The 4 P's: Price

Marketers, whether online or in the traditional sense, must set the right price for their product(s). Pricing is a powerful signal to the buyer. Low prices are typically better with an inverse relationship between price and sales.

Wal-Mart continually drops prices on many items – "New Low Price."

However, sometimes a higher price will send a signal of better quality or exclusivity. For example, it is said "Good things aren't Cheap and Cheap things aren't Good." You expect a fine automobile or a premium wine to cost a lot. Sometimes marketers will raise prices (on perfume, hotel rooms, clothing, jewelry, etc.) to convey an exclusive, premium position for the product or service.

This is the same online – lower prices typically lead to increased sales revenues (but not necessarily profits!). And higher prices can sometimes convey higher quality. However, one distinction mentioned above is "disintermediation" in which the middlemen are eliminated, thereby allowing the online merchant to offer lower prices. eTailers can ship directly to the customer, incurring only the extra shipping cost, but not the markups by wholesalers and other related costs.

Online merchants often operate under a different set of expectations than traditional "brick and mortar" sellers.