A look at the biggest pricing errors Amazon sellers make. Fix these nine things and avoid these mistakes to maximize profits and sales.
Video: Top 9 worse pricing mistakes
How to not lose money through terrible pricing strategy
With pricing strategy, it’s less about what you do, and more about what you don’t do. If you eliminate the 9 mistakes I’m about to outline, it’s impossible to not get your Amazon pricing mostly right.
In a sense, there’s only two major pricing mistakes:
- Pricing too high
- Pricing too low
So then Amazon pricing strategy, essentially, is about avoiding both of these. What results is a good intelligent price that will result in the profit you want in the timeframe you expected.
While these are the two Big Ones, there are many more. Avoid these 9 things, and its hard to squeeze out significant extra revenue for the same amount of inventory.
I’ll call this “stratosphere pricing.” Politely, you could call this “overly optimistic pricing.”
This is where you price an item far above your multiple competitors, to the point that it’s not realistic for that item to sell.
Usually this is driven by some flawed logic, like “This item is selling pretty well, so if I price mine as the 10th lowest price, then it only has to sell nine times and I’m the next sale.” You often hear specific Sales Rank’s used as a justification for this, such as taking a book ranked 100k and pricing it to be 10th in place on the logic “A Sales Rank of 100,000 means it’s selling once a day, so mine will sell in 10 days.”
This logic is sound in many situations, but it ceases to be realistic past a certain point. You don’t want to desperate chase prices downward, or always be the lowest price, but the opposite (pricing too high) is just as bad. Both fear and greed will cost you.
(Note that the Amazon Sales Rank is a key factor in how you price, and the higher the demand, the higher you can price something and have that price still be “realistic.”)
Generally, if your inventory is in reasonably high demand, and you’re not getting sales, you’re probably guilty of Stratosphere Pricing.
Pricing Mistake #2: Pricing Way Too Low
This is the opposite of Stratosphere Pricing, or what I crudely call “Drug Addict Pricing.” This isn’t just pricing slightly too low (no one ever gets pricing exactly right, after all. Ultimately, we’re all just guessing). This is the mistake of pricing aggressively low, in a desperate attempt to get a quick sale.
- Always matching the lowest price.
- Underpricing other sellers.
There’s an almost cosmic law at work here, where the universe punishes desperation by driving away the very thing you’re desperate for. So it is with pricing desperately: You end up with more “sales,” but less profits. And business about who walks away with the most money, not the most “sales.”
Obviously (maybe not?) if the lowest 5 sellers are all priced within pennies of each other (this is become the norm in recent years), then it probably makes the most sense to just match that lowest price. No point in pricing higher to get a few extra cents. You absolutely want to just match that lowest price. (One exception might be, maybe, if all your competitors are in Acceptable condition and yours isn’t. More on that in a minute…) So yes, there are tons (and tons and tons) of situations where blindly matching the lowest price is a smart pricing move. Maybe even most of the time.
Another form of Drug Addict pricing there are very few excuses for is underpricing other sellers. There are exceptions, but this is almost always an act of foolish desperation and one of the most destructive pricing strategy mistakes.
To put all this another way: Sales is the ultimate vanity metric. Because faster sales doesn’t translate to more profits.
Again: Both fear and greed will cost you.
Pricing Mistake #3: Not Repricing
When a seller tells me their inventory isn’t selling, I always ask how often they’re repricing. Usually I get an answer like:
- “I reprice almost every day.”
- “I’m usually in the lowest 2 or 3 prices.”
- “I do a pretty good job of repricing.”
These answers are always red flags. Usually I fight my way to the truth and it eventually emerges: They’re barely repricing at all.
Repricing is not something you do “when you get around to it.” It is a central part of running an Amazon business. If you don’t reprice, you aren’t getting sales. And if you aren’t getting sales, you don’t have a business.
An item that is not repriced is the same as that item not being for sale at all.
Take that last sentence in. Most sellers understand and agree. Some sellers have their minds blown when that hits them for the first time. Others get defensive. But there’s no way around it: If your inventory is buried by lower-priced competitors, then no one is seeing your offer. And if no one can see it, no one can buy it. And if they can’t buy it – is it even for sale?
Pricing Mistake #4: Not Aligning Expectations To Reality
You can price as aggressively or as conservatively as you’d like – as long as you understand the consequences.
The problems arise when you choose a pricing strategy expecting a specific outcome, when it’s impossible for that strategy to deliver that outcome.
One example is pricing above multiple other sellers, then being confused when you don’t get a flood of quick sales. It’s not that there’s not a situation where that makes sense, but pricing that way and expecting an immediate sale is a clear case of not aligning expectations to reality.
Another example: Chasing the lowest price at all times, then being confused when your profit margins are razor thin. There are plenty of Amazon sellers whose entire model is high turnover and low margins. But expecting high margins with this approach is not aligning your expectations to reality.
When you pick an Amazon pricing strategy, know the consequences.
Pricing Mistake #5: Panic-Dropping Prices
This mistake is where you’re expecting a sales in an unrealistic time frame, and when the sale doesn’t come, assuming it’s a problem with your price. Then panic-dropping the price too soon, purely out of fear.
A lot of sellers watch every item closely once they list it for sale, monitoring it desperately, and holding their breath, waiting for a sale. This is the Amazon version of helicopter-parenting.
It goes without saying, there are valid reasons to drop the price on an item. That’s a big part of repricing, which often requires dropping a price to make it competitive with the current competitor landscape. The problem comes when the price dropping is done based on an unrealistic expectation of how fast something should sell, and a misguided blame on the current price being the reason an item hasn’t sold.
Prices do drop. You will get undercut by competitors. But when a price drop is dramatic and crazy and unrealistic, you have the option of waiting for the price to rebound. Keepa price charts can help you assess if the current price is well below a reasonably expected sales price. Prices do bounce back.
But being undercut isn’t the cause of the worst form of panic-price-dropping. The absolute worst form of this is having the lowest price, and dropping it even more when something doesn’t sell right away. This is “panic price dropping” in it’s purest form, because it is so pointless and misguided.
Key pricing principal: You don’t always need to be the next sale. Deep breath. Relax. Don’t panic.
Pricing Mistake #6: Pricing Based On Sub-Condition
This is the pricing strategy mistake where sellers think they are only competing with products in the exact condition of their offer or better. Example: You’re selling a book in Very Good condition, and you ignore all Good or Acceptable condition offers, and only price against other Very Good or Like New offers.
Absolute pricing suicide. And tons of sellers do this.
How much do Amazon sellers care about condition? Not as much as you’d think.
You should only compare Used to Used and New to New. But that’s where it (mostly) ends.
You are still competing against offers in worse condition. But take a common example of listing a book in Very Condition, and you have a competing offer in Good condition. That Good condition offer is still competitive, and should not be ignored. A lot of sellers in this circumstance would only price against other VG offers, and that would be a big pricing mistake.
What about Acceptable condition? Am I saying that a Very Good condition offer should price-compete with an Acceptable condition offer? For the most part, yes. Amazon customers still buy Acceptable condition offers. More than you would think. So if you simply price as though they don’t exist, you’re leaving a ton of money on the table.
Condition doesn’t matter to Amazon customers as much as you think.
Pricing Mistake #7: Pricing Based On Extraneous Data
This is the mistake where sellers factor in totally irrelevant data when setting a price, resulting in setting a lower price than they should.
If you’re pricing based on anything other than “is this Used or New,” you’re probably overthinking it. Here are some example:
- Looking at eBay prices
- Looking at prices on other sites (like Bookfinder.com)
- Looking at prices of other editions
- Looking at prices of other formats
- Looking at rental prices (if a textbook)
And many more…
A good rule of thumb is to assume your customer is only looking at the product page for your book, and nowhere else.
Pricing Mistake #8: Underpricing
This pricing mistake takes the form of underpricing the lowest price, in a frantic attempt to get a quicker sale.
Underpricing is a game that no one wins. Don’t engaged in a desperate race to the bottom. Matching a price is almost always better than underpricing.
When you underprice, that extra 1 or 10 cents doesn’t matter that much to buyers. That extra 10 cents doesn’t matter for the Buy Box.
Five reasons you should (almost) never underprice another seller:
- You create a race to the bottom
- You’re in business to get the most money, not the quickest sale
- Underpricing is predicated on the false assumption of “the more often I underprice other sellers, the quicker I’ll get the sale”
- You are triggering repricing software that will destroy you
- You’re not a drug addict
No one should be this desperate to get the next sale. You’re (hopefully) not a drug addict. It shouldn’t matter that much.
Are there exceptions? Yes. Such as a competing FBA offer that conflicts with what I think is realistic. Such as a book with a really bad Amazon sales rank that is priced far above the lowest merchant fulfilled offer. In that case, I’ll ignore and price in a way that I think is realistic.
There are other examples. But in most cases, I won’t do it.
In a desperate underpricing war, everyone loses.
Pricing Mistake #9: Trading Too Much Risk For Too Little $$$
This pricing mistake takes the form of pricing in such a way that you’re delaying the sale of an item in order to bring in a tiny amount of extra profit.
Take this example: You’re listing a book for sale, and there are 5 competing offers with these prices:
And let’s say this book has an average Amazon Sales Rank of 70,000. So it’s averaging a little more than one sale a day, and you decide to price it a little higher on the logic that other copies will sell out, the price will fluctuate, and you’ll get a sale in time. You decide to price at $21.
While the assumption that you’ll eventually get a sale at $21 is probably true, it is still bad pricing strategy. Why? Because you’re inviting a ton of extra risk and adding a ton of time to your sales cycle for an extra $1. It’s not worth it.
Maybe it takes you a few months to get that $21 sale. But at what cost? Lots can change in 90 days. The price can tank. It may never sell. Etc. And for what? An extra dollar? Not worth it.
They should have matched that lowest price, took the money, and ran.
Never invite large risk for a small profit. When the upside is small, take the money and run.
Recap: the Top 9 Amazon pricing mistakes
- Pricing Mistake #1: Pricing Way Too High
- Pricing Mistake #2: Pricing Way Too Low
- Pricing Mistake #3: Not Repricing
- Pricing Mistake #4: Not Aligning Expectations to Reality
- Pricing Mistake #5: Panic-Dropping Prices
- Pricing Mistake #6: Pricing Based On Sub-Condition
- Pricing Mistake #7: Pricing Based On Extraneous Data
- Pricing Mistake #8: Underpricing
- Pricing Mistake #9: Trading Too Much Risk For Too Little $$$
Now you know what not to do.