I’m going to talk more about this tonight on the Domain Success series, but I read this post on the Small Business Digest about pricing your product in the recession and found myself agreeing with most of it.
Of course the article was not talking specifically about domaining, but about products in general.
The article was written by Reed Holden and Mark Burton co-founders of Holden Advisors, a consultancy that works with business-to-business firms to design and implement value-driven pricing strategies that increase profitability in highly competitive markets. They are coauthors of Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table (John Wiley & Sons, 2008).
Here are their top four strategies with my comments after each:
- Don’t panic. Panic pricing leads to lower profits, especially in a recession. If you get desperate to close deals, chances are lowering prices won’t help. In fact, this behavior shows customers you are nervous.
I agree with this. Panic selling is never a good idea. This is a small community and if the word gets out your a disparate seller it will devalue the rest of your domains
- Develop a flanking product/service. If you have the capacity in a downturn, develop a lower-value service or product that can be used to meet the needs of lower-value customers. Be very careful not to drop prices of your high-value offering.
As this related to domains, we all have different categories of domains, lets call them for purposes of this discussion: platinum, gold silver and bronze. You know which of your domains fall into these categories.
Hold on to your platinum and gold unless you get the price you would have asked for a year ago. The lesser domains are those you could be more negotiable with if you need or want to sell. I will have some specific examples of this tonight, from our own portfolio.
- Price with confidence. Just because it’s a recession doesn’t mean your existing customers won’t value your products and services. If they need to cut prices, give them the lower-value offering. Remember that even in a downturn, you are delivering value in your offering. Recessions don’t change that.
Exactly we know that domains continue to sell in this recession. Although stocks and real estate are way down, domain names and gold have continued to rise. Don’t let an uneducated buyer talk you into lowering your platinum and gold because shares of Bank America are down 90%. Your not selling stock, your selling a presence on the internet.
- Know when to say NO.
If your presented with a crap offer, reject it. Try to educate your potential buyer. I often send the link to Ron Jackson weekly domain sales report in an attempt to educate buyers as to what domains are actually selling for. If they get it great. if they don’t get it or refuse to get it, just say no.
As you say it- confidence, confidence and good looks helps too.
Ask any woman about confidence…
All it takes is patience and confidence!!!
Then again, advertisers are paying much less for traffic, so the domains are worth less than they were, for the most part.
Would you value a bond that yielded 2% the same as one that yields 5%? Anything above the basic yield from a domain is based on the market, and if you have only one bidder, that is the market.
Like the home market, you can choose not to sell during a downturn, as most do, but you cannot claim that the asset is worth as much because the market says it is not.
I would anticipate that domain sales will flatten just as home sales have flattened simply because the cost of maintaining a domain is near zero, so folks will just wait it out.
Harrier,
“advertisers are paying much less for traffic”
If you’re selling to end users this doesn’t matter. The #1 reason is price points for domains are low. $2,000 – $5,000, $10,000 – these price points are ridiculosly low for what an end user is buying.
I hear this argument mostly from domainers about PPC traffic and how this type of revenue is lower than last year but thats the biggest mistake many domainers make – they are pricing for other domainers. Sure, it helps to price some domains low for liquidity purposes but as Mike said we are not selling stocks.
I have wrote articles about the cost of one time expenses like billboard ads, newspaper ads, radio ads – all traditional media. Each buy is for a limited period of time and for the most part none of these mediums can be effectively tracked for ROI purposes. Not only do you own a domain forever but you also can determine a ROI relatively quick.
Don’t worry about ad revenues down – stick to your prices and price for the end user. Any good domain is still a bargain … of course, the jury is still out on what makes a good domain. That takes money, experience and sales history (to end users) to understand.