February 3, 2022

Selling on Amazon: How to Price a Product 

Selling on Amazon: How to Price a Product 
Selling on Amazon: How to Price a Product 

If you are a beginner selling on Amazon, there are many factors you will need to evaluate. You may spend a lot of time figuring out what to sell on Amazon, the size of the product you want to sell, its features, color, packaging, amongst other factors. 

However, one crucial factor every seller needs to pay attention to from the early stage of product research and even throughout the life of the product is the price. 

Customers constantly pick products based on price. If prices are set too high, your product may not attract customers, causing you to lose sales. If your prices are set too low, it could result in a pricing war and reduce the value of your product niche, and cause profit margins to plummet. 

Also, pricing is a major determinant to securing the Buy Box which ultimately leads to an increase in Amazon sales. 

Different factors interplay to determine the price of a product. In this article, we will look at a few ways to price your product to help you arrive at the best possible price. 

How to price a product on Amazon in 2022

It is important to understand what happens in the Amazon marketplace. What do consumers want? How are sellers meeting customer demands? Understanding the marketplace will help you set prices that are favorable for consumers. 

Here are various ways to price your products and how to generate more income for your business: 

  1. Know your profit margin 
  2. Set prices competitively 
  3. A/B test various prices 
  4. Differentiate your product 
  5. Use psychological pricing 
  6. Set product prices above Amazon's free shipping minimum 
  7. Add discounts using coupons 
  8. Consider Repricing your product 

Know your profit margin 

As the sales go up and you grow revenue with Amazon, you want to make sure there is a healthy gap between your revenue and expenses. 

Your profit margin is the percentage of income you have after all expenses are removed. These expenses could include Amazon referral fees, FBA fees, cost of goods sold, PPC costs, and other expenses. 

To maintain a healthy profit margin, it is important to calculate it at the product research phase. This will help you save money and time with every sale. You can calculate your profit margin with this simple formula: 

Profit Margin = [(Sales – Total Expenses) ÷ Revenue] x 100

A healthy profit margin for private label products is between 25% to 30%. According to Jungle Scout, 68% of Amazon sellers operate a profit margin above 10% while over 32% operate a profit margin above 20%. Of course, the higher your profit margin, the better.

When choosing a product, analyze its demand, competition, and profitability. Also, calculate the cost of sourcing the product from your supplier, shipping costs, storage fees, advertising costs, and other costs. 

Getting a good profit margin improves profitability and helps you minimize costs.

Set your prices competitively 

In setting your pricing, it is important to consider how your target price matches the existing market. You don't want to set prices that are too high as this could appear unfavorable to potential customers and push them to your competitors. When setting your price, focus on adding value to your customer. In other words, offer a great product at a reasonable price.

Setting your prices too low is equally as detrimental as setting them too high. If your product is brand new and has no reviews, you could keep prices a dollar lower to attract customers to your product. This could be a short-term pricing strategy to help you grow Amazon sales. 

However, setting your prices significantly lower than the overall market price and competition could cause a price war that ultimately reduces the value of your product niche. For example, if the average price of your product is $20 and you set your product price at $15, your competitor could see this and undercut prices in order not to lose customers. Over time, other competitors will have to cut down prices so as not to lose sales. Ultimately, this price war will lead to low or zero profit margins for everyone. 

A/B test various prices 

A/B pricing test otherwise known as split testing is a way to run controlled or random experiments using two or more versions of a website, specific metrics like Amazon conversion rate, as well as other variables. 

A/B testing is a great way to find out which pricing performs better. All you need to do is list your product at two or more different prices for some time. This will help you compare and make more informed decisions. 

For example, you can set your product at $20.99 for the first two weeks and set it higher at $22.99 for another two weeks. At the end of four weeks, check for the price that saw the highest number of sales and make your choice.

Differentiate your product 

If you are selling your product at a higher price than your competitors, you need to show customers that they will be getting value for their money. You will need to consider what additional benefit your product is adding to customers. 

A good place to start is research. To stand out from the crowd and pull in as many customers with a higher price, you need to find loopholes in the market that you can take advantage of. 

For example, you could go through your competitor's customer reviews to see what they are lacking and the pain points of their customers. This will help you improve your product or customer experience and give you a competitive edge. 

Let's say your competitor sells plastic containers for food storage and in the customer reviews, you discover that customers complain of the containers breaking too easily. You can then ask yourself: can I sell food storage containers with better material? 

If you can differentiate your product from the competition, you can sell at a higher price and gain pocket share. 

Use charm pricing 

Charm pricing, also known as psychological pricing is a strategy that involves using certain numbers to create a psychological impact on customer behavior. It usually involved using odd numbers like .99 or .95. 

For example, you can try pricing your product at $19.99 instead of $20. Charm pricing gives customers the impression that the product is priced at the proper value. It also gives them the impression that they have saved money even if it's just a dollar. 

Set product prices above Amazon's free shipping minimum 

While Amazon Prime members get free shipping on all Prime-eligible products, Non-Prime members have to pay for shipping on orders below $25. 

To attract Non-Prime members and increase your Amazon conversion rate, you can set your product prices above the $25 threshold. Customers are more likely to purchase a product that already has free shipping attached to it. This way they don't have to purchase another item to meet the threshold or pay any additional costs for shipping. 

Add discounts using coupons 

Adding a discount to your listing using coupons is a great way to attract customers, increase click-through rate and get some sales rolling in. When customers search for your product, they will see a bright green-colored coupon under your price. 

One great way to use coupons is to raise your prices slightly higher and add a discount coupon. This way, customers feel like they are getting a good deal. Also, you don't have to discount your product price too much. 

To add a coupon to your listing, simply go to your Amazon Seller Central account, click on “Advertising”, then “Coupons” to create a new coupon. You can choose between adding a “percentage off” or “money-off” discount type. 

Consider Repricing your product 

If you are selling on Amazon, you know that securing the Buy Box can increase sales dramatically. 

Amazon seeks to give customers the best products for the lowest prices available. 

The lowest price on any product category secures the Buy Box and features the Buy Now button on the product page. However, to get the lowest price, you need to set your prices competitively. 

You can reprice using these methods: 

  • Manual repricing: You can reprice your products manually using no software or tools. While this method gives you some level of control, it is painstakingly time-consuming and slow. 
  • Repricing software: Using Repricing software, you can set minimum and maximum prices that the software can work with when repricing your product. Unlike manual repricing, using Repricing software doesn't require investing as much time. The software simply automates prices based on competitors’ prices to help you secure the Buy Box. Some Repricing software includes xSellco, RepricerExpress, and so on.
  • Automated repricing: Amazon has a pricing tool via Amazon Seller Central that automatically changes your pricing as needed. It has a feature that allows you to set limits and rules that Amazon works with. However, unlike Repricing software that looks at prices of other retailers, this tool only looks at prices on Amazon.


Pricing your product is key to succeeding on Amazon. Setting your prices high could cause you to lose sales while setting them too low could devalue your product niche. Consider the above techniques and procedures to price your product accurately. 

You can also get some professional and personalized assistance from Amazon experts at ePlaybooks

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