We have previously published an article in which we talked about the main pricing strategies . From it, you will learn what “costs +”, “skimming” and “deliberate dumping” are. You will also receive basic recommendations on dynamic pricing and the feasibility of its use.
In this text, we want to reveal other, no less popular, pricing strategies. Amazon is a highly competitive platform, so the main calculations in this text will be based on determining the strategies of your competitors and how you can use them in your project.
"Why does it cost so much?": identifying competitors and setting the right prices
In fact, the main question for analysis is already reflected in the title. Our main task is to understand what principles other sellers were guided by when they determined the cost of their goods.
However, first we need to find and identify our competitors. We wrote in detail about how to stand out from other sellers and conduct an analysis in another article (follow the link to read the material). Let us recall a brief summary of how to find competitors:
Enter your product name into the Amazon search bar and check out third-party offers;
view “Related products” that the system automatically selects, and also study the search results by category;
use special tools: Jungle Scout, Helium 10 , AMZScout.
Based on the data obtained, you can conduct a full analysis of Amazon competitors, or focus only on their pricing strategies. To begin, we determine the upper, lower, and average bar.
Let's say you sell fitness trackers similar to those offered by your competitors. Analysis shows that the main competitors set the price from $80 to $120. You can "hit" dumping and sell your product for $75 or take the arithmetic mean of $100. You can compete at the upper limit only if your product has undeniable advantages (or you provide a fundamentally different level of service).
Dumping can have both positive and negative consequences. Here are some scenarios where this strategy may be appropriate:
1. Introducing a new product (to quickly capture market on page seo service share and increase product awareness).
2. Optimization of inventory (to avoid loss of profit by selling goods at a lower cost than usual).
3. Poaching customers from competitors, especially if you have a distinct advantage or the ability to provide additional services or products in the future.
4. React to other players' actions : In response to your competitor's dumping, you can also temporarily reduce prices to retain your customer base and minimize the loss of market share.
However, it is worth remembering that dumping can also have negative consequences. In particular: loss of profit, damage to reputation (buyers may perceive low prices as a signal of reduced quality), undermining price expectations, which will make it difficult to return to normal figures in the future.
Therefore, dumping should be strategically justified and used carefully to minimize negative consequences and use it as a temporary tool to achieve certain goals.
So the next step to setting the best prices on Amazon is to identify your USP (unique selling proposition) and benefits.
Let's say your tracker has an additional heart rate function that competitors don't have. In this case, you can set the starting price at $110, justifying it with unique functionality.
How to Set Prices on Amazon: Basic Calculations
So, you know your competitors and their pricing policy. And you have even set an approximate cost for your products. It's time to make some adjustments to the "base".
1. Increases due to additional value
In this case, we are not talking about increasing the quality of the product itself, but about creating additional motives for buying it. Let's say you offer free shipping/premium packaging/gifts with the order (we include these expense items in the calculation).
2. Differentiation and segmentation
For example, we offer a basic version of a product at a competitive price, and a premium version with additional features at a higher price.
Rough Guidelines: Fitness Tracker - $75 Fitness Tracker with Heart Rate Monitoring - $110 Fitness Tracker with Heart Rate Monitoring + Free Shipping + Gift Box + 2 Leather Replacement Straps - $130
3. Adjustment for discounts and promotions
If competitors regularly offer discounts or promotions, take this into account when setting your prices. For example, if other sellers often offer a 20% discount on certain products, you can set the base price slightly higher and offer a similar discount to attract customers.
4. Seasonal adjustments
Let's say you sell swimwear. Typically, there is low demand for swimwear in the winter, so it would be logical to lower prices to support sales during this period.
Remember that setting prices is an art that requires continuous analysis. Therefore, we recommend that you do not stop in this process, conduct a regular adjustment policy and "keep your finger on the pulse" of the market situation.
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