Which Pricing Strategy Is Right For Your Amazon Business?


Guest post by Rodney from

Setting a pricing strategy has commercial consequences for your business. Pricing can make you the most competitive and attractive brand on the market, or the least. With such importance attached to pricing, you’d be forgiven for taking the traditional route of looking at the market, balancing your costs against your need for profit, and setting a static price that’s not too low and not too high. But, as I’ll explain below, taking a different pricing strategy can have real benefits for your business.

Undercut Your Rivals With Dynamic Pricing

Dynamic pricing is a simple concept – you set flexible prices for your products so they move with customers demand. This means that your business can sell its products at the lowest cost to the consumer and undercut your rivals.

To see an example of how dynamic pricing works in practice, look at how Amazon operates. The ecommerce giant changes the prices of its goods as the market dictates, always with the end goal of being the cheapest option for its customers. Amazon’s dynamic pricing strategy has been so successful that it’s forced other ecommerce retailers to take the same approach.

Some of the biggest companies around have had to incorporate dynamic pricing into its strategy, including Walmart and Target. Although its a successful strategy, dynamic pricing is not without its drawbacks.

This approach can alienate customers who prefer to know the price up front, and there’s a chance of getting embroiled in a race to the bottom with other stores that can erode profit margins to unsustainable levels.

Another challenge for companies that use dynamic pricing is the need for advanced technology programs to optimize price adjustments over time. Luckily there are tools like Minderest that can do the hard work for you. Integrating with a wide range of ecommerce platforms and apps, you will be able to automatically analyze and adjust pricing strategies based on your nearest competitors.

Related: 3 Dynamic Pricing Tips for Amazon Sellers

Show Your Customers They’re Unique With Personalized Pricing

Often confused with dynamic pricing, personalized pricing takes a slightly different approach. To clarify, dynamic pricing, everyone can see; personalized pricing is only available to the individual viewing it. Because it requires access to a significant amount of personal data, this form of customer-centric pricing has become widely used by tech and ecommerce companies.

For example, travel websites such as Expedia are renowned for using complex algorithms that take into account booking history, location and browsing data to provide certain customers with specific prices. Uber is another example, to match the price of a fair to demand, the technology platform came up with a surge pricing algorithm that finds the sweet spot between incentivising drivers and encouraging customers to use the service.

But personalized pricing is not only the domain of tech goliaths. Thermacell is a company that sells mosquito repellant to partners in big box stores (including Walmart). The company has given its sales reps the power to tailor the price they sell the products for based on each individual partner, customizing them based on the buying history of each partner. This adds another layer to the principle of personalized pricing – simplifying the process while retaining the personal touch that makes customers feel that they are unique.

One of the potential issues of using personalized pricing is that it can be difficult from a financial planning side. This is because if you are creating bespoke prices, then it means your finance team won’t be able to predict the revenue of your businesses as accurately as if you used a flat structure. This is why combining flat and personalized pricing is often a sensible approach to take.

Charge a Higher Price to Show Your Service is Better

Once upon a time, my economics teacher told the story of a US president who discussed taking a fiscal policy of continuing to raise taxes (because people have to pay them). He was informed that this would result in people leaving the country to avoid the tax hike altogether. Charging more than your business rivals seems to be a strategy just as brilliant as raising taxes (why would customers pay the highest price?) but there is a logical sense behind it, so long as the context is right.

Charging a higher price than your rivals is all about showing your business as the prestige option, the best one on the market and the one you not only need but desire. The benefit of taking this strategy is that your customers believe they are getting better results, while you get more engaged consumers.

Apple is the world’s leading tech business and the planet’s richest company, with over 1.3 billion active devices across the globe. While it owes a lot of its success to being able to market its brand as a lifestyle (people don’t use its products, they’re part of who they are), a large part of Apple’s financial health comes from charging a higher price.

Don’t believe me? Its phones are more expensive than Samsung’s and it sells its laptops for more than Dell – despite often being considered an inferior product by many expert commentators.

Adopting the strategy of charging a higher price than your rivals is risky. Like Apple, you need to be able to justify your reasons, because if you don’t there is no reason for your customers to pick your products – why would they? However, get this strategy right and the rewards are obvious – you have the highest value product so make the most money.

Final Thoughts

Setting a pricing strategy is one of the most important things your business can do. It helps determine how competitive it is and how much money it can make. While the obvious approach is to use a flat or static model, as you’ve seen from dynamic pricing, personalized pricing, and charging a higher price, there can be a real benefit to doing things differently. So ask yourself now: “is my business using the right pricing strategy?”

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