Price on Amazon is frequently changing and unless you own your private label or custom-made bundles, you need to maintain your listings’ prices repeatedly in order to stay in the competition. Amazon dynamic pricing helps to win Amazon buy box and to increase sales. Employing the suitable repricing strategies for your objectives is important, however, unearthing the right ones is challenging. When selling on Amazon, you must have a cohesive Amazon pricing strategy for backing the price you decide to charge for your product.
Pricing is very competitive on Amazon. Not only does this affect the chances of winning the Buy Box, it is also one of the main contributing factors to a customer’s ultimate decision as to whether they ought to purchase from you or another seller.
The logic should be: if sales are high then the prices get raised, if sales are low then the prices get lowered. Unfortunately, things are not as simple as that.
Amazon’s algorithm is very complex and cutting your margins through price reductions doesn’t always improve your position on Amazon. That is why it is paramount to understand the various differences in pricing and the various pricing strategies.
There are two types of prices on Amazon, that any seller must be familiar with:
Item price – this is the cost of a product only. This is the price customers will see minus shipping costs and any other factors that may affect the total price.
Total price or landed price is the price with everything included – this is what the customer, should they buy, pays. The following are included in the total price:
- Shipping and handling charges
- Discounts, rebates, or special sales/promotions you offer/make with respect to purchases
- Shipping method
- Business practices, such as any reduction or elimination of shipping charges on an order, or of any other order-related fees and expenses
- Low-price guarantees
10 Amazon Pricing Strategies for Private Labels and Brands
- Use coupons to provide compelling discounts
Amazon displays a small but eye-catching label next to items where a customer can apply a coupon. Coupons increase the number of click-throughs and sessions for individual products, which can help with your Amazon search ranking.
- Try sales pricing, but don’t expect too much
You might have thought about showing sale prices on your products. Amazon may choose to show sale prices on your items as a “strike through” of the manufacturer’s suggested price, with your cheaper price next to it. This can help consumers feel like they’re getting a bargain, especially if the regular price is much higher.
- Increase prices on items that are just below the Amazon free shipping amount
Find out what the free shipping threshold is on the Amazon marketplace where you are selling. I’ve listed most of those thresholds in the image above. Learn the average shipping cost Amazon charges non-Prime customers spending less than the minimum.
- Use consumer psychology when working out the pennies
If you price your items ending in .99, it’s likely they will be perceived as “cheap” or a bargain, due to customer expectations and years of price conditioning. If those are the customers you’re aiming for, that’s great. Otherwise, consider a different amount.
- You can drop product prices quickly, but only raise them slowly
Identify the products where you want to raise prices.Only increase your prices by around 10 to 15 percent of the previous price, each time. For example, $14.99 > $16.99 > $18.99 > $20.99. Once you’ve increased the price, leave it around three or four days before you raise it again.
- Understand your break-even point when setting a price for profit
For each item, you need to calculate the total cost of sourcing it, manufacturing, shipping, fees, and other aspects of getting the item from the supplier all the way to Amazon, and then on to the customer.
- Understand the different types of Amazon customers and price accordingly
Methodical buyers do lots of research, look for the best deals, compare prices, and take lots of areas into consideration before purchasing. Typically, they are looking for bargain items that are good value for money. Estimates show around 60 percent of buying is methodical.
- Compete on pricing, but don’t try to be the cheapest
Don’t under price everyone else in your category as you’ll eat into your profit margins. Your products will also look cheap, low quality, and less attractive, and you’ll have to sell more to make money.
- Offer products to Amazon business buyers
It’s easy to set yourself up as a merchant providing products to businesses. You just need to go to Amazon Seller Central and register as a business seller. Then, you can provide special prices for businesses, including quantity discounts when they buy multiple products. If a buyer logs in with a business account, they will see your products when searching and browsing.
- Carry out split testing to refine your pricing strategy
Split testing compares two periods of time, and you can use it to analyze all sorts of things about your strategy – price changes, discount coupons, free shipping amounts, price increases and reductions, and more.
Changing your prices, or your strategy, to suit Amazon’s requirements is just one aspect of the business. All of it would come to nothing if you do not maintain strict control over your inventory.
Take an example of a scenario when you’ve reduced prices drastically to match the competition and are now selling more products than usual. If you don’t have sufficient inventory, you will not be able to fulfil the orders in time, resulting in a bad seller rating which further pushes you off your selling streak.
To avoid such issues, always manage inventory with the help of inventory management software such as Primaseller. This way, you always have a perspective on inventory, get alerts when stocks run low and can manage orders without staying up all night.
Frequently Asked Questions
- Does Amazon use dynamic pricing?
Yes, the company has an in-house dynamic pricing engine that calculates numerous factors and dynamically adjusts its prices.
- How does Amazon offer lower prices?
Thanks to its dynamic pricing engine, the company offers lower prices for the most popular products.
- How do you implement dynamic pricing?
You can build an in-house pricing engine or use dynamic pricing software.