When you create a product, one of the first things you’ll have to consider as you complete it and get it to market is how much you will sell it for, what your expenses are, and how much profit you’ll make from each sale of the product. When you are selling on multiple channels, one of the biggest questions comes from pricing on Amazon. You should consider how to price your product on Amazon to make money.
When you get to the stage of considering how to price your product on Amazon, here are some things to consider about selling that you might not have considered.
1. Know Your Market And Competition
When you create a product, it needs to be based on the problems that your ideal customer has and wants to solve. Part of knowing your market also includes knowing how much they can afford to pay for your product, based on where they place the importance or need of your solution. You can do a lot of research right on Amazon to figure out what other related products are selling for and what the costs likely are.
You can use the Amazon FBA Calculator to figure out the costs and fees to help you understand the margin you might be able to expect. As you differentiate your product, you will be able to have a higher margin. Try to stand out instead of being like every other listing on the platform. When you are thinking through how to price your product on Amazon, aim for the prices on the first page of results. Since it’s your goal to get to the first page and ultimately to the first 3 positions, you need to know that you will make money at that price. So start with that knowledge and consider the other options.
2. Understand the Various Pricing Techniques
There are numerous pricing techniques that you can learn about, such as cost-plus pricing, which involves adding up your costs then adding a specific markup. Then there is competitive pricing, which means that you check what your competitors are charging and base your pricing on theirs. You can also use value-based pricing and price your products based on the value of the item.
The most efficient way is to choose the way that is most comfortable for you. It’s very important to know what your fulfillment fees would be and work to lower them through changing packaging to fit into a lower tier if possible. When you can spend to acquire that customer (meaning you have more margin or more repeat customers), you have a huge advantage over your competition.
3. Know Your Costs For All Parts Of The Sales Process
No matter what pricing method you choose to incorporate into your product development, it’s imperative that you truly know your costs. When you can document how much it really costs you to produce a product, it’s going to be easier to not only price the item but also to justify the cost.
So being aware of all the costs in the process, from the cost to manufacture the product to the fulfillment fees and marketing, you need to know what your profit margins are. And don’t forget about the cost to write the listing and do the product photography. These are things that you don’t want to skimp on because they are going to help with converting the customer to a sale. Your investment in making a great listing and possibly advertising will pay off as your sales go through the roof.
4. Know Your Customers’ Costs
Another important factor when determining your price is to consider the other costs your customers may have associated with your product. For example, if there are taxes added, shipping, and other factors that you know about, always consider them in your pricing strategy to ensure that you maximize your price without outpricing your customers.
While you might not think about this as a factor, it’s something that your customer is considering. Whatever you can do to help with these, like making sure the customer experience is outstanding and teaching them how to use the product to it’s fullest potential, all go into their consideration. When you think through all the costs to the customer, you can even create a better product by possibly including some accessories or making some adjustments to sell at a better price.
5. Determine Their Price Sensitivity
Some buyers are more price-sensitive than others. If you have a lot of competition and your buyers know about the other offers, it will help you to consider this factor so that you can choose whether you’ll be the price leader or the value-based choice. Considering how to price your product on Amazon needs to take into account the prices on the first page of results and how your product compares to those.
Amazon buyers tend to not be as price-sensitive as other shoppers on other platforms, but if you are in a saturated market like garlic presses, pretty soon they all look the same. Standing out and showing your value through growing your brand and knowing your customer all pays dividends when you find out how to price your product on Amazon.
Pricing strategy is affected by your ideal audience’s spending practices as much as the cost to produce the item. It depends on where the product you sell fits in with the buyer’s needs, wants, and desires. For example, whether this is a substitution to something they already use or a brand-new expenditure. It’s important to consider all these factors. Consider how you can make the decision a no brainer for your customer through excellent keyword research, dialed in advertising, perfect pictures, and well-written listings. This will get you more conversions and more sales and higher on page 1 on Amazon, which will then get you more sales.
If you need help with pricing your product or getting your brand on Amazon, schedule a call with us, and let’s talk about how we can grow your brand and more on this platform.