In essence, you have to figure out the right balance of profit-making per unit and the optimum number of purchases. There are plenty of strategies to price your products and help you do the above, but the best way is to usually mix at least 2 strategies.

Pricing can really make or break your ecommerce business, so it’s important to spend enough time here to get it right. Also, don’t forget that depending on your overall strategy you can add other tactics into the mix to increase the profit from each customer and their lifetime value.

Before we dive into the strategies, let’s get our facts straight first. You need to know the following before you develop a pricing strategy or formula:

1) The margins of your products.

This is relatively easy to do. You calculate the cost of each unit of a specific SKU (transit to your warehouse and any other fees included). Then you try different prices and you simply follow this formula:

(Price – Cost) / Price

This simple formula will give you your margins for each product. Under no circumstances should you put a price on that product that results in a negative number.

2) Cost of advertising.

Are you going to advertise your products? Chances are that you will and most probably online.

You should add to your costs the cost of advertising to promote that specific product or simply divide it between all your SKUs.

For example, if you spend $3K each month on Google AdWords to promote your products and your ecommerce store, you should divide that between all your products equally.

With those 2 basics out of the way, let’s move on to some simple pricing strategies for ecommerce businesses old and new. Remember that you can use any of them or ideally a combination of them. What works best for you will depend on your location and market, don’t blindly copy others.

Pricing Strategy 1: Cost-based Pricing

This is one of the most popular and simplistic pricing strategies both for ecommerce stores and brick and mortar retail stores.

The way it works is by simply taking the cost of a unit as identified in step 1 (transportation and other variable costs included) and then either simply add the desired margin on top of that or a simple fixed amount of money that you deem optimal. The total amount will be the final price of the product.

The 2 challenges with this approach are that you have to figure out the exact cost of each unit without forgetting any costs out and that you have to know that cost in order to always stay above it during promos etc.

If an ecommerce business has really nailed down its operations aspect of the business they can easily utilize this method with minimal effort.

How much overhead you will add is up to you, but usually, the employees’ salaries are left out of the equation.

The second tricky part is how much profit to add. A part of it can be done from experience and another part (or the whole part) from tracking competitors’ prices that sell the same or similar products.

Pricing too high or too low can cripple your sales. Doing a check of your competitors by hand first and then regularly with a software can help you stay on top of them.

Pricing Strategy 2: Market-oriented Pricing

Expanding from the last section of the previous strategy, this strategy is also called competition-based strategy and it factors in what your competitors are doing and in what condition the market is in.

This is a good strategy for commoditized products and if you can compete on price. Usually, this is paired with another pricing strategy like #1, cost-based pricing. In essence, it helps you identify when to lower your prices in order to get more sales, but without compromising your profitability from #1.

Not only that but when your products are too low, you can also increase that price, remain the cheapest vendor and squeeze that extra profit.

Pricing Strategy 3: Consumer-oriented Pricing

This is also called value-based pricing and it’s usually for non-commoditized products. In these cases, the value is usually sold and the price has just to be reasonable.

For example, a novelty product that might not have direct competitors can follow that pricing strategy, while highlighting its benefits over older or other competing products.

To do this properly, you have to be able to consider exactly what you’re doing regarding the sale of products, and how they’re showcased.

Apart from appealing photos, the description is the main way people are able to gain an insight into what the product does, how it works – and how it’s different to other competing ones.

This tutorial aims to highlight how you’re able to manage the most effective Amazon product listing descriptions…

Structure

Amazon product listings adhere to the same structure:

Title
Images
Features (Bullet Points)
Description (incl HTML)
What most people see in the Amazon listing is the top part (Title, Images & Bullet Points) – the “meat” of the listing is the description, which can include basic HTML formatting.
If you want to create an effective listing, the trick is to be clear, concise and thorough.

The best generally have clear, high definition images, coupled with informative & compelling bullet points (which are focused on benefits) and a keyword-rich title.

The real killer the “copy” used throughout the listing. Both in the bullet-points and the full description, being able to convey the benefits of the product whilst ensuring the reader is compelled to buying your particular product is a fine line.

Due to the nature of this copy, a number of copywriting experts have been making serious money providing “Amazon Product Listing” copywriting services. The premise is they will help people make more money by writing more lucid copy.

How To Do It Yourself

As mentioned, the above structure is pretty-much what determines whether a product will be accepted by Amazon.

The most important thing to do is understand what “triggers” buyers to trust your product.

When selling products, it’s far better to deal with emotion than logic…

Logically, you may think the product can be listed and people will pick it, evaluate it based on its features and make a purchase.
Emotionally, people choose products by the company they feel will deliver an experience as close to their aspirations as possible.
Such examples as creating a “compelling” title (which just has to list the various features of the product from the perspective of how it can be used) and a “description” which showcases how the product can fit into the buyer’s life will convert much higher than simply listing the features of the product. Remember, the majority of people are buying the product for an ulterior reason… highlighting how it will push them to this underlying result will make the difference between buying the product or not.
To this end, the following explains how each of the elements of the description work:

Title

The most important thing to ensure with a product’s title is that it’s as descriptive as possible.

Obviously – some products (such as books) don’t need overly descriptive titles. However, the majority of categories do require the most descriptive title possible.

Consider the following examples:

AYL Silicon Cooking Gloves – Heat Resistant Oven Mitt For Grilling, BBQ, Kitchen – Safe Handling of Pots and Pans – Cooking & Baking Non-Slip Potholders – Internal Protective Cotton Layer
AYL Silicon Cooking Gloves (Green) – Heat Resistant Oven Mitt + Internal Cotton Layer
It’s proven that the top title converts higher.
The reason for this is actually very simple – people trust the more descriptive nature of it.

In a wash of 100′s of similar products, people want quality, value and assurity that the company behind the product is actually going to be legitimate. Having a descriptive, inclusive title as the top one is one of the best ways to do it.

Images

Images are necessary for getting products noticed.

The keys with images are as follows:

Clarity is *everything* – don’t worry about any background or whatever – people want to see the quality of the product and expect 4k+ imagery to show it
Only show what’s required – software products don’t “need” a box but they’ll obviously add to the perception of its quality — people primarily need to see screenshots
Make sure the images represent *exactly* what the buyer is getting – don’t use any tricks/hacks to make the product look better than what it is – just show people the product & accessories which may come with it
If you’re not very good with photographs, you’ll need to talk to a photographer.
Alternatively, there are companies on the likes of Fiverr who’ll be able to set up a good shot as well.

The point is that as long as you have ~5 really good images, this should be okay.

Features (Bullet Points)

This is where things start to get important.

The features (bullet points) are meant to describe the specifications of the product; they’re now mostly used to provide users with information about the product (copy).

Regardless of what you write there, there are several factors to consider:

Wrap features inside benefits – Rather than saying “15cm long”, say “3 HANDY SIZES – 5cm, 10cm & 15cm”
Include ALL 5 bullets – might be tempting to only use 3 – use all of the 5 and talk about the company & “guarantee” for the last one
Lead with “CAPITALIZED” benefits – buyers want to know what the product is going to for them, and then why – you do this with “CAPITALIZED TITLES – followed by an explanation of each point”
Don’t be afraid to use several sentences for each bullet – some products just need the features listed; if you need extra edge, add copy
Focus on the product (not the buyer) – beginners make the mistake of leading with buyer-centric benefits (because they read it in some copywriting forum) – this is bad. People are on Amazon to buy products, not learn about how an oven glove will make them look younger etc.
As mentioned, if you’re looking at developing an effective system, you need to be able to encourage buyers that your company – and by virtue – your products are trustworthy and high quality.
The way you do that is to make as much use of the available content area as possible.

Description

Finally, the description is the bulk of content below all the specifications laid out “above the fold”.

Depending on the type of product, and whether you have a new brand or established company, the “description” area can be a number of different things.

It’s best to consider it similar to a product listing page on eBay – showcasing exactly what’s for sale. Minus images, a similar state of affairs exists (you can use limited amounts of HTML in it).

The most important thing to realize is that you’re not restricted to just bullet-points (as you are with the product features) – this not only gives a little more creative freedom. Obviously, this means that you need to ensure you’re making the right choices…

Lead with the SINGLE reason why people would buy YOUR product over a competitor’s – marketing / sales 101 but it’s so easy to forget it. There’s always a SINGLE reason why people buy a particular product (it can be the quality, design or how it works)
Lead with a headline, use a small bit of blurb to describe the product and then use several bullet points to describe what the buyer is going to get – you only get ~300 words so don’t go overboard
Pick an emotive angle – The best product are sold through emotion – use copy that evokes ideas of how the product will fit into someone’s life
Use HTML sparingly – bold text is nice, but not the defining factor of your product – don’t go overboard with the stylization (it should compliment the copy, not define it)
Recommended Resources
If you’re brand new to the Amazon game, you need to be remember that nothing will replace having an effective product.

How you display said product is also extremely important, as are reviews.

Even more startling: 10% of advice was found to leave investors in an even worse financial position.

Through a “vertically integrated business model”, Commonwealth Bank, National Australia Bank, Westpac, ANZ and AMP offer ‘in house’ financial advice, and collectively, control more than half of Australia’s financial planners.

It’s no surprise ASIC’s review found advisers at these banks favoured financial products that connected to their parent company, with 68% of client’s funds invested in ‘in house’ products as oppose to external products that may have been on the firms list.

Why the banks integrated financial advice model is flawed

It’s hard to believe the banks can keep a straight face and say they can abide by the duty for advisers to act absolutely in the best interests of a client.

Under the integrated financial advice model, there are layers of different fees including adviser fees, platform fees and investment management fees adding up to 2.5-3.5%

The typical breakdown of fees is usually as follows: an adviser charge of 0.8% to 1.1%, a platform fee of between 0.4% and 0.8%, and a managed fund fee of between 0.7% and 2.1%. These fees are not only opaque, but are sufficiently high to limit the ability of the client to quickly earn real rates of return.

Layers of fees placed into the business model used by the banks means there is not necessarily an incentive for the financial advice arm to make a profit, because the profits can be made in the upstream parts of the supply chain through the banks promoting their own products.

This business model, however, is flawed, and cannot survive in a world where people are demanding greater accountability for their investments, increased transparency in relation to fees and increased control over their investments.

It is noteworthy that the truly independent financial advisory firms in Australia that offer separately managed accounts have done everything in their power to avoid using managed funds and keep fee’s competitive.

The banks have refused to admit their integrated approach to advice is fatally flawed. When the Australian Financial Review approached the Financial Services Council (FSC), a peak body that represents the ‘for-profit’ wealth managers, for a defence if the layered fee arrangements, a spokesman said no generalisations could be made.

There are fundamental flaws in the advice model, and it will be interesting to see what the upcoming royal commission into banking will do to change some of the contentious issues surround integrated financial advice.

Many financial commentators are calling for a separation of financial advice attached to banks, with obvious bias and failure to meet the best interests of clients becoming more apparent.

Chris Brycki, CEO of Stockspot, says “investors should receive fair and unbiased financial advice from experts who will act in the best interests of their client. What Australians currently get is product pushing from salespeople who are paid by the banks.”

Brycki is calling for structural reform to fix the problems caused by the dominant market power of the banks to ensure that consumers are protected, advisers are better educated and incentives are aligned.

1. Cost of Living: Some factors, determining, the Cost of Living, include: wages (and wage growth); prices, etc, and how wages, are, or, aren’t able, to keep – up, with the increase in costs, etc! Most realize, we have, in the past – few months, experienced, a huge, jump, in pricing, most – apparent, in the food stores, restaurants, and, nearly, everything, related – to, day – to – day, existence, etc!

2. Federal Reserve: In recent times, the near – historic – low, extended period, of interest rates, has, in addition, to the intended measures (helping businesses, and the economy, in trying – times), has caused a Real Estate, Sellers Market, and, a huge rise, in home prices, in most parts of this country! In addition, it created a surge, in consumer use of credit, because, borrowing, appeared, cheaper! However, most economists forecast, many of these supports, and maintaining, such low rates, will, gradually, be reduced (or minimized), probably, beginning, next year. What impact will that have, and will we see, the historic reaction, which has been, when rates rise, it helps reduce inflation, etc?

3. National economy/ conditions: Largely, because of a world – wide, supply – chain, set of obstacles/ challenged, many industries, have experienced, challenges, in terms of, getting sufficient amounts of needed materials, etc! Go into, nearly, any store, and you will see, more – sparse, shelves, than we have seen, in recent memory! In addition, building supplies, products, food, toys, cars and car parts, etc, are under – stress, because of this!

4. Worldwide economies/ economic conditions: Nearly, every nation, is experiencing, economic issues and challenges! The United Kingdom, because of worldwide, as well as specific national trends/ causes/ conditions, has been largely, impacted! Since, we live, largely, in a global economy, when there is any disruption, in the supply – chain, it affects, everyone!

5. Stock and Bond Markets: Because of several reasons/ factors, the United States Stock Market, has benefited, significantly, and experienced, significant increases, in the price of stocks. In addition to the obvious ones, because, interest rates, have been, so low, many investors, believed, stocks, were, nearly, the only game – in – town! When, if, interest rates, rise, bond rates, will rise, and existing, bond prices, will adjust, and drop!

6. Immediate, intermediate, longer – term ramifications/ impacts: The immediate impact of inflation, is, usually, rising prices, and, wages, which, usually, rise, at a far – lower rate! In the intermediate – period, we begin to see, weakening economic trends, and in the longer – term, depending on how long, it ensues, there are often, several, undesirable ramifications, and impacts!

Don’t take inflation, and its risks, for – granted! The more you know, and understand, the better prepared, you will be!

1. Bond prices and interest rates: The price of a bond, generally, is inversely – related to interest rates! When these rates go down, prices, rise, and when they go up, the inverse occurs! Bonds have, what is known, as, a par – value, which is the price, paid, at the end of the term. Markets usually set these at 100, which represents $1,000 per bond, at maturity. However, during the period, the pricing can rise or fall, which impacts, liquidity – related issues!

2. Mortgage rates: For the last few years, we have been witnessing and experiencing, record – low, mortgage interest rates, which have helped the overall, real estate/ housing market, especially, in terms of, pricing increases! In most areas of this country, we are seeing, home prices, at their highest levels, ever, by a significant, dramatic amount! When this rate, is low, a home buyer is able to buy, more – house – for – his – bucks, because, his monthly payments, are so low! Consider, however, what might be the potential ramifications, and impacts, when these rates, will, inevitably, rise?

3. Consumer credit: Low costs of borrowing, help the automobile industry, in terms of consumer financing, etc! Although, not as much as other vehicles, rates on credit card debt, are lower, and there are often, shorter – term, promotions, offering deals! However, since, most of these are variable, and based, on some index, etc, what happens, when there is an increase, in this?

4. Business borrowing: Another area affected, is business cost of borrowing! Presently, they have had access, to relatively, cheap – money, which helps in reducing the costs of borrowing, overall operations, purchasing inventory, etc. But, what happens, when this, ticks – up?

5. Impacts on stock market prices: For some time, because bonds have paid so little, in terms of dividends, etc, many have considered, the stock market, the only game, in – town! In addition, many corporations, have seemed, better – off, than they probably are, and we have witnessed, a higher, ratio of prices to profits, than in the past! How long will this last? How high can it go?

Many factors impact these issues, especially: actual and/ or, perceived inflation; consumer confidence; politics/ government actions/ the Federal Reserve, etc. The more you know, and understand, hopefully, the better – prepared, you will be!