Amazon Pricing Strategy – 8 Ways To Maximize Sales & Profits For FBA Sellers

A step-by-step guide, A to Z, on the best Amazon Pricing Strategy To Use In Your Business In 2021! I will show you 8 Amazon pricing strategies to maximize your sales & profits in your Amazon FBA business.

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If you're looking to start a business selling products on Amazon, then you'll need to know and understand the product listing criteria and how to rank on Amazon FBA. Yes, you can start making money selling on Amazon, regardless of your experience selling online.

Amazon is one of the best opportunities to make a passive income and earn money from anywhere in the world. Gone are the days of directly exchanging your time for money. That's the old model. The new model leverages the incredible opportunity that the internet affords us.

Whether you want to make money working from home, or just want a side hustle, understanding how much it costs to start selling on Amazon will give you the upward momentum you need to launch your Amazon private label business today!

The best part about selling on Amazon is that the retail giant does all the work for you. You'll never have to pick or pack or ship a product, ever. Gone are the days of dealing with fulfillment or customer service requests. Amazon does it all for you. All you do is collect the income.

But in order to get there, you need to get on the road to building your Amazon FBA business today. Tune into the video now to discover just how powerful of a passive income machine Amazon can be and how you can start making money from it no matter where you live in the world!

Amazon Pricing Strategy - 8 Ways To Maximize Sales & Profits For FBA Sellers - Audio file

Amazon Pricing Strategy - 8 Ways To Maximize Sales & Profits For FBA Sellers - Video transcript

Hey guys and welcome back to my channel. In this video I would like to go over 8 Amazon pricing strategies to maximize your sales & profits as an FBA seller, so be sure to watch all the way through so you don't miss any of the important details as we do have a lot to cover.

Now, before I hop into this video, if you are new to this channel you're going to want to subscribe as I talk about the best ways to make a full time income with Amazon FBA and always get straight to the point, with that said let's get right into this video .

Now, every seller’s goal on Amazon is to make as many sales as possible. There are so many factors that influence a customer to purchase your product, where your products rank among keyword search results, your review count and rating, whether your listing features quality images and informational copy, shipping speed, and of course, your product’s price all figure into the decision to buy.

Having the proper pricing strategy on Amazon for your private label brand is crucial. With the private label method, you’re not competing for the Buy Box as you would using retail arbitrage or wholesale methods, but you are competing with the other products within the search results.

Priced too high, your product may not entice customers, they’ll opt for your competitors’ relative affordability. Price your product too low, and you may start a pricing war with your competitors, sending both the value of your product niche and your own profitability on a downward spiral.

So how do you choose the perfect price for your product? There’s no one-size-fits-all strategy, the right price largely comes down to your product’s quality, your production costs, and what customers are looking for, all of which can vary from your competitors. That said, there are a few data-driven techniques that will help you arrive at the best price for your product.

When researching the right price for your product, it helps to understand the Amazon marketplace, in terms of both what consumers want and how other sellers meet those demands. So let me show you 8 strategies for pricing your Amazon products.

The first one is to understand your profit margin. Watching revenue roll in is great, but only when it covers the cost of sourcing, listing, and shipping your products by a healthy gap. That’s why it’s so important to calculate your profit margin early in the product research phase. Otherwise, you could eventually lose time and money on each sale.

Profit margin is the percentage of income you keep after all expenses, which include cost of goods sold, Amazon referral fees, FBA fees, advertising costs and other expenses.

We can roughly estimate our profit margin by considering the “Rule of Three.” Assume that the money from each product’s sale will be broken up in the following way: one third goes toward fees one third are eaten up by costs before it’s even sold such as taxes, and fees on your inventory, and one third goes to you as profit. Dividing our profit by the product’s price gives us our profit margin.

Amazon sellers should aim for a profit margin between 25% and 30% for their private label products. Achieving a comfortable margin isn’t just great for profitability,it also gives you some built-in wiggle room for your initial advertising spend. Once you’ve optimized your campaigns, these costs should go down,and profits up.

Before sourcing a product from your supplier, you should already have an idea of what you’ll charge for it on Amazon. You need to calculate your cost, Amazon fees, inbound shipping fees, storage fees, as well as advertising costs.

Analyze potential products for profitability, demand, and competition, and take all product-related costs into consideration. Identify your minimum and maximum price; Use your sourcing costs as a reference to calculate your minimum and maximum sales prices. These boundaries will keep your product in competition with similar items.

Remember: if your prices are too high, customers will buy from your competitors. Price your product too low, and you’ll eat your own profits. To avoid the latter, set your minimum price to your breakeven price, that is, the same amount of money it costs to produce it.

Note that you’d never want to actually sell your product at your breakeven price, you won’t make a profit that way! But knowing your minimum will help you from going too low.

You can use the Jungle Scout Extension to view a product’s average sale price. This will give you an idea of what your maximum price should be. If you do want to set your price higher than average, you’ll need to justify the hike which I will discuss later on in this video. 

Second is to price competitively. As a private label brand on Amazon, your goal should be to provide a great value to the customer. Value comes in the form of high product quality at a reasonable price.

Your goal should be to build a legitimate, unique brand on Amazon versus selling generic products. This creates more perceived value for your product and sets them apart from the competition.

Price new products with no reviews lower at first. If your product is brand new with no reviews, it may be wise to keep your price a dollar or so lower than your lowest-priced competitor. Use this as a short-term strategy until your product begins to gain traction and reviews.

Now, what happens if my competitors aggressively cut their prices? Entering a price war is a major concern for private label sellers on Amazon. In fact, two thirds of sellers are concerned about increased competition driving prices down.

Sellers who seek to drive sales through aggressive price-cutting will typically not last long as a seller. They’ll quickly realize that by driving prices down, they’re removing any possible profitability their product had, especially after factoring in advertising costs.

My advice: stand your ground. Don’t play along with “race to the bottom” tactics and destroy the product niche you’re selling in. Eventually, those sellers will be phased out when they lose profitability. Stay within your minimum and maximum price and focus on creating a great, optimized listing.

That said, you’ll want to keep an eye on how your competitors price similar products. Whether you are just starting out doing product research or expanding your current product line, it is important to track your competitors’ products over time to determine the product’s viability.

Use Product Tracker to track real-time sales, Best Seller Rank, inventory, and Buy Box price. You want to be sure that your competitors’ products are actually selling at a consistent price point, and that you’re not inadvertently entering a price war.

The third strategy is to differentiate your product. To justify setting a higher price than your competitors, you need to show customers why your product is worth more than a similar item.

You can’t just source a competitor’s exact product on Alibaba, slap your logo on it, and expect to sell it at a higher price. You need to consider the additional features, benefits, and materials your product offers the customer.

Here’s a simple place to start: read customer reviews for your competitors’ products to find out how they’re lacking, and improve on those pain points with your own product.

Can you use better materials in your product? Could you add a feature that improves the customer’s experience? These are the types of competitor-related questions you should ask yourself during product research. You can’t sell the same old product and expect a higher sale price.

Another great way to figure out which price your product performs better at is to run a split test, or A/B test. A/B price testing is simple: list your product at two different prices for a set amount of time, then compare its performance. This way, running a split test allows you to make data-driven decisions on pricing instead of just guessing.

You can run a manual A/B test or you can automate it using software like Splitly to track and gather the data you need. Splitly also has a feature called Profit Peak that automatically optimizes your price point based on market fluctuations, supply and demand, and many other variables.

The fifth pricing strategy I want to cover is to price products above Amazon’s free shipping minimum. Amazon Prime members receive free shipping on all Prime-eligible products, but what about buyers who are not Prime members?

Non-Prime members in the US pay for shipping on all orders below $25. That shipping cost can add an additional 5 to $10 to the customer’s order, which could deter purchasing. If you price your products above that $25 threshold, you may experience a higher conversion rate among non-Prime customers.

Moving on to Amazon pricing strategy number 6 which is to use “charm pricing”. Charm pricing, also known as psychological pricing, is the practice of purposely pricing products in a way that influences customers’ purchase behavior.

For instance, try pricing your product at $19.99 instead of $20. At $19.99, the product seems like a better deal, even though it’s literally one cent cheaper. If you’re selling a product that’s more of an “impulse purchase,” like a novelty item, using this pricing strategy may help increase your conversions as the customer may feel like they’re getting some kind of deal.

You can use A/B testing to see if charm pricing works for your product. Try prices ending in 99, 95, or 90 and see if they perform better than a round number.

By contrast, if you’ve listed an expensive or luxurious product, you could try going for prestige pricing. Luxury products tend to sell at prices ending in zero, think Apple gadgets and designer handbags. A round-number price may work better for your product, so try A/B testing prices ending in zeroes.

The next strategy is to set a Business price. If you didn’t already know, Amazon allows businesses to register for a business buyer account. This allows commercial customers to purchase products for their business tax-free, as well as reap other benefits such as bulk discounts.

As a seller, you can set business prices for your products that only Amazon Business-registered buyers will see. You can offer discounts and bulk prices, encouraging large orders from commercial clients.

To set up a business price in Seller Central, go to “Manage Inventory,” then “Preferences. Make sure “Business Price” is checked. Now, you should see the option to set a business price and quantity discount in your “Manage Inventory” section. Set your desired price and quantity, and you’re good to go.

The last pricing strategy I want to cover is to provide discounts using coupons. Adding a coupon to a new Amazon listing is a great way to get some initial sales rolling. Within keyword search results, Amazon will display a bright, eye-catching coupon offer underneath your price to entice customers. This can increase your listing’s click-through rate and conversions.

A great way to use coupons on Amazon is to actually raise your price slightly, then add the coupon to your listing. That way, customers still feel like they’re getting a great deal without discounting your product too much. Psychologically, adding a discount via coupon can be more effective than just lowering your price without a coupon.

It’s easy to set up a coupon through Seller Central. Go to “Advertising,” then “Coupons.” Click “Create a new coupon” and complete the steps that follow. You’ll be asked to enter the product you want to discount, choose your discount type, money off or percentage off, and a time frame to run the promotional pricing.

I encourage you to optimize your pricing strategy sooner rather than later. You could be missing out on higher profits, so put your pricing strategy to the test using the techniques I covered in this video. Amazon is an extremely competitive marketplace, and what works for your competitors may not work for you. Be thorough with price testing and you’ll eventually land on a price point that allows your product to make consistent sales.

Now, before we wrap this up. As you can see, there are a lot of steps involved in building an Amazon business. And I wouldn't recommend piecing together everything by simply watching videos on YouTube. This is why I suggest investing your time in a great free training that can guide you through this process.

I recommend this training because this is the best training on the market and one that I have personally gone through. They walk you through every aspect of what it takes to start, grow and scale your Amazon business.

This training will build off of what I talk about inside my videos so I left a link for you in the description and if you're serious about selling on Amazon I encourage you to check it out!

That’s all I got for you in this video. Thanks for watching and please make sure to also watch the next videos with more Amazon FBA tips that will show up right about now.

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