Always test your price. The more testing you do on your price the more you will know the optimal selling price for your product.
By testing your price, you will know if you can increase your price, and therefore increase your profit on each sale.
You may also find that by lowering your price a certain amount, you will greatly increase your sales, offsetting any profit loss from the decreased sales price.
You will also know the optimal price to drive more conversions during flash sales and promotions.
Testing is key to grow your profits in your Amazon business.
You Should Always Be Testing Your Price
Last week, we talked about listing prices in terms of a price war.
In that article, we discussed how testing your prices can help you avoid a race to the bottom during a price war, and can help you increase sessions, conversions and profits.
This week, we wanted to expand on pricing and why you should always be testing to find the optimal selling price.
You Want to Squeeze as Much Profit Out of One Product as Possible
As you know, it is a lot of work to source and list a product. It takes time, money and energy.
We always found it better to optimize one product and get the most profit out of it before starting to look for another product.
Think about it. You already did all the work to get this product up and selling. Instead of going through that entire process again for a new product, why not squeeze more money out of this current product?
One way to do that is find the optimal price to sell your product. Right now, you may be making a lot of sales. Also, you may not be facing a lot of competition from other sellers.
So why would you need to test your prices?
Well what if testing your pricing would allow you to increase your sales price without hurting conversions? Would you do it?
What if by testing your price you could find a lower price that would increase your sales and conversions, while offsetting any losses and making you a greater overall profit. Would you do it?
You Can Test Features and Product Addons That Can Increase Perceived Value
By optimizing your products that you have already began selling, you optimize your time.
By highlighting certain features in your product, giving certain guarantees, and adding additional features to your listing, you may increase your product’s perceived value.
When you increase a product’s perceived value, you are able to raise that product’s price while also maintaining or increasing your conversion rate.
With Splitly you can test various features, addons, and guarantees to see which one increases your conversion rate.
Once you find the features, addons, and guarantees that increase conversion, you can then test your pricing to find your products optimal selling price, which may be significantly higher than your previous price.
Not only did you raise your selling price, which will increase your profits for each sale, you also insulated yourself from a price war.
As stated in our previous blog when you market your product as a premium, high-end brand, you can sell at a higher price without worrying about a competitor undercutting you.
People Tend to Pick the Middle Price
Many private label sellers will lower their prices to move inventory and increase their rank assuming their lower price will lead to an increase in sessions and conversions.
It is true that A9, the Amazon algorithm used to find products when a customer searches a keyword, looks at pricing as a factor when listing products.
However, A9 also looks at a product’s conversion rate.
Therefore lowering, your price alone may increase your rank slightly, but unless you can show that your new price is increasing conversions, you may actually be hurting your rank.
Online marketers know that if you want to sell a pricing plan, you should create 2 other pricing plans. One plan will be priced less than your targeted pricing plan. The other plan will be priced higher than your targeted pricing plan.
Research has shown that people tend to buy the plan in the middle. Why? Because people tend not to trust the cheapest price, and therefore are suspicious of plans with the cheaper price.
They also don’t buy the higher priced plan because they see the middle priced plan, and notice that it is a bargain compared to the higher priced plan.
People Don’t Buy the Cheaper Pricing Plan. Why Would Your Amazon Product Be Any Different?
Why would your products be any different?
In fact, you don’t know if your product is any different until you test your prices. People may be wary of your product if it is priced too cheaply compared to other products in the market.
Similarly, there are many factors a buyer may conceptualize, consciously or subconsciously, before they make a purchase including
- how well the sales content is written
- how aesthetically pleasing the images are
- how the images highlight the products quality
- which product features are mentioned and how it would benefit that particular buyer
- how many positive reviews a product has
- how many negative reviews a product has
- whether that buyer has bought from that seller before
These factors will play into a buyer’s decision and may even persuade the buyer to purchase a more expensive item.
Would you rather buy a $15 product with one hundred 5 star reviews and well written sales copy, or a $10 product with fifteen 5 star reviews, three 1 star reviews and poorly written copy?
Therefore, don’t automatically assume you have to lower your price just because your competition has.
Moreover, to arbitrarily lower your price in hopes of boosting your rank may actually hurt your rank by lowering your conversions.
If you are not testing your pricing, you don’t know if your pricing plans are working or not.
Test Your Pricing During Promotions and Flash Sales
In the past you may have run promotions and flash sales to move inventory and increase your rank.
Increasing your conversion rate is an effective way to increase your organic rank in the Amazon A9 algorithm.
However, this is only effective if you are actually increasing your conversion rate. Granted, by lowering your price you will likely rank a bit higher.
However, if you are not keeping track of your conversions, this increase in rank may actually lower your rank in the long run.
A slightly higher rank will likely lead to more sessions. However, if these new sessions are not converting, your conversion rate will decrease, which will sink your rank.
If your promotions lower your conversion rate, you may actually be lowering your rankings.
Therefore, if you are going to run promotions, you should determine which pricing drives the most traffic to your product and which one will lead to the highest conversion rate.
If one promotion price is leading to more conversions, stick with that one during your promotions.
Before You Make any Changes You Should Test Your Prices
Whether you are already making sales or not, you should always be testing your product to reach an optimal price. Testing your price can either increase sales, increase profits, or both.
If you have already done the work to get your product up and listed on Amazon, you should do the best you can to make the most money off that one product.
In order to do that you must test your product to see what the optimal pricing of that product is.
Maybe you can increase your price without hurting your conversion rate, which in turn will increase your profits.
Similarly, maybe you can decrease your price so that, even though your profit per sale is lower, your overall sales increase, making you more profit overall.
However, don’t assume that just because you lower your price you will make more sales. Indeed, you may actually hurt your sales.
Therefore, everything should be tested, including your promotion and flash sale prices.