Value-Based Pricing Strategy for Amazon Sellers

 

Every seller on Amazon wants to achieve the perfect balance between the maximum and the minimum. Prices should not be too high to attract customers and must not be to low for keeping sellers profitable.

How to set these ideal prices? How to know that you have made the right decision?

 

The value-based pricing strategy can be a great helper. It will determine the best price for your products without over- or underpricing them.

This will make your goods more attractive to shoppers and you will get more profit from increased sales and revenues.

 

Value-Based Pricing Strategy: What Is It?

First of all, let’s find out what is value-based pricing on Amazon. The core of this strategy lays in shoppers’ thoughts on how much they would spend on your product. Sellers set a forecasted value, as they think their customers see it.

Such perceived value is known and True Economic Value in Economics (or TEV). In simple words, customers are ready to pay more if a product offers some extra features to them if they see that they will benefit from using this product.

The key principle of value-based pricing strategy is setting the maximum that your customers are ready to pay for products. So, you would fulfill their needs and get the most profit.

 

How to Use This Strategy on Amazon

While implementing this solution on practice, remember about True Economic Value. Look at competitors’ prices, as researching them and the reviews is a good way to find out what shoppers like. Also, you can ask your customers what they want using surveys or interviews. Though this approach is widely used in the B2B segment, you are free to use it in B2C.

After you have the feedback or competitors’ data, identify the performance differential and its value to customers.

  • What is unique about your product?
  • How does it differ from others?
  • Is this difference valuable to potential customers?

If you ask your customers what features they would like to see in your product, that would be great, as you would know their desires without any guess-work.

Once you know the prices of competitors and what shoppers would like to get with your product, you can define the ideal value-based price for your goods.

 

How to Implement Value-Based Pricing Strategy on Amazon

  1. Identify a segment of your target audience. You should concentrate on a certain segment and their needs to define the best price for them.
  2. Think of the price of the best alternative - the same product but without the performance differential.
  3. Think of what sets your goods apart from the alternatives and estimate the performance differential. How much your target audience will pay for extra benefits?

 

Why Value-Based Pricing is Effective?

The most simple and usual pricing strategy is ‘cost-plus’. Sellers just take into account all their costs and set their margins. However, this approach doesn’t include market trends and consumers’ interests.

Value-based pricing strategy is oriented on your customers and allows you to make sure that this is the exact price that your customers are ready to pay for the product. You won’t lose profit and will know that your clients are satisfied.

If you have a strong marketing strategy, value-based pricing is the most effective. All you give to customers is value and exceptional customer experience. Shoppers are ready to pay for them.

Such an approach is useful when it comes to price growth. It is difficult to know the limits of price increases. Being market-oriented is always helpful, take into consideration your customers’ wishes and interests. That will lead you to profits and increased sales rates.