Saturday, February 18, 2017

How Should You Handle Price Competition on Amazon?

What should you do when your Amazon competitor matches your price?

Even worse, when your competitors undercut you?

How Should You Handle Price Competition on Amazon

Will your sales plummet?

That’s the logical conclusion, especially if they get the “Amazon’s Choice” flag.

So should you cut your prices and race your competitors to the bankruptcy court?

Customer Buying Behavior

Amazon customers choose to buy from the site for many reasons:

  • Low prices
  • Reviews
  • Ease of returns
  • Free postage
  • Good stock levels
  • Free add-ons

Do you always buy from the lowest priced Amazon seller without checking their review ratings? Nobody else works like that either.

Buyers want value at least as much as they want low prices, and they will consider all of the above factors before they make their decisions. If you cut your prices, you also cut your profits on each sale. So it makes no sense to reduce prices while ignoring all the other factors in your buyers’ decision-making process.

Amazon Ranking Criteria

The default ranking criterion on Amazon is “relevance,” and there are hundreds of complex factors that go into this algorithm. These factors include price, average review score, recent review trends, and how long you have been selling on Amazon. They also include how many customers return their purchases, what other customers are clicking on at that moment, and stock levels.

Amazon sometimes flags one seller as “Amazon’s Choice” as shown in the screenshot below.

Amazon's choice

Screenshot source

If you are awarded this flag, then it will have a significant impact on your sales, but getting it is far from simple. You need to work on every aspect of the value you provide to Amazon’s customers, not just price.

Automatic Repricing Software

There are no monopoly options on Amazon. You are competing with other companies that sell the exact products you sell. If they cut their prices to gain a temporary advantage, should you cut yours?

If you reduce your price, you need to sell more products to make the same profit.

Inbound's Table

Table source – own work

The table above shows that if you reduce your price by 10%, you need to sell 25% more to make the same profit. If you cannot make this number of extra sales, then your bottom line will suffer.

You need to be continuously evaluating your pricing decisions and how they are affecting your profits. This includes looking at:

  • Your competitors’ reactions to any pricing changes you make
  • Your stock levels
  • Competitors’ stock levels
  • Number of sales you are making at a given price point
  • Number of sales your competing sellers are making while your price is at a given level

It gets too complicated for any human to handle all the variables, especially when those variables are changing every few seconds.

Luckily, you can automate your pricing decisions with an Amazon repricer such as that which Feedvisor offers.


Screenshot source

Automated repricing software can base pricing decisions on many more factors than your brain could ever handle.

Feedvisor gives you back the time you used to use to spend trying to optimize your prices for maximum profit. It raises and lowers your prices according to the pricing rules you set up and can even take into account the sales you make through other channels.

Most importantly, automatic repricing removes any human bias and is based on numbers in order to maximize efficiency and profitability.

Your Reputation Advantage

If you already have a reputation in your niche, use content marketing to direct readers to your Amazon store. This gives you a hidden advantage over other sellers. Your readers already think well of you, so with a few strategic guest posts you can convert that sentiment into sales.

Your Repricing Options

If you cut your price without cutting your costs, you make less profit. Cutting your prices only makes sense if you can sell enough additional products to make more profit than you were at the higher price.

There are other ways to get the sale, even on Amazon. Better reviews, extra photos, free “extras,” free postage, and better descriptions are how you can position yourself as the seller who offers the best value alongside fair pricing.

Repricing as a response to competitor price cuts is one option, but cutting your own prices is rarely the best choice. If you have repricing software, you will have no worries because the software handles your pricing decisions according to the rules you have entered. Because they give you time to lay down rational repricing criteria in advance, using Feedvisor and similar repricing tools prevents you being bounced into price wars nobody can win.

The post How Should You Handle Price Competition on Amazon? appeared first on Growmap.


How Should You Handle Price Competition on Amazon?

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