Amazon Pricing Strategy: Setting the Best Selling Price
Updated on: March 23, 2022
If you are selling your products on Amazon, then one of the most important factors to consider is pricing. This is because Amazon is the world’s largest marketplace; you’ll need to compete with numerous sellers selling similar products. How many sellers are on Amazon? Just about 6.3 million…and climbing. When you consider the competition, it’s easy to understand why strategic pricing is essential. Here, we will take a look at the right Amazon pricing strategy that can work for you.
What Is a Pricing Strategy?
A pricing strategy is a way for you to determine a price that is perceived as fair to customers while still maintaining a profit. There are a number of factors to consider when setting your Amazon pricing strategy. First, you will need to determine the price at which you will be able to make a profit. Second, you will need to consider the various fees that Amazon will take after the sale. Finally, you will have to factor in the price that you paid to purchase the product and ship it to an Amazon or third-party warehouse. Once you have figured out your Amazon selling pricing strategy, you will be ready to launch your product onto the platform.
What is Amazon’s Pricing Strategy?
The Amazon pricing strategy is to keep the price of a product as low as possible when creating a product listing. Because of this, you need to constantly monitor your product’s price to make sure that you have the best price and win the “buy box.” The buy box refers to the top listing for a product on the Amazon sales page. The listing that wins the buy box will win the majority of sales for that product.
When setting the price of your product, you can use four tactics:
With this strategy, you will be repricing the product yourself. While this gives you the most freedom, you will have to monitor the page listing to ensure that you are offering the best price for your product.
Amazon repricing tools
There are a number of tools that you can purchase that will reprice your item to ensure that you are always winning the buy box. While some of these Amazon repricing tools are available with a monthly or annual fee, they may be worth it because of the extra sales that you will gain.
Rules-based pricing simply means that you are setting up your personal rule as to what the price will be. As an example, you can set a rule that you will always undercut the lowest price by one cent or 0.2%.
With algorithmic pricing, you will be using a program that will weigh a number of factors to determine the best price for your product. When used correctly, this pricing strategy can offer you the greatest advantage over the competition.
How to track Amazon price drops
To help you track price drops on pages where you are selling your product, you can use the following tools to get the most up-to-date information:
4 Pricing Strategies Sellers Should Know
How much sellers make on Amazon depends on their pricing strategy. With the right pricing strategy, you should be able to gain consistent sales while still experiencing a profit. Here’s a look at four pricing strategies that you can use for your Amazon product listings.
The economy pricing strategy basically keeps the price as low as possible in order to make up profit in terms of volume. Many grocery stores and discount retailers will use the economy strategy when pricing their products. On Amazon, the economy strategy is popular since people tend to compare products solely on the price.
Premium pricing is reserved for established brands with an excellent reputation. As an example, luxury brands are able to charge premium pricing. As an Amazon seller, you may be able to use premium pricing if you establish your own brand that customers know, like, and trust.
Skimming is a strategy where you set the price artificially high knowing that you will lower the price later. The skimming strategy is usually used when you think that competitors will soon enter the space. You can earn a big profit per sale before the competition comes into the space.
Penetration pricing is where you will set the price of a product artificially low in order to gain market share and win over customers. This product will also be known as a “loss leader.” you can use penetration pricing in hopes that the customer will purchase other products from you during the same shopping visit or some time in the future.
Amazon Pricing Tips
In order to help you price your products properly, you should be aware of several proven tips that help other successful sellers. Here are four valuable Amazon pricing tips worth using.
- Be aware of Amazon’s pricing policy
- Automate your pricing strategy
- Know how the competition is pricing their products
- Back your price with positive reviews
How to Price Products on Amazon
The best way to price products on Amazon is to first research the competition and look at their pricing. Then look at your own cost to purchase and ship the product to an Amazon or third-party warehouse. From there, factor in the Amazon fees and determine the minimum price needed in order to realize a profit. From there, adjust the price of your product to ensure that you are always winning the buy box.
Amazon Pricing Strategy: FAQs
Chances are you may still have some questions about finding the right Amazon price setting strategy. Here’s a look at the answers to the most frequently asked questions:
What Are the 4 Main Pricing Strategies?
- Economy – Set the lowest possible price and still realize a profit
- Skimming – Set an artificially high price if you are first to the market and lower the price as competitors come in.
- Penetration – Set an artificially low price in order to gain market share or collect customer contact information.
- Premium – Set a price higher than the competition in order to leverage the brand equity in your product.
Should I have a pricing strategy on Amazon?
It is important to have a pricing strategy on Amazon because you will be competing with other sellers who may be offering the exact same price. Also, Amazon rewards the lowest price with the buy box which attracts the most sales.
What is Amazon’s Pricing Strategy?
Amazon uses the economy pricing strategy where they offer the lowest possible price to the customer.
Winning more Amazon Customers with the Right Amazon Seller Pricing Strategy
By performing the right Amazon pricing strategy analysis, you will be able to set prices that will help you win the buy box and get more customers. To help you discover the right price for your product, use Helium 10 and our helpful Amazon FBA tools.