Maximising profitability on Amazon

Strategies for effective pricing

Are you struggling to price your products effectively on Amazon? Don't worry, you're not alone! It can be tough to navigate the ever-changing world of eCommerce pricing. 

First things first, let's talk about the buy box. This little gem is a powerful sales driver, and for good reason. According to data from Marketplace Pulse, products that win the buy box tend to sell around TWICE as much as those that don't. So, how do you get your hands on the buy box? It's all about pricing. Make sure you're offering a competitive price and you'll be well on your way to winning the buy box and increasing your sales.

Secondly, let's talk about Amazon's constantly changing prices. Prices on Amazon can change multiple times per day, with some products experiencing dozens or even hundreds of price changes in a single day. 

Data suggests that higher prices don't necessarily lead to lower sales, as long as they are justified by the quality of the product or other factors.

In one study of 100,000 products on Amazon, products with prices in the top 25% by category had an average sales rank of 1,379, while those with prices in the bottom 25% had an average sales rank of 2,670.

Higher prices can actually lead to better sales rankings.

Strengths - Leverage your Brand Value

If your brand has a good reputation, customers may be willing to pay a premium price for your products. 

• Unique or high-quality products: If your products are unique or of higher quality than those of your competitors, you may be able to command higher prices.
  
  
• Good seller rating: A good seller rating can help to build trust with customers and may allow you to charge higher prices.

Lack of differentiation 

If your products are similar to those of your competitors and don't offer any unique features or benefits, it may be difficult to justify higher prices.

• Poor seller rating: A poor seller rating can turn off customers and may make it difficult to charge higher prices. 
  
  
• High costs: If your costs are significantly higher than those of your competitors, it may be difficult to set prices that are competitive while also maintaining a profit margin.

Increasing demand

If demand for your products is increasing, you may be able to increase your prices without negatively impacting sales.

• New product launches: Launching new products can provide an opportunity to set higher prices, especially if the products are unique or offer significant value to customers.
  
  
• Expanding into new markets: Entering new markets can provide an opportunity to set higher prices if there is a lack of competition or if your products are in high demand.

Increasing competition

If new competitors enter the market or existing competitors start offering lower prices, it may be difficult to maintain your current pricing strategy.

• Decreasing demand: If demand for your products starts to decline, you may need to  start considering using PPC or other marketing strategies to increase your sales.

Differentiating Your Products and Focusing on Customer Value

Instead of simply trying to offer the lowest price, focus on providing value to your customers. This might involve differentiating your products through unique features or benefits, offering excellent customer service, or providing high-quality product descriptions and images.

By focusing on customer value, you may be able to justify higher prices and still win sales.  Pricing your item as the lowest in the category is a short term win and will not benefit you or the brand.

“But I will lose sales” - be BOLD

Higher prices can signal quality to customers. When customers see a higher price tag, they often associate it with a higher level of quality. This can be especially true for products in more premium categories.

Higher prices can lead to higher profits. It's true that higher prices may result in fewer sales, but they can also lead to higher profits if the cost of goods sold is low enough. Profit is your sanity, not purely sales.

For example, let's say you sell a product for £50 and your cost of goods sold is £30. If you sell 100 units, your total profit will be £2,000. Now let's say you increase the price to £100, but as a result, you only sell 50 units. Your total profit will still be £2,000.

Amazon's search algorithm takes into account the price of a product when ranking it in search results. This means that, all else being equal, a higher-priced product may rank higher in search results than a lower-priced product.

Higher prices can lead to better sales rankings. In general, products with higher prices tend to have better sales rankings on Amazon because Amazon's algorithm takes into account both the number of sales and the revenue generated by those sales. 

Higher prices can lead to increased customer loyalty. Customers who are willing to pay a higher price for a product may be more loyal to the brand and more likely to purchase from the seller again in the future.

Avoid Price Wars

Are you tired of getting caught up in endless price wars with other third-party sellers on Amazon? Do you find yourself wondering how they're able to sell items at such unbeatable prices and still turn a profit?

Well, here's the truth: most of these sellers are probably making a loss. They list items at low prices and don't make adjustments to their cost prices or shipping fees. Sure, they may make a lot of sales at first, but they're likely selling at cost or even at a loss.

So, what's the solution?  Don't engage in these pointless price wars. Instead, use market leading techniques to re-price your items and maximise your sales. Take advantage of third-party re-pricer tools to boost your sales, but remember to maintain a healthy margin. There's no point in making a low profit and selling 10 items when you could make the same profit in just 3 sales with a healthy margin.

For example, let's say you sell an item at £1 profit and it gets lost in the mail. You'll have to make at least 10 sales to make up for the lost revenue. But if you sell the same item at £4 profit, it will take you fewer than 3 sales to make up for any lost revenue.

So don't get caught up in the madness of price wars. Use market leading techniques and smart pricing strategies to turn a healthy profit on Amazon.

Secret Sauce?

Differentiate your products and focus on customer value. This means highlighting unique features or benefits, offering excellent customer service, and providing high-quality product descriptions and images. By focusing on customer value, you'll be able to justify higher prices and still win sales.

Looking to boost your retail product's sales even further? PPC (pay-per-click) advertising is a powerful tool that can help you achieve even better results. By paying for sponsored ads that appear in search results or on product pages, you can drive more targeted traffic to your listings and increase your sales.

Here is a little secret: PPC isn't just about driving more sales - it can also provide valuable insights into the performance of your products and the effectiveness of your advertising campaigns. With the help of PPC data, you can track the return on investment of your advertising efforts and make informed decisions about how to allocate your advertising budget and help you to decide a healthy RRP.

So, if you have a "retail ready" product and are looking for ways to drive even more sales, consider the power of PPC advertising. Not only will it help you achieve better results, but it will also provide valuable insights that can help you improve your overall eCommerce strategy.

Basically, price is a big deal on winning on Amazon. However you want to win customer loyalty, and profits too. Pricing higher, with the right strategy, A+ design, and marketing, can be just as big a win as selling out of product's cheaply and making less profit for all the work involved.

Be bold: build a Brand customers will appreciate and love.