Pricing Products Effectively on Amazon
Pricing products correctly can be a difficult task.
Brands go through a balancing act of pricing their products to avoid undesirable profit margins, to be competitive with the marketplace, and to entice customer purchase. In addition, Brands need to be aware of how their price on Amazon impacts other retail relationships, and also how competitive marketplaces can impact the ability to sell your product on Amazon.
The following factors should be incorporated into your pricing analysis for your offerings on Amazon:
How competitive is your niche? Research your competitors’ products. Is the market dominated by a few large brands? Or is it segmented by many smaller brands? What is the range of prices that you find for items with similar attributes as yours?
Know your costs: Ensure that you have an accurate figure for your COGS. Incorporate all materials, production, shipping, storage, labelling, packaging, and labor expenses.
Identify all your Amazon fees: Depending on how you fulfill your product, your Amazon fees may vary – but everyone pays a referral fee. Verify the fulfillment and storage fees for your product if using FBA, and incorporate inbound freight and storage costs as a buffer.
Customer expectations: how much customers anticipate paying for a product similar to yours. If your product is superior, you can charge a higher price. If it is more of a commodity, you may need to reduce the price to remain competitive.
Protect Your Brand equity: If you have created a brand with name recognition, you may be able to command a higher price than others. If you are unknown or growing your brand, you may need to lower pricing to encourage customer adoption.
Trends in the Market: Keep abreast of market trends and adjust your pricing accordingly. If your product is in high demand, you can increase its price. If demand is low, it may be necessary to reduce prices in order to remain competitive.
Don’t Forget Advertising: Brands often fail to gauge the investment needed for advertising on Amazon. If you have run ads previous, gauge what your TACoS has historically been. If you haven’t advertised before – apply a plug until you can get an accurate gauge on your ad costs.
While there’s no silver bullet to pricing strategy, incorporating these, and other factors into your cost structure will give you a confident measure of your profitability and pricing competitiveness.
Want to improve your profitability and design a pricing strategy to outpace your competitors? Let’s chat.