Price Strategically: 4 Major Pricing Pitfalls and How to Overcome Them
For many Amazon sellers, product pricing can often be a headache. Most of the time, sellers offer dozens, and sometimes even hundreds or thousands, of various products and services. Therefore, setting up different pricing strategies for these diverse products becomes a significant challenge for them.
However, many sellers are not pricing experts and may not have in-depth knowledge about determining the optimal price for their products. To assist you in establishing the best pricing strategy, we have compiled a list of 4 major pricing pitfalls that every Amazon seller should avoid when making pricing decisions
1. Setting one price forever
How often do you change your prices? Setting different prices at different times is trickier than it appears. Amazon sellers must invest time and effort in systematic pricing experiments to understand their impact on sales and profits.
This is why some Amazon sellers avoid changing their prices for extended periods or react strongly only when they notice competitors' products affecting their sales, often by lowering prices to regain market share. As a result, prices tend to move in only one direction: downward.
➤ What can you do?
To be proactive in your competition, sellers need to implement dynamic pricing strategies for their products, adjusting prices both up and down. Research has shown that Amazon changes its product prices very frequently, approximately 2.5 million times per day. Thus, to achieve success like Amazon, sellers should also leverage dynamic pricing approaches.
Typically, it's a good practice to test prices within about 10% of your original price. Once you identify successful price points, re-run the A/B test after a month or two to see if the new prices can boost sales and profits.
2. Fighting price wars
Engaging in a price war is often a vicious cycle with no real benefits. To win such a battle, Amazon sellers often find themselves sacrificing profits, compromising on product quality, or offering subpar customer service. Unfortunately, customers may not be satisfied with these trade-offs, and this can harm a seller's brand reputation.
Sellers who win the price war might enjoy short-term gains but often suffer from diminished long-term profitability. Additionally, by lowering their prices, they primarily attract customers who prioritize lower prices over product value and quality.
➤ What can you do?
To steer clear of price wars, consider promoting your brand by offering premium services and high-quality products while emphasizing their value. Forge a connection between your product and customers' lives to trigger positive memories. Make it clear that they're buying more than just a product; they are buying a valuable experience, a cherished memory, or a premium addition to their collection.
A study by BCG indicates that 80% of U.S. consumers and 70% of German customers consider themselves value-conscious rather than price-conscious when making purchasing decisions. This suggests that many customers still base their product choices on factors beyond just the price.
3. Overlooking buyer personas
For brands offering a diverse range of products, it's crucial to pinpoint your core customer base. It is crucial to understand who your primary customers are, their occupations, and their age groups. By developing a clear buyer's persona, you can align your product pricing effectively.
Furthermore, once you've identified your target audience, you gain the ability to anticipate when they're most likely to make a purchase. This insight empowers you to make informed decisions about the best timing to invest in promotions and adjust prices for maximum impact.
➤ What can you do?
Conduct a thorough online analysis or a survey to understand your customers better. Learn how much they would be willing to pay for your services and similar products, and explore the possibility of adjusting your prices without negatively affecting your sales.
Furthermore, once you identify your buyer’s persona, you can personalize your products for them, gradually turning them into loyal customers for whom pricing will not be the top priority when making purchase decisions.
4. Failing to document pricing adjustments
Documentation can be a tedious task, and its importance is often overlooked because it doesn't bring immediate improvements to your performance. As a seller, you might rarely revisit your records to review the changes you've made.
However, when unexpected issues arise, you'll want to understand which changes directly or indirectly contributed to the outcome. This knowledge allows you to fine-tune your performance and even replicate adjustments to see if they enhance your results. Therefore, maintaining detailed documentation of your pricing tweaks is essential.
➤ What can you do?
Start by documenting your pricing changes, either on paper or electronically. This practice establishes a clear trail for future reference, helping you track the evolution of your pricing strategy over time. Make sure to include the date and the specific product associated with each pricing adjustment.
If your budget allows, consider implementing AI-powered pricing software. It automates pricing changes, maintains a comprehensive record, and saves valuable time on manual tasks. This enables you to redirect your focus towards fine-tuning and enhancing other aspects of your business, ultimately leading to greater success
Mastering pricing strategy
In the dynamic world of e-commerce, mastering pricing is a journey filled with challenges and opportunities. As sellers, we've explored four major pricing pitfalls and, more importantly, how to overcome them.
Remember, pricing is not a one-size-fits-all endeavor. It requires you to adapt dynamically, showcase your brand's value, connect with your target audience, and keep detailed records. By steering clear of these pitfalls, you can optimize your pricing strategy, enhance profitability, and build a brand that thrives in the competitive E-commerce ecosystem.