Amazon pricing strategy: at what price should you sell a product?
Discover in this article the key factors to take into account to determine the selling price of your products on the Amazon marketplace, as well as the essential pricing rules and strategies.
An edifying number of consumers (82%) indicate that price is a very important factor when buying a product on Amazon. Price is therefore an essential factor influencing consumer engagement.
It is one variable among many that should be monitored regularly to obtain and maintain good business performance.
Table of Content
- Set the price of its products on Amazon
- Amazon pricing strategy: what to avoid
- 5 essential elements to evaluate when setting up your Amazon pricing strategy
Set the price of its products on Amazon
According to Amazon, you can offer items at “any price you think is fair, within the limits set by the marketplace. Please note, your price must comply with the requirements of your sales contract and the marketplace price policy, of course. ”
Below are a few things about product pricing on the Amazon marketplace:
- Professional sellers cannot offer a product valued at more than $ 300,000.
- You can provide a reference price, such as the manufacturer’s suggested price. This can be displayed in different places to show buyers the savings made.
- Reference prices should represent the price at which you, or other sellers or retailers, have recently made “substantial” sales of the given product. You should also make sure that the benchmark prices you provide to Amazon are up to date. If your reference prices do not meet these criteria, leave the field blank when adding a new product.
- The “Your Price” field should indicate the actual price you plan to give customers. The “Sale price” field should only be used when you organize a time-limited promotion.
- If Amazon cannot verify any of your benchmark prices, it can be deleted.
- The above price limits do not apply to products in the “Collectibles” category.
- The price you set for your product does not include shipping and handling charges.
In addition to these rules, Amazon has implemented a fair market pricing policy that must be followed.
If Amazon finds pricing practices on a product that can have a negative impact on customer confidence, the marketplace can: remove you from the Buy Box, remove the entire offer, suspend the shipping option, or suspend or terminate your sales account.
Amazon pricing strategy: what to avoid
Be careful to avoid these pricing practices:
- Set a misleading reference price for customers.
- Set a price on a product that is significantly higher than the prices recently charged or offered outside of Amazon. In March 2019, Amazon removed the requirement that third-party sellers must offer their lowest prices on Amazon. However, many sellers continue to operate this way for fear that their accounts will be affected.
- Sell multiple units of a product at a higher price than a single unit of the same product.
- Setting an excessive shipping price on a product
- Why is the optimization of the price of your products necessary?
- When it comes to pricing products on Amazon, you can do it manually or using automatic rules.
Think of pricing as a way to win against all types of competitors (direct and indirect). If you are a brand that sells a yoga mat, you will need to price your product by thinking about the competitors who are selling similar yoga mats.
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5 essential elements to evaluate when setting up your Amazon pricing strategy
You should ensure that the following factors are taken into account in your pricing strategy on the marketplace:
If you’re using an automated pricing solution, simply enter your cost data and the floor and ceiling price limits for each product to set up a smart pricing strategy. Please note that your minimum and maximum prices will already be fixed beforehand. This is because it is a condition for your products to be listed on the platform.
Get an idea of how you want to present your brand to users on Amazon. Why? Because the price will have an impact on the positioning perceived by consumers regarding your products and your brand.
Some brands want to be perceived as being low-priced, others want to position themselves on a higher quality image. Up to you! But it is certain that the fixing of your price will impact the perceived positioning.
How do the prices you set and the price changes you make affect demand? Try to use technology that maps the prices of the competition. This is to align your pricing strategy for each SKU. You can also choose automatic rules based on your business goals, such as maximizing profits. In any case, don’t forget to study the elasticity of demand in relation to your price fluctuations.
Dynamic pricing is certainly the key to success when it comes to e-commerce. Dynamic pricing allows you to adjust product prices continuously. This is in response to current market conditions but also according to supply and demand in real-time. So you can use this strategy to be more aggressive in your target market. Which helps you gain market share in the face of competition.
When establishing an amazon pricing strategy and determining the most optimal prices for your business, it is important to have a clear overview of your business objectives, to know the costs of your products, and the possible additional costs to take into account. It’s up to you to establish a global pricing strategy to generate additional income and profits for your business.
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