3 Pricing Strategies that Work for Amazon

amazon pricing strategy

When selling on Amazon, you must have a cohesive strategy backing the price you decide to charge for your product. Here are three traditional pricing strategies you can use for your Amazon seller account, too.

1. Market Penetration Pricing for Startups

Also known as penetration pricing strategy, this pricing policy is mostly used by startups looking to break into the Amazon market.

  • What it is: Penetration pricing involves charging an amount lower than your competitors to attract customers when you’re new to the Amazon world.
  • Initial Losses: In the very beginning, you can expect to garner some losses as your sales figures will not be big enough to cover the discount you’re offering to your customers. As sales grow, you can choose to stick with these sales if the overall sales figure is covering costs.
  • Raise Prices: Most sellers don’t stick with their initial prices. When they think they’ve developed a good enough relationship with customers and have established a good standing, they usually raise their prices to reflect their current standing in the market.
  • A Warning: In the online world, charging extremely low prices usually leads customers to believe your product is of a low quality. Therefore, lower your prices by just a dollar, or a few cents, so customers don’t view you suspiciously. Before settling on a price, consult AMZ Insight price tracking.

2. Price Skimming for Innovation

This pricing technique is usually for those sellers who are looking to introduce something new to the amazon marketplace.

  • What it is: Price skimming refers to initially raising prices when you introduce a new invention or a non-existent item to the Amazon marketplace. As more players enter the market, you gradually bring down your charges (while still charging more, preferably).
  • What it does: Charging higher prices initially means that you’ll attract early adapters and lowering them eventually makes more price-conscious customers come your way. If your innovation is good enough, you can generate a lot of money by initially charging more.
  • Illusions: By charging an initial higher price, you will create an impression of exclusiveness and high quality. By the time competitors arrive, you’d have built a brand, already.
  • A Warning: Charging too high a price will push customers away, even early adapters. If you have to charge a higher price, make sure your marketing for the product matches it.

3. Bundle Pricing

Bundle pricing is perhaps the most relevant for Amazonians. Not only do bundles increase amazon sales, they’re a great way to increase visibility for your business.

  • What it is: It’s selling multiple products together at a lower rate than what they would cost if purchased separately.
  • What it does: It attracts customers by making them think they are being offered something for free. You can also get rid of items that are holding inventory space and/or aren’t selling well lately. Bundles work great during holiday seasons and can even increase exposure for your other products.
  • A Warning: if you don’t offer something good to customers (something they can actually use) or include products that don’t really complement each other, you’ll end up generating a lot of bad PR.

Pricing your product is an important step in your Amazon journey. Don’t make assumptions and use AMZ Insight for expert opinion.