21 Nov Pricing Strategies for Your Products on Amazon

Discover the importance of the pricing strategy on the products you sell on Amazon with this interesting analysis where we will tell you everything you need to know to apply the best pricing strategy for your catalog.

Product prices are one of the factors that most entice consumers to shop on the Amazon marketplace. Nearly 80% of consumers say that price is a very important parameter when buying a product on Amazon. Similarly, 80% of consumers also say they turn to Amazon to check product prices before making a purchase decision.

In reality, sellers and brands know that they need a competitive pricing strategy in order to win conversions on the platform. In fact, more than 50% of Amazon brands say competitive pricing is the most effective strategy they use to drive sales.

Pricing Basics on Amazon

Too often, Amazon sellers and brands approach pricing from an emotional perspective rather than a rational, objective approach. A good high-quality product at too high a price can lead to failure, while on the other hand, a cheap, low-quality product sold at a very good price, despite its quality, could be a great success.

While most of the pricing resources available to sellers revolve around winning the Buy Box, the pricing of your products has a big impact on other aspects of your performance as a seller. On the one hand, the price of your products is a key driver of your revenue and profits, i.e. your demand curve. This means that a product sold at a higher price leads to fewer units sold, resulting in lower revenue, which is calculated by multiplying the price by the quantity sold.

Regarding the demand curve, one benefit of selling on Amazon is undoubtedly the magnitude of the traffic that the platform receives, and that ultimately buys your product. As more orders are fulfilled (more is sold), you can experiment with different price points over time to determine the impact on demand, and it’s what will allow you to understand the price points that will help you maximize your revenue.

Different pricing decisions can lead to the same revenue but with different benefits. If an item is sold at a higher price but in a smaller quantity, it will have a higher profit than if it is sold at a lower price and in a larger quantity. Therefore, it is crucial to define prices objectively and based on a revenue-focused or profit-focused strategy, to ensure that your business goals are achieved.

How Can You Beat Your Competitors With Your Pricing Strategy?

The first approach to pricing is that you should use prices as a boost to win the buy box.

The next approach is to see pricing as a way to win against the competition, both directly and indirectly, not only those you’re competing against for Buy Box share, but also competitors who are selling products similar to yours and stealing demand from you. For example, if you’re a private label selling a water bottle, you may not be competing for the Buy Box on that specific ASIN, but you’ll need to price your water bottle against your competitors who sell similar water bottles.

All of these aspects and pricing approaches will have a significant impact on your key performance indicators (KPIs), including:

Number of units sold

Revenue

Proceeds

Best Selling Rank

Perception of quality

Perception vs. Other Competitors

Part of the client’s disposable income

How to move the demand curve on Amazon?

Different KPIs will have a different impact on the direction of the demand curve, and moving the demand curve positively means that with the same price, you’ll sell more units. On the other hand, if the demand curve moves negatively, it means that you will sell fewer units at the same price.

Undoubtedly, your goal will be to positively move the demand curve, which can be accomplished by improving various KPIs, such as increasing your average seller score and the number of reviews to help improve your positioning on the Amazon results page.

Your goals can be strategic, such as maximizing revenue and profits, or they can be tactical, such as stealing demand from a competitor by increasing your sales. However, your goals should never be based on emotion. For example, some sellers may feel pressured to run a back-to-school promotion simply because other sellers are doing it, but if your goal is to maximize profits, a promotion will prevent that goal from being achieved.

As every experienced Amazon seller or brand knows, there’s more to Amazon pricing than strictly winning the Buy Box. Nearly half of consumers don’t make it past the second page of search results on Amazon and more than 25% say they frequently buy the first product listed on an Amazon results page.

The prices you set for your products not only determine your Buy Box participation, but also have a huge impact on your search ranking, conversion rate, and overall sales performance. To win on the Amazon marketplace, you have to employ a pricing strategy based on economic goals to reach Amazon’s top sales rankings, maximize revenue and profits, and take demand from your competitors to win.