Pricing Your Product For Amazon FBA

If you price too high, your product will not sell. If you price too low, you could leave a lot of margin and profits on the table. So how should you price your product? 

In this article we cover the top pricing strategies you can use for your products in the Amazon marketplace.

Tip 1 Above and Below

When a customer is searching for a product and sees your item, it’s irrelevant what the price is.

Price is not related to the value of the product. Price is not related to the complexity of a product.

The price is very subjective and based on perception. Let me give you an example.

Why is an iPhone case which is made of one small bit of injected plastic more expensive than a kettle or toaster which may have dozens of parts and uses 50 times the amount of materials? The iPhone case might be $20 but the toaster only costs $10. That makes no sense.

The price of an item is based on the general market and competition for that item. In competitive markets the price will be a lot lower even if the item is complicated or expensive to make.

The margins on some electronics are 5 to 10%. There are thousands of companies competing for these products. The margin on a toilet brush might be 100% or more. It’s a much simpler item to make and is much more profitable, but it’s boring so there’s less competition.

The sexiness of a market increases the competition which lowers the overall price. Go for non-sexy markets and you will have more flexibility on price and higher profits.

Tip 2 Comparison

When an Amazon customer looks at search results they’re comparing your price with the competition around your product and also considering what they expect to pay for that type of item.

For example, if your iPhone case is selling for $10 and all the other competitors are selling at $15, yours looks cheaper. This may be a good or bad thing, depending on the product. Nobody wants to buy the cheapest ring for their wife.

The other thing they’re comparing is the general price for the item they’ve seen in other places. For example, the iPhone case might normally be $20-$40 in a cell phone store. So all the results look cheap, compared to the price the customer would have to pay elsewhere.

Your price should change depending on what your competition does because everything is relative to what’s on the page.

Tip 3 Below Competition

Take the average of the competitors above your listing and below your listing and use a price that is 5 to 10% below that pricing.

If most of them are selling at $14.97, you look a lot cheaper at $13.97. The risk is that everyone continually lowers their prices and competes against your listing.

This will drive down the profits for the whole niche, not just your product.

Tip 4 Above Competition

Alternatively, you can price your item above your competition.

If you’ve got great product images, great feedback and reviews, increasing the price will signal to your customers that your product is of higher quality.

For one of my products I doubled the price when stock was running low and it started selling more at the new higher price. Amazon only takes an extra $.15 for every dollar you increase the price, so adding $10 to the price adds $8.50 to your margin.

If your profit was only four dollars a unit before, that’s a 200% gain in profit. Small changes in the price can massively affect your profitability.

Tip 5 General

For new items, you want to keep the prices as low as possible, especially while you’re running initial promotions to get the sales going.

The pricing strategy when you’re on page 3 and page 1 of the search results is very different. When you’re not on page 1, keep your prices low until you rank up. You might not make much profit during this time, so you’ll need to run promotions and pay per click.

Once you’re on page 1, you can consider increasing your price because you have enough traffic and sales so that a slight increase in price won’t affect your velocity.

Tip 6 Milk that Listing

If you’re ranking on page 1, you can milk your listing.

Increase the price 10 to 50% for one or 2 days, collect the extra profits and then return the price back to normal so that you don’t lose your ranking. You can periodically increase the price for a day or so each week, milking your traffic.

If your item is seasonal, customers may be willing to pay more for it during the peak season time. The overall demand for that niche will be up to take advantage of the extra traffic.

Another great time to boost your profits is when you’re low on stock. Increasing the price can slow down your sales, preventing you from stocking out and at the same time letting you collect extra profits.

Tip 7 Test Test Test

Without testing and measuring the results you don’t know which prices are best.

Try several different prices and see which one makes you the most profit. You can track your conversion, sales and profits for different prices using CashCowPro.

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