A battlecry on the importance of intelligent Amazon pricing strategy.
Why is pricing strategy so important?
Pricing is second only to your inventory in what separates the people who make a lot of money on Amazon from the people who merely just do “okay.” Pricing,
Amazon sellers put so much emphasis on sourcing inventory, and completely ignore the other half of the equation: How they price that inventory.
Let’s say you have two sellers. They both have 5,000 units in their inventory. Yet one of them will make three times more than the other. Sounds impossible, but I see this often. And the only way this is possible is that the seller who makes 3x more has a superior pricing strategy.
Why is almost no one talking about pricing strategy? Part of it is that the damage done by sloppy pricing strategy is invisible. You never know what you could have gotten for an item, which is what makes bad pricing strategy so insidious. It’s a silent killer of profits.
What you’re missing out on if you ignore pricing strategy
Here are two things that are impossible to do as a seller:
- You can never get money from a buyer that you don’t ask for.
- You also can’t go back to a seller and say: “Hey, I think I could have gotten more for this item. Can you pay me what I should have listed it for?”
Once that sale is made, you have lost whatever potential revenue you could have gotten from that sale forever. Multiply that times thousands and thousands, and that adds up to be the average year of losses for most Amazon sellers. Losses easily avoided if they had practiced intelligent pricing strategy.
It’s just wasted money lost by desperately chasing the quick sale.
How intelligent pricing can triple your revenue
I’m going to give you, in clear mathematical terms, an argument for how pricing can literally triple your revenue.
I’m going to use some basic math on the power of intelligent pricing and how it can literally mean the difference between making $1,000 a month and $3,000 a month (or beyond). And very few sellers understand that pricing has this much of an impact on their business.
Pricing is tied with your inventory in what separates the people who make a lot of money on Amazon from the people who merely just do “okay.”
It’s where a lot of your money is made, and a lot of your money is lost. But what’s interesting is that everyone focuses on sourcing as the most important part of your inventory, and almost nobody talks about pricing.
You can have two sellers who have an inventory of 500 items, and you could literally have one make three times more than the other. And right now you’re thinking, “how is that possible?”
They have the same inventory. Yes, but one person prices their inventory more intelligently than the other. That’s the key difference.
Let’s compare a pricing formula for two hypothetical Amazon sellers who are selling textbooks. We’ll call Seller #1 “nervous seller.” In other words, he’s very conservative with his pricing. And we’ll call Seller #2 “aggressive seller.” He’s someone who’s a lot more bold in their pricing.
So Nervous Seller has a textbook, and he priced that textbook at $9.99 FBA. His payout is $1.50.
Aggressive Seller says, “I think I can get $17 for that textbook.” He prices his at $17, gets a $5 payout, over three times the return. One small pricing tweak = 3x the revenue.
Again, Nervous Seller has a textbook. He prices it at $14.99, and gets a $6 payout.
Aggressive Seller comes along with that same textbook. He says, “You know what? I can get $30 for this book. It might take me a little bit longer to get a sale, but I’m going to get $30 for that textbook.” He lists it for $30. He knows he’ll have to wait a little longer than Nervous Seller,
Nervous Seller gets the first sale. Aggressive Seller gets a sale eventually. $30 gets him an $18 payout. Again, 3x the return.
Slightly bolder pricing, three times the return.
Nervous Seller again prices a book at $20. He gets a $10 payout
Aggressive Seller comes along and says, “You know what? I’m an FBA seller. I can price that at $50, and gets a $35 payout. Again, 3x the return.
Slightly different pricing strategy. Triple the revenue.
As an Amazon seller, you can’t get paid an amount that you don’t ask for.
This is the difference pricing strategy can have on your business. That’s how valuable what you’re going to learn in this book is.
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