How AI Helps Shape Your Pricing Across Different Product Life Cycle Stages

September 7, 2023

For Amazon sellers, nailing the correct pricing strategy for your products is absolutely important. In the bustling online marketplace where competition is fierce and trends are ever-evolving, the right price can be the difference between a sale and a missed opportunity.

When entering ecommerce platforms, products typically experience various phases during their life cycle. Thus, it is crucial to craft effective pricing strategies throughout a product's journey in order to optimize your profits.

Whether you're starting with a new product, trying to stay competitive as you grow, or making sure mature products are priced just right, you've got to be flexible with your pricing strategies.

Which pricing strategies you can use in different product life cycle stages

First of all, the product life cycle refers to the stages a product goes through, from its introduction to the market, growth, maturity, and eventual decline.

It's a model that helps businesses understand how a product's popularity and sales change over time. Sellers can use this model as a guide to decide how to adjust your strategies (marketing, pricing, production, etc) based on different stages.

Here we are going to focus on pricing strategies in various product life cycle stages.

Introduction stage

When introducing a new product or stepping into a fresh market, sellers’ main purposes are to attract customers, increase product awareness, and grow the market share.

However, according to McKinsey’s article, around 80 to 90 percent of the selected prices for new products tend to be on the pretty lower side. Namely, most companies or sellers often undercharge their new products despite investing a large amount of time, effort and money.

A recommended pricing strategy here is to do in-depth market /competitor research to set up both a price ceiling and a price floor. Then, A/B testing different price points within the range. 

By defining the upper and lower limits of product prices, you not only encompass all potential values and benefits in your price points but also ensure that you do not compromise your profit in your sales.

Growth stage

In the growth stage, your product experiences a surge in popularity and sales. Thus, expanding your market and increasing your product’s or brand’s reputation become the most important things.

During this period, some similar products might have entered the market, making pricing more competitive and complex. Sellers need to pay attention to competitors every now and then and keep an eye on their pricing strategies in case of losing market share in this stage. Thus, competitor-based pricing could be a good strategy for sellers.

On the other hand, if you are entering the market as a pioneer, you might still enjoy the profits and reputation when newcomers join the competition. In such a case, value-based pricing can lead to higher profitability.

Maturity stage

As more and more sellers participate in the pricing game during the maturity phase, Amazon sellers need to not only effectively monitor the competition but also strike the perfect balance between profit margins and competitiveness. Additionally, avoiding pricing wars with other competitors is also a crucial part here. 

Some popular pricing strategies in this stage include competitor-based pricing, where pricing decisions are grounded in comprehensive competitor analysis; bundle pricing, a strategy that offers multiple products as an enticing package deal; and promotional pricing, which involves temporary price reductions to allure customers and stimulate sales.

In this environment, Amazon sellers must continually evolve their pricing strategies to stay competitive.

Decline stage

The decline phase in the product life cycle is the final stage where a product experiences a steady drop in sales and profitability.

Market saturation, changing consumer preferences, or technological advancements often trigger this phase. Companies may either discontinue the product or attempt to prolong its life through cost-cutting or niche marketing.

In this phase, price adjustments play a key role in managing inventory. By offering discounts or promotions, businesses can minimize losses while ensuring a seamless transition to newer product offerings.

This stage requires a delicate balancing act, as companies must navigate declining demand while preparing for the exciting prospects of fresh innovations.

Why do you need help from AI

When determining which pricing strategies to use in different stages, you may have many questions like: 

How do I find out which prices perform best? How long should I test different prices before making the final decision? How often should I test it? Are my prices too high or too low for customers? Is there any possibility that prices can go up without hurting the overall profits?

During the pricing execution, you will probably have more questions than those mentioned above. Plus, it would cost you a great deal of time to conduct various pricing tests until you decide on your optimal prices. Sometimes, those prices might not even be the optimal ones.

How APE helps you conduct dynamic pricing models

In our talk with several Amazon sellers, they often lack the time and knowledge to either determine the optimal prices for their products or systematically test different prices to discover potential profits.

Therefore, we've developed this Amazon Pricing Engine with the aim of assisting Amazon sellers in optimizing their profits and finding the ideal pricing sweet spots for different products.

Our top features include:

  • A/B test various price points: Our APE regularly conducts A/B tests to find the optimal prices for your products.
  • Gain full control of your pricing: With a rule-based pricing approach, you can define your pricing logic during special seasonal sales.
  • Easily access competitor prices: simply enter your competitors' ASIN to receive real-time updates on their pricing and associated data.
  • Strike balance between profitability and competitiveness: set up your price ceiling and floor as a rule and let APE dynamically experiment with various pricing

Let AI conduct pricing experiment for you

For Amazon sellers, pricing is undeniably one of the major concerns, and its significance resonates throughout the various stages of a product's life cycle. That’s why Amazon constantly tests different price points to maximize their profits and revenue.

To become a successful Amazon seller, you have to understand the key element that Amazon places the highest value on. Furthermore, it's important to recognize that pricing is not a static factor but rather a dynamic element that demands continuous assessment and adaptation over a product's life cycle.

Our APE has proved to assist many Amazon sellers increase their profits and achieve almost 95% customer satisfaction within the industry. If you are interested in learning more about our product, schedule a first chat with us.

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