How (and why) Amazon Sales Rank should be considered when setting a price on Amazon, and is mandatory for any pricing strategy.
Why is Sale Rank the #1 factor in Amazon pricing strategy?
You’re always considering multiple factors when setting a price for anything you’re selling on Amazon.
Among them:
- Type of product
- Fulfillment channel
- Amazon’s price.
- etc.
but the detail that has the greatest importance is Amazon Sales Rank (otherwise known as “Best Seller Rank” or “BSR”). Sales Rank forms the foundation of any pricing (or repricing) decision.
What is Amazon Sales Rank?
What is Amazon Sales Rank?This is Amazon’s measure of an item’s demand.
You know how the New York Times has their “100 bestsellers” list? Amazon has their “50,000,000 bestsellers” list – tens of millions of books, each with their own individual sales rank, updated by the hour.
Think of Amazon Sales Rank like this:
- For high-demand items, Sales Rank is a rough guide to how many units have sold that day.
- For lower-demand items, Sales Rank is a measure of how long its been since an item has last sold.
Since every product category has their own ranking spectrum (no two books can hold the same sales rank, but there can be a book and a board game each with a rank of 113,234 for example), it would be challenging to list out the sales rank dividing line between “high demand” and “low demand” for every category, but I can do this for the Books category (since it’s the one I’m most familiar with).
For Books, we can very roughly define “high-demand” as having a rank of 100,000 or better (a lower number). Any book with a rank better than 100,000 has probably sold more than one copy that day.
Lower-demand = a rank worse than 100,000. So any book in that range is likely selling fewer than one copy per day.
This may seem like excessive information for a tutorial on pricing, but it’s actually key to understanding why Sales Rank and pricing are so interconnected.
Three quick facts about Amazon Sales Rank:
1. Sales rank is just a snapshot in time: An item ranked 100k now could have been ranked 5 million 30 seconds ago. Important to note as you’re repricing.
2. Sales history is more important than Sales Rank: When in doubt, supplement Sales Rank with our built-in Keepa sales history charts. These give a broader view of an item’s demand.
3. The better the rank, the less you have to “nurse” it: High demand items don’t need to be repriced as often.
So what does this have to do with repricing?
Here is the pricing principal this has all been building up to:
The better the sales rank, the more boldly we can price.
The worse the sales rank, the more conservatively we should price.
To put it another way:
The better the sales rank, the more we don’t need to optimize to be the next sale. The worse the sales rank, the more we should optimize to be the next sale.
The basic concept here is simple. You should price an item ranked 1,000 (in any category) totally differently than an item ranked 1 million.
What are examples of this rule in action?
Let’s make this crystal-clear in a hypothetical:
Let’s say you have a book where the lowest five offers look like this:
- $30
- $33
- $45
- $50
- $100
How would you price this book? You might have a strong opinion. But you shouldn’t. Because the question is impossible to answer.
You can’t ever know how you’re going to price until you know an item’s Sales Rank.
So let’s go ahead and say the Sales Rank is 20,000. That’s a book that’s selling several copies a day, but it’s not exactly selling hundreds.
In that case, I’d probably price this at $43.99. Maybe more depending on my mood, but probably not less.
Alternative scenario: That same book, except it has a sales rank of 1.9 million. How am I pricing in that case?
$33. Not even a question.
The only difference is the Sales Rank. The worse an item’s Rank, the lower you should price it.
The logic behind Sales Rank-based pricing strategy
If this hasn’t clicked yet, here’s why it’s so important:
The more buyers for a particular item, the less we need to be the lowest price to still get a sale. The more customers, the more realistic it becomes that we can get a sale while still pricing above the lowest offer.
Here are a few examples where we can price more boldly, not be the lowest price, and still get sales:
- The cheaper offers sell out, and we’re next in line.
- Buyers prefer our condition to the condition of cheaper offers.
- Buyers prefer our condition description to the description of cheaper offers.
- Buyers prefer our feedback score to the score of cheaper sellers.
- Etc.
None of these move the needle that much on the likelihood of a sale. But combined, it becomes very realistic (and in fact, expected) that we can price higher than the lowest offer and still get sales.
When a buyer is only coming along once every 90 days (as might be the case with a book ranked 3 million), then you better position your listing to get that next sale. It will be another three months before another buyer comes along.
But if something is selling multiple times a day, then who cares if you miss a sale? Or even 50 sales? Then you’ve only set yourself back 10 or 15 days (or whatever). Who cares? A buyer will come. You barely need to worry about the price.
Different sales rank, vastly different risk profile.
Rank-based repricing: Taking this to the extreme
I’m going to drive home this principal with a strategy (or, anti-strategy) from my personal business. Hopefully this will cement this concept in for you, permanently.
Once I ship a high-demand item in, I pretty much forget about. I don’t look at it. I don’t reprice it. I just forget about it. Because I know it’s going to sell at any price.
Read that last sentence a few times, before I clarify it slightly: I’m not saying I never reprice high-demand items. But I barely do. And I do it in an extremely sloppy way (like “price $2 higher than the 3rd lowest FBA offer,” using this repricer) that would indicate I don’t have any interest in it ever selling. Which isn’t exactly true. It’s not that I don’t want it to sell. It’s that I know it will no matter what I do or how I price it.
With high-demand items, prices are going up and down at such a crazy rate, it practically does not matter how you price. A buyer will come.
Remember the #1 rule about Sales Rank & Pricing
The worse an item’s Sales Rank, the more conservatively you should price it, and the more frequently you should reprice it.
Bottom line: Don’t reprice an item without using Sales Rank as your guide.
-Peter Valley
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