For an Amazon seller, the pricing of its product is of paramount importance. It decides the success of products in the marketplace amid extreme competition.  

Not only does this affect the chances of winning the Buy Box, but it is also one of the main contributing factors to a customer’s ultimate decision to purchase from a particular seller. 

As a brand on Amazon, your goal is to generate sales, get positive product reviews, and provide the best customer service. A key aim in pricing, therefore, should be to increase your Amazon sales rank, which in turn can increase organic sales.  

This article will discuss how to develop a robust Amazon pricing strategy for your business to win the buy-box. 

Amazon adopts a dynamic pricing mechanism supported by an extremely complex algorithm to determine the bestseller rank. Its price change factors are a combined effect of multiple variables such as –  

• Demand volume 
• Inventory volume 
• Product visit: Frequency and repetition 
• Day and time of purchase 

Let’s look at the 4 critical pricing strategies for Amazon: 

Pricing strategy 1: Cost-plus pricing 

This is the most basic method of pricing: sell something for more than its cost. 

Advantages 

1. Simplified pricing: Add up all the costs and add a profit margin to represent the value you are giving your customers  
2. New product introduction:  new product can be placed it in the market on a cost-plus basis to gain some market intelligence and insight 

You can start with cost-based pricing, but as soon as you have enough data, you can move to competitive pricing – or if you can – move to value-based to maximize profitability. 

 

Pricing strategy 2: Competitor-based pricing 

If you are unsure of the initial value of your product and do not want to go too high or too low, it’s a good idea to look at the other seller’s price before deciding your price to be competitive. 

Advantages  

1. Good for Resellers: A competitor-based pricing strategy is critical for resellers since as a reseller one needs to be within a 2% price difference of the lowest price version to be considered for the Buy Box 
2. Competitive benchmarking: It provides the shopper with multiple products with similar nature & usage with very little difference in price, hence each product is benchmarked to the next competition ultimately to win the buy box. 

 

Pricing strategy 3: Stable pricing 

Keep prices stable and as close to the market value as possible. 

Advantages

1. Best suited for D2C: If you are present on multiple platforms, including your own website, price stability may be vital for your brand credibility 
2. Customer convenience: Customers tend to value products where the price is not too volatile 

 

Pricing strategy 4: Value-based pricing 

Pricing is based on the perceived value of a product or service. 

Advantages  

1. Perceived value proposition: Consumers start to value your brand offering rather than shopping by price 
2. Good for private labels: Value-based pricing can be a great way to differentiate yourself as a quality merchant while pushing up your margins 

 

Amazon’s dynamic pricing strategy has successfully orchestrated a before and after in the way you shop online. While its positive shopper perception and revenue growth indicate that a dynamic pricing strategy is a comprehensive alternative for any eCommerce business wanting to sell more and come good on Amazon. 

PiWheel’s eCommerce experts and tools can help you strategize pricing for your eCommerce business. Our tools provide intel on category and competitor pricing to help you stay ahead in the competitive environment.