Amazon – The Bargain Paradise?
Amazon has long positioned itself as the price leader and offers the lowest product prices among online marketplaces. It is, of course, the best place for striking the biggest bargains for products. However, do lowered prices strike the deal and win the Buy box On Amazon?
In this article, we’ll see how important is the product price in winning the Buy box on Amazon. We’ll also learn pricing strategies and the most favorable pricing strategy that will bring the best profits as well as help you win the Buy box always.
Low Price = Top Ranking?
Many people are of the opinion that price is the only factor in winning the Buy Box. Is that true? Are cheaper products generally better on Amazon and are therefore rank better in the search result? Does Amazon rank favorable products higher up in the search results so that the customer gets what he expects from Amazon – low prices?
Is it possible to improve the ranking of products by price reductions? Is it necessary, in a different form, to be particularly favorable by lowering the product prices? These questions bother a seller when they research how to sell products on Amazon. Even Amazon sellers who are making quite a decent amount often encounter such questions.
There are three popular methods that Amazon sellers use to price their products appropriately.
- Algorithmic repricing
1. Manual Repricing
As the name suggests, this is the simplest repricing method which involves manually updates of product prices through Amazon Seller Central interface (To know more about Seller Central refer this comprehensive Amazon Seller Central Guide) or any other third party platform. As it is manual, this offers the highest level of control to the sellers, but it requires significant investments in terms of time and effort which could be constraining on sellers with a huge inventory.
Thus, this method could work optimally for sellers with a few high-value items or items with less competition like handmade products or antique items.
2. Rule-Based Repricing
It is a very popular repricing technique followed by most sellers. It looks at the prices set by the competitors and adjusts the pricing. But it follows the rules that you define for it, thus not necessarily ignoring the profit requirements.
For example, you could set the rules so that the prices should drop by the lowest price by x dollars. Or the price should drop such that the lowest profit margin is 15%.
Rule-based repricing thus provides relief from the manual effort of the manual repricing method. It is also fast, being nearly real time. However, this method lacks in some aspects.
First, setting up the rules itself be conflicting sometimes with too many rules introduced in order to optimize the repricing. Thus they need to be constant supervision and management.
A very important aspect of the demerit of this method is that it looks at just the prices by the competitors and completely disregards the seller performance metrics. Since lower pricing is the factor that is of concern, without pairing the rules you can’t tap the maximum potential profit.
It is the latest repricing technique in which computer algorithms decide the best possible price. It takes into account all the known market conditions. To understand this pricing strategy, the best analogy is the pricing strategy for stock market decisions.
With this understanding, it is capable of handling the different variables intrinsically to determine the Buy box itself and setting the price with the optimal balance between profit and the share of the Buy box.
Algorithmic repricing is most appropriate for sellers with a high potential profit margin and a wide range of inventory.
This method delivers the best out of the first two methods. Good judgment and automation, also proves to deliver highest returns with the least effort undertaken. However, this repricing method is expensive and thus needs deliberation before adoption.
Which method suits you the best would involve identifying your needs and requirements.
To the facts – Examination of prices with 10,000 keywords
In order to get to the bottom of the pricing issue, we conducted a statistical analysis with 10,000 keywords. The price structure for the first 10 pages of the search results was analyzed.
For each keyword, the search results were divided into price classes (quantiles) according to the price. For each keyword, 10 price classes were determined from the cheapest 10% to the most expensive 10% of the products.
The result – The price has no systematic influence on the ranking
If there was a link between favorable price and good ranking, the cheaper products must top the search results, while the more expensive products were on the back.
This means that the share of cheaper product classes should decrease from page 1 to page 10, while the share of more expensive product classes should increase. However, from what we observed, this is not the case. Cheap and expensive products have equal distributions in the search results pages 1 to 10.
The result of our analysis is therefore clear. There is no systematic link between price and position in the search result. On either side of the search results, both cheap and expensive products manage to get into the display. This composition does not differ from page 1 to 10. Only for the most expensive 10% of the products the lower price products are less frequent on the front sides.
How can you explain this result? Customer diversity and price perception
The result, for the product a variety of different products and prices comes up in the search results. This is plausible on 2 reasons. Customer diversity and price perception.
The first aspect is that at Amazon a variety of customers with different preferences shop. Some customers are looking for bargains while others look for premium products and purchase them at Amazon. Since Amazon wants to serve all these customers, it is plausible that the search result also displays the variety of prices.
The second aspect concerns price perception. Customers make their assessment of a price as high or low, depending on comparison prices, i.e other products that they find in the search result. If Amazon were to display only the cheapest products on the front pages, the expensive products would also be perceived as less favorable. By displaying expensive products, the customer’s anchor price is set higher and he is more likely to buy a medium-priced product because, in relative terms, he makes a “good deal” in his perception.
What does this mean for Amazon optimization? What other possibilities are there?
This is a great news for salespeople. It is not necessary to offer their products particularly favorably on Amazon, in order to sell well and successfully sell! In reverse, it means that with a low price, it is not automatically possible to get to the top ranking of the search results and increase sales.
Although setting a competitive price should not be neglected, the price is however not the only starting point that traders are available to boost their sales on Amazon. Rather, there are a number of approaches to effectively improve the ranking of own products and sell more.
Search Engine Optimization
To sell on the platform Amazon is to enjoy a notoriety, a confidence, and an exceptional traffic without doing anything. Simple searches in Google show you that Amazon links enjoy high search rankings. This is due to the great confidence that Google places in Amazon, good descriptions and well-targeted titles to know more Amazon search engine optimization refer this well-written Amazon SEO guide. Unfortunately, all this is not enough all the time to be first on the search terms that interest you.
Here is a tip. If you take care of the reference pages containing your products, they get better ranks in the search results and thus will bring you more traffic. By creating links to your product page you will get more sales.
What kind of link should you create?
Already the classic links like press releases or articles on website 2.0. You can also comment on blogs or forums by putting a link to your page.
Another good type of link is that coming from Youtube. Post a video related to your product on Youtube and create a link to your sales page. In addition to bringing traffic, it also gives a nice link for SEO.
The Amazon product pages naturally contain no links but are nevertheless well-placed thanks to the weight that Amazon holds on the internet. If you add good links, you will quickly see your products in first place and get more sales!
Also, see if it is possible to place a niche site on the topic of your product in the first results of Google. You will then be able to send yourself traffic and strongly increase your sales. And you know the best? If you put Amazon affiliate on your niche site, which targets your product, you will win on both tables! First by touching the 5% commission on the affiliation of a product to Amazon, and then on the sale of your own product! Is not that great?
To find out if you can create a niche site with Amazon business strategy, you first need to look at the number of searches per exact month on the targeted term. If this is important enough to make it worth going to a small site, see if the competition is not too severe for ranking your niche site in Google results. If this is correct, get started!
Pricing the items is one of the most crucial and perhaps also a challenging task. The intention is to make profits you would deem good enough, yet get to have more sales. But this is the very same the competitors want and the way they price affects a lot on how you should be pricing your products.
How should the products be priced
The easiest to understand and the most convincing way is to lower the price to undercut the lowest competitor. If the performance metrics are almost the same as the competitors, then it’s almost certain to get the buy box. Though adopting this strategy yields positive results, but it has its own drawbacks.
In case the seller’s performance metrics are much better than those in the competition, buy box would still be won without having to lose the profit by pricing the product the minimum that should be depending on the competitors’ price as the strategy suggests.
If all the sellers were to adopt the same methodology, that is dropping prices to get the least, it destroys the profit margins and could result in all sellers selling at the cost prices rendering the business useless.
We need to understand that the buy box is not the ultimate thing and the only thing to have, though efforts should be to win the buy box, there should be an optimum balance between high-profit margin and a healthy buy box share.
SellerApp can help you with all of these measures, enabling you to significantly increase your sales on Amazon.
SellerApp is an Amazon data analytics platform for manufacturers and distributors to sell more successfully on Amazon.
As the world’s first versatile software, SellerApp enables the evaluation and optimization of the rankings on Amazon. Amazon vendors can now for the first time search engine optimization (SEO) for the most important product search engine on the Internet.
In addition to the ranking optimization, SellerApp offers amazon predictive analytics with the possibility to manage product evaluations, to monitor prices and sellers as well as to keep competitors in view.
SellerApp is used extensively by for amazon statistics by multinational companies as well as small “Amazon only” vendors to increase their success on Amazon.