggest a new price in the event that based on that customer sales data, right, your behavioral sales data, the current price is causing the merchant to leave a significant amount of money on the table, either revenue, profit, or a combination of the two.


Steve Hutt (09:11):

And so what about price matching like is, so is this price optimization? Is it different than price matching?


Brecker Brees (09:17):

So price optimization, especially behavioral optimization is really light years ahead of price matching. And if you have a unique product price matching really doesn't make much sense to me. I've never understood why these merchants who have really great unique products are so persistent about price matching. You know, even if you sell a product that does exactly the same as your competitor, your company is not the same. Your e-commerce store is not the same. Every e-commerce business offers a different user experience level of customer service, and when to close competitors, price match one another, it can lead to a pricing war, which is, it's just a lose-lose. Things like competitor pricing are implied in consumer behavior. You know, if your pricing isn't competitive enough Pricestack will be able to pick up on that immediately through the behavior of your site’s shoppers and be able to adjust accordingly. So alternatively many e-commerce merchants who truly have brought a very, very unique product to market overthink the level of competition in their market and really sell themselves short. So this presents a wonderful opportunity for Pricestack to help merchants like that make strategic price adjustments that just grow the bottom line, right? I mean, it's great news to hear that your product is way more unique than you thought it was and your data is telling us that your customers also agree.


Steve Hutt (10:47):

Then I guess the next question is, is that, you know, well, why would it be important for Shopify brands to think about this sort of pricing strategy? And you're saying “hey, don't look at your competition and don't undervalue what you're all about.” If it's, you know, you're all selling coffee at $20 a pound, and it's just a different label on it. But if there's probably a significantly bigger story behind the brand and why people want to get behind a brand, and maybe that has a premium price to go along with it, but every brand is different, you're saying. And because of that, you can't just look at competition. I mean, you can't be oblivious to it, but you also have to let the, I guess, the data inside Shopify with your AI help make these decisions for these e-commerce brands. Exactly. That's the answer then? So, I mean, there's, there's so many things going on in the world right now. Stop looking at your competition. Have a little bit of information about it, but let the AI that's built into Pricestac reveal what is the best price or best possible price based on the behavior of your customers? Am I phrasing it correctly about how the solution is working?


Brecker Brees (11:50):

Definitely. Yeah. I mean, it's, alternatively my example, you know, if your market is more competitive than you thought it was, our AI is going to pick up on that and it's going to just prices accordingly to be just as competitive as you need to be. Not more, not less.


Steve Hutt (12:05):

And one thing I like too is that it's not like the solution is not forcing you to make price changes, and certainly it doesn't make the changes for you. It certainly reveals the data and says, “Hey, based on this, here's what we're recommending and go ahead and make those changes. We're recommending it. And you're going to see a lift, but it also is a little bit of an experimentation too.” Definitely.


So let's talk about the people that are listening today, because there is a very diverse range of entrepreneurs and they listen each week. I mean, there's thousands of people come to this show each week. From your vantage point, since you have lots of people connected and you have some history behind from a pricing and from an e-commerce perspective, what sort of advice would you give brands today that are definitely eager to grow in scale? It could be related to pricing, but then I'm just curious and overall what you see, what success looks like on today's landscape?


Brecker Brees (12:59):

Well, it's funny, you know, how many brands already recognize, you know, that they need to be consumer first, they've really taken a consumer first mindset to heart when developing their strategy to scale. marketing strategy, when developing new products, but then when it comes to pricing strategy, the first thing they look to is, like you're talking about before cost of goods sold competitive pricing cost, plus you know, sometimes the consumer, you know, when the discussion of price comes around, just totally goes out the window to all those mid-market brands out there really all brands. My advice is to not fall into that trap. Of making everything else, customer centric, but then when it comes to pricing, well, we need to be mindful of competitor pricing and our costs. And, you know, some merchants are really fixated on having, you know, we want 20% margin and, we have to do everything we can just to have it, but in everything else, they're, they're flexible and they respond and adapt to the customer. So my advice is price is no different, you know, price is just as important as a part of the business as all those other things and therefore needs to be customer centric. So if you're really trying to achieve a customer first business mindset and strategy, price needs to be in that discussion and the customer always has to be at the forefront of a pricing model.


Steve Hutt (14:33):

Just thinking off top of my head here about discount codes and promo codes that were kind of just past BFCM right now, we're in the middle of the holiday season. And I think there's lots of deals in sales and things going on. I'm just wondering about how Pricestack fits into that equation, where there are lots of codes and promotions that are available that can be very seasonal, or sometimes you hit a certain threshold where it's free shipping, and then maybe even some payment options, maybe you're using like Affirm, and these sorts of, I guess, four equal payment options. And so these are all probably shopping factors. I'm just curious how Pricestack fits into that equation when there's, you know, a few variables out there, price is one of them, for sure. But then maybe there's other different things of codes, shipping charges and different payment options.


Brecker Brees (15:26):

Yeah. That's interesting. I don't want to say too much about this. It's definitely something we're working on. It's really interesting in economics, there's a lot of talk right now about  how you frame price, what does that do to consumer psychology and lowering a price by 20% or offering a 20% off promo code or discount to your bottom line that looks the same, but to the consumer, to the customer what's going on in their mind when they view those two things, they look at them very differently that opens the door to some more optimization opportunities. And definitely next year, we're going to start getting into that game. Because I think that's really important that sometimes it might be better to have an optimal discount. Sometimes it might be better to have an optimal price, but what will work the best and, for lack of a better term the most optimal situation would be optimizing for both simultaneously. Making sure that your prices are optimal while your discounts and promo codes and sales are also optimal.


Steve Hutt (16:32):

Well that’s kind of leading into my next question a bit because I think, and that's one thing that I guess you're going to be working on for ‘21, for sure. But let's talk about the future of Pricestack. I mean, you have a Shopify app in the app store and congrats on getting approved on that. And are you able to talk about maybe some of your North stars for ‘21, like partner alignment, innovation, I mean, end of the day, I'm just curious in how you're going to continue offering value and assistance to Shopify brands as it relates to pricing.


Brecker Brees (16:58):

Right now we're really aggressively expanding our partnership network. The value that price optimization brings is really, you know, often cross compatible with a lot of other great solutions that are solving some other really pressing and important problems. And while underserved price is such a large part of business, especially e-commerce. And it's just something that a lot of these other great solutions aren't talking about, but using Pricestack simultaneously optimizing price simultaneously makes their solution exponentially more powerful. We found that there's a lot of great win-win opportunities, not just for us and our partners, but also for the merchant. So also we've been working on a new product called Preflect. It's a lightweight survey tool. It can be used as a conventional survey tool to collect consumer data, but even more interesting, it can be used to create intelligent shopping flows that optimize the buying process for the consumer while simultaneously collecting really rich data about your site shoppers.


Brecker Brees (18:06):

Now everything that Pricestack does will really always seek to provide e-commerce merchants with solutions to improve their business based on the unique behavior of their own shoppers, using their onsite first party, behavioral shopper data that's coming right from their shoppers. While Pricestack requires merchants to really be generating at least a hundred thousand per month in revenue for us to have enough data, to provide extremely accurate price suggestions, Preflect can provide value for merchants of any shape and size immediately. And it really is a great stepping stone for smaller merchants in their journey to be more customer centric, be more customer first, and to incorporate your customer's sentiments into their everyday business strategy. And that's really at its core, that's what Pricestack is all about is improving your business based on first party data, looking at what your customers are doing, what they're thinking, how they're reacting, how they're behaving and taking that data and using that to make your business better.


Steve Hutt (19:12):

I'll make sure I put links to those in the show notes both for our prefect and for sure the Pricestack app and your website. Well, I'll get some details at the end of the show for that, but we are nearing the end for today. But do you have any closing comments or any takeaways that you would like to leave with our listeners?


Brecker Brees (19:26):

Yeah. I always like to, I love that term, the bottom line. So this is my bottom line, you know, to all those merchants out there, your customers are communicating with you and your store in nonverbal ways. And it really just so happens that they have a lot to say. Right now, most merchants, they just don't have the tools necessary to listen and interpret these conversations in a meaningful way. And really Pricestack is that tool Pricestack at its core will allow you to form a pricing strategy. To listen, of course, listen to that conversation, interpreted and form a pricing strategy that is almost entirely based on the opinions of the people who matter most, which of course, are your customers the best part about price optimization is that you don't just have to choose, do we want really healthy margins or do we want really happy customers? Because they like the prices. And what I always say, price optimization, on that concern in most cases you can do both. You can make more money, you can drive bottom line growth and you can have prices that are really agreeable to your customer base. So you can have your cake and eat it too.


Steve Hutt (20:38):

So how can people learn more about the Pricestack solution and the Shopify app?


Brecker Brees (20:43):

You can go to pricestack.com. You can search for Pricestack in the Shopify app store. And Steve, I think you're going to link our SmokeCartel.com case study. I really encourage everyone to go check that out. That was a really great case study and we were really, really happy with those results. And so were they.


Steve Hutt (21:03):

And understand that the Pricestack solution is currently free? I'll make sure I have these links to everything in the show notes. I think at the starting point, I mean, it really is a no brainer. It's a free solution. You can link it to your store. It'll look at your first party data. It'll give you, I guess, some daily suggestions for free looking at your current data and helping identify, you know, what's the best pricing options for the products that you sell. And I believe as the brand grows, you know, upwards of five to fifteen million or more, I believe there's a growth plan or some enterprise plans and things that are available that can integrate and create even more success with dynamic pricing and some more great things that you're working on.


Brecker Brees (21:46):

So the free plan we currently offer a totally free version of Pricestack. Just like you said, Steve, and that's really to all Shopify merchants who are either in, you know, a high growth stage and they're there early on and they really want to find out what Pricestack is all about. It allows you to view some free price suggestions day to day. You can view five per day and you get some basic analytics. And really our goal, the free version is to really help merchants understand and identify the problems that they might have in their pricing strategy. That's the first step. There really is no great tool to help you identify problems in your pricing strategy. You'll definitely be able to do that 100% free and even just find out, you know, how off the mark are we, how much are we leaving on the table?


Brecker Brees (22:27):

And you know, how much can we improve? And so with the free version, merchants will get a general idea of whether or not their average product is overpriced ,underpriced, or if it's just right. And so our growth plan really answers both the what and the why. It gives merchants some really deep analytics on the price suggestions that allow them to make a really informed decision and also form a true pricing strategy that's backed entirely by their own sales data. And we give them all the tools and analytics in order to do that in a way that's very precise data-driven and also allows them to easily mold and change and adapt it as the market moves as their customer's tastes and preferences change, they can quickly and easily adapt to those shifts in the market and really stay ahead of the curve.


Steve Hutt (23:20):

What's fantastic. Well, you know, as you know Shopify’s mission really is to make commerce better for everyone. And it's clear, you know, both you and your co-founder, you know, you really are in title alignment with wanting to help Shopify brands to, you know, improve efficiencies, certainly grow revenue, definitely lifetime value when it comes to pricing. And I think that's really exciting. It's a very unique episode. I'm glad that everyone was able to listen in today, but I think it's something that has not been shared publicly anywhere with this sort of technology. I might put a small note in here. This has actually been angel funded through one of the Mark Cuban companies. And so I think it's very interesting that Mark Cuban has made a decision to want to invest in Pricestack. And so it's exciting where you're headed.


Steve Hutt (24:04):

I just wanted to thank you. Brecker for number one, taking time today, I know it's massively busy during this holiday time and the middle is pandemic, lots of craziness going on right now, but I really appreciate you sharing your knowledge and your vision and really giving back to the Shopify ecosystem. Of course, I appreciate you having me all right. Have a great day. You too, Today's episode is brought to you by Grin the all-in-one influencer relationship management platform grow an authentic direct to consumer brand on Shopify with the number one influencer marketing software solution for creating genuine direct relationships with influencers, you can learn more about their incredible solution and get started today at Grin.co. Well, that's it for today's episode, I'd like to thank you. A loyal listener of eCommerce Fastlane. It's my hope that this podcast is offering you a ton of value through growth strategies, tactics, and exclusive insider tips on the best Shopify apps and marketing platforms. All with my personal goal, to help you build launch, grow and scale with Shopify. Thanks for investing some time today and listening to the show. I'm so proud and excited that you have a growth mindset and are a constant learner. I truly appreciate you and your entrepreneurial journey. Enjoy the rest of the week and keep thriving with Shopify.


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