A competitive pricing strategy is a crucial factor you need to consider when running your Amazon business.

A recent survey shows that price is one of the top reasons consumers choose to shop on Amazon. Your marketing efforts may be able to warm up a potential customer. Still, without the right Amazon pricing strategy, you might lose them to your competitors.

However, as you try to adjust your product prices, your competitors do so as well. What ensues is an arduous and exhaustive pricing war. If you don’t want your business to end up at the bottom of the price war race, you need effective strategies.

The tactics you’ll discover here will help you adjust your prices without compromising your profit margin, while maintaining brand equity.

What is a Price War?

The definition of a price war is two or more rival companies competing to get hold of the largest market share by strategically lowering the price points on their products.

A price war can erupt anytime between competitors because of the nature of how ecommerce pricing works. Sellers can change prices quickly with just a click of a mouse, or they can use automated price optimization tools.

It is a battle among third-party (3P) sellers on Amazon, reducing their prices repeatedly to come up as the least expensive. Amazon’s Buy Box algorithm considers pricing as one of the significant factors that affect who gets this spot. It adds more tension to sellers, fighting over the lowest price to get this coveted space displayed on every related product page.

However, the lowest price doesn’t necessarily mean the most optimal for your business. Slashing your prices can significantly hurt your profit margin. While it may boost sales, this notion is usually short-term only and doesn’t guarantee higher profit. Even a 1% price drop can cut down your earnings by 10%.

Top Tips on Winning Amazon Price Wars

Winning the price wars is not a one-shot deal. It’s an ongoing battle, so you must remain profitable most of the time to continuously fund it. Therefore, you need to ensure that your business is not taken out of the Amazon marketplace entirely.

  1. Don’t Overdo Price Cuts

It’s not always possible to get the Buy Box, but you can ensure that your business remains profitable for a long time. A recent study revealed that consumers associate high-priced items with high quality.

Slash your product price now and then, but avoid coming off as a low-quality brand. Your brand will become more popular over time if buyers perceive you as selling high-quality goods.

  1. Don’t Go Beyond your Minimum

Identify the minimum selling price that will remain profitable for you. Even if a competitor beats you to the Buy Box, there’s always a possibility that you can still snatch the position. Once they deplete their stocks or increase their price because they’re no longer making enough profits, you’ll be the lowest-priced item.

  1. Bait the Competition

If you can’t wait for their stock to sell out completely, you can check how much they can lower the price and adjust from there. You’ll have to observe how your competition will react manually.

For example, try to set your price to the lowest possible amount and see how low your competition will go down. You only have to do it for around 15 minutes to determine your competitor’s minimum price. If they drop it to $12.99, you can lower your price to $13.01, wait for them to sell out, and then increase your price to $15 or more.

  1. Deplete your Competitor’s Stock

What if it’s not possible to match your competitor’s super low price? Your best strategic approach this time would be to deplete their stock.

To do this, look for other ecommerce sites where people buy the same products in your niche, such as Facebook.

Suggest your competitor’s items to these sites. As people buy their product, their stock will deplete faster while it’s selling at an unreasonably low price. If their inventory suddenly goes dry, Amazon will take them out of the Buy Box.

Don’t raise your price too high, though, just because your competitor has no more stock. Amazon still favors sellers who offer low prices, so keep your product pricing low and grab that Buy Box successfully.

  1. Match the Lowest Price

You don’t always have to undercut your competitor to win the price war, especially if you’re a new seller. While you may not get the Buy Box all the time, you can still get a fair slice of the market share if you can match the lowest price. 

When consumers have to decide between two products in the same price range, other factors start to come into play, such as:

  • Number and quality of product reviews: When faced with difficulty choosing between identical products, consumers trust Amazon product reviews to help them decide which is a better option. If you have a stellar rating, buyers will more likely pick you over a competitor with the same price.
  • Detailed product description: A well-written product description influences up to 54% of buyers when choosing a product. It’s always essential to prioritize benefits over features and include visually appealing lifestyle images in HD format.
  • Brand awareness: Most consumers these days use multiple channels during their shopping journey. Improve your brand’s online presence by marketing on different platforms, such as Twitter and Instagram.

You may be sharing the Buy Box with your competitor, but you won’t have to sacrifice your profit margin by going too low. You can still get a fair amount of market share without having to go to an all-out war with a mature competitor who has more funds than you.

Beat Your Competition with these Price War Techniques

Amazon pricing is just one part of the total equation to becoming a successful seller. Use these tips to help you cover this important factor – it will allow you to allocate time to other aspects of your business, such as marketing and improving product quality.

Do you want to learn more strategies in building your Amazon business? Register for Prosper Show to continue to grow as an Amazon seller.