Before you start working on your Amazon pricing, you need to get into their mindset.
“There are two kinds of companies. Those that work to raise prices and those that work to lower them – Jeff Bezos, Founder & CEO of Amazon.”
Best quality at the lowest price is what they promise.
You are a guest on their platform so you need to understand what drives them so they can drive you.
New entrants struggle with many aspects of Amazon as their dreams and aspirations are top of mind. As a result, many of their decisions are centered around emotion as opposed to hard facts.
Step 1: Know your Numbers!
Know your break-even price, right down to the last dollar! Supplier + Shipping + Duty + Storage + Amazon Commission + Amazon FBA Fees + Amazon Return Fees + Overheads eg cost of money if you’re smacking your credit card to carry you through. These are the main ones to consider but just reflect a moment and decide which are relevant to you and what else you need to account for and then run up the total.
Know your maximum price. Again, focus on hard data. Enter your top 5 keywords and look at similar products to yours on Page 1 and average their price. That’s essentially the maximum price of your product will bare. The higher your price, the further down the pages you will be with a lower volume of sales.
Maybe Page 1 is not a realistic goal for you for many reasons – your cost of inventory is a big one! Make a conscious decision of which page you are shooting for and calculate your maximum accordingly.
Step 2: Price stability
What’s the worst customer experience you’ve ever had? Buying something and then finding the same thing cheaper down the road is a big one for most.
Again, you need to get with the game. You absolutely need to build customer trust and develop a long-term business/brand on Amazon and you can’t do that by tweaking your price every 5 minutes!
Amazon doesn’t like large price movements. We’ve had clients drop their price $5 to stimulate sales as long-term storage fees approached) and sales stopped! Similarly, other’s have bumped their price by a few dollars to match similar/same competitors and sales stopped…
Reduce your price under $1 every other day if you know you need to get your base down OR create a discount if it’s to be temporary. Creep it up if that’s your strategy but either way, go slow!
You want to “own” the Page you are shooting for so chart your own course. Remember, everyone is pulling levers on Amazon at the time so there’s no point shooting from the hip and tweaking your price to match your closest competitor’s movement. They may be overstocked so trying to move inventory or (hopefully) selling through and exiting the niche!
You don’t work in isolation so resist the urge to react!
Make time your friend. Test yourself – before you tweak your price wait 24 hours and then see if it’s still the right decision. You may be surprised at the result…
As always, ask us anything. If we don’t know, we’ll know someone who does!
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