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Amazon Pricing Strategy to Capture Marketplace’s Audience

Finding success on eCommerce marketplaces like Amazon involves putting together a well-thought-out and planned pricing strategy.

The tactics that often work for independent eCommerce stores don’t always work in the online marketplace.

The goal of any marketplace platform is to generate as many sales as you possibly can. However, with the competition becoming fiercer and fiercer every day, it’s becoming increasingly difficult to stand out against your competitors.

Like traditional methods of selling online, you need to factor in the cost you paid for the item, what your competitors are currently charging as well as how you currently rank in terms of sales.

In this post, we’re going to look at a number of different pricing strategies you can use to capture the marketplaces audience and increase your number of sales!

Don’t do a race-to-the-bottom

We say it time and time again on Prisync, but one of the worst eCommerce pricing strategies is a race to the bottom approach – the same goes for if you’re trying to sell on Amazon as well.

A race-to-the-bottom approach is a concept whereby you price your products less than anything your competitors are offering to dominate the market.

Now the reason why we’re against this approach is twofold.

The first is that it gives the illusion that you’re selling cheap products. Especially if you’re hoping to build a brand, this will be ineffective as you grow.

Second, you lower your profit margin and run the risk of selling your products at a loss.

You might have a great deal with your supplier who can create your sunglasses for $0.10 a piece.

But what if your competitors have a deal to create them for $0.05 a piece. Unless you can negotiate better deals with your suppliers, your competitors will always be able to undercut your prices – at a rate, you are unable to compete with.

If you do want to lower your product prices, then an effective way to do this is to price your products 1.2-1.5% above the current lowest seller. This way, you’ll avoid the race-to-the-bottom approach but still be competitively priced within your own industry.

You also need to factor in your own costs to run your business. These should include (but are not limited to):

  • Shipping costs
  • Customs for any international sales
  • Payment wiring
  • Amazon FBA Fees
  • Customer Return Fees
  • Your own fees for returns
  • Amazon Commission fees

Use a pricing tool to help you stay competitive

The nature of Amazon means you’re consistently surrounded by competitors. When a customer searches for a particular product, they’re presented with not only your product but your competitor’s products too.

That’s why it’s super important to use a competitive pricing software to help you navigate the entire content industry, both within and outside of Amazon.

Using data as your driving force, you should actively monitor your main competitors current and historic pricing strategies to give you the opportunity to proactively alter your own prices based on that learned data you’ve acquired.

amazon pricing strategy
Source: Prisync.com

Remember, for any pricing strategy the goal should be to appear on the first page of Amazon for any given search term. Not appearing here will hinder your sales so badly it actually won’t matter what pricing strategy you implement.

The best thing about using software to help you analyze historic and current price points is it gives you a wealth of intelligence to use to fuel your future pricing strategies.

You will be able to use the data to anticipate your competitors’ trends and understand exactly which products need to be repriced and when. Using this information, you’ll be able to better understand when you need to bundle your products together, use upsells or even just identify products that are acting as lost causes.

Focus on price perception

Think about some of the reasons shoppers choose to buy their products on Amazon  One of the driving benefits of users shopping with Amazon is the perception of deals – whereby shoppers believe they get the best deals on the web.

But, it’s been known that because Amazon is constantly tweaking the prices of their products (often on an hourly basis), they can take advantage of price perception and actually dominate the market.

You can follow this same approach as an Amazon seller too. All you need to do is make it seem as though your products undercut the market averages more often than it actually does.

This speaker is $66.13 reduced from $75.00. Now for the average customer, that’s a decent discount. Amazon even goes as far as to list the percentage saved too. amazon pricing strategy

 

Now where perception comes into play is if we research this product outside of Amazon.

Amazon pricing strategy

It’s actually cheaper to buy the product outside of Amazon and the price listed above is not even a reduced price.

Because consistently across the board, Amazon’s prices are generally lower, the perception of a great deal is there.

In this instance, you should consider what your competitors outside of Amazon are charging for your products so, despite your Amazon price, you still appear to have a greater deal than your counterparts.

Factor in seasonality

You probably wouldn’t sell a Christmas tree for the same price in March as you would in November, right?

For products with a seasonality element, this should be factored into your overall pricing strategy. Many products have a period of concentrated sales – whereby they generate the most sales at this time.

Understanding whether or not you fit into this category is the first benefit to understanding when you can expect your highest profit turnover rates.

If you’re unsure whether or not you have a seasonal effect, then look at your own previous sales reports to decipher when your product sells the most.

For example, this Christmas tree is $169.99 currently. 

Amazon pricing strategy

 

However, if we were to use a dynamic pricing software, we can see that over time the price has fluctuated.

Seasonal pricing is a dynamic pricing approach which enables e-commerce retailers to optimize their prices based on the certain times of a day, a month, a year or the lifespan of a product in the market. 

Not surprisingly, their lowest price point was during November, where the price was only $99.99, this may have been because they wanted to capitalize on the number of people who would be looking for a Christmas tree during the holiday season.

Whereas, in March, when there is less demand, they can recoup their costs for those people who may have a need for a Christmas tree.

So, through seasonal pricing, you’ll always be on alert in the know of market trends as well as what your rivals are offering. With that intelligence, you can always know where to diminish or increase your prices over certain times.

Amazon pricing strategy final thoughts

I hope this article has given you some food for thought when it comes to your Amazon pricing strategy. Please do keep in mind, however, that dominating Amazon is a difficult task and often it takes time to do.

As you test out different approaches, it will soon become clear what pricing strategy works best for your own business and products.

An effective Amazon pricing strategy involves looking at, an examining past historic Amazon data, factoring in your competitors own activity and using peak seasonal periods to maximize your profits.

What Amazon pricing strategy have you used in the past?

 

Comments

2 Comments

Daniel Walker

great one.

Jordie Black
Jordie Black

Thanks Daniel!


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