Question

social pratice in economics

write an essays about pricing strategy of amazon or the consumers behavior in a certain market of amazon company

2000-4000 words

Answer 1

Strategy 1: Repricing
Suitable for: Undercutting competition
Repricing is the most common strategy employed by Amazon retailers to match up to the competition. Either manually or through the use of automated repricing tools like RepricerExpress, you can adjust the price of your product to match the lowest amount at that time.

As mentioned above, repricing is not a sustainable strategy over the long run in most cases. Also, you need to constantly adjust the prices to a) ensure that you’re matching up and b) to prevent losses at a time when all other retailers increase their price.

Using a tool is always better than meddling with pricing manually. RepricerExpress allows you to set the baseline for each product below which you’d not want to compete on pricing. It also adjusts prices dynamically all day long, so you can make the most of a price increase without even getting involved.

• Take a look around and see how many other retailers already exist for your choice of products. Also, keep an eye on their seller ratings.
• If there is too much competition, employ repricing. Do this with products that have a heavy profit margin, as you don’t want to end up with peanuts after every sale.
• Automate repricing so as to avoid manual intervention and to make the most of price fluctuations through the day.
• Consider adding products to your catalogue that have little to no competition but sufficient demand (Private Labels are an example) and sell them to build your seller rating over time.
• Ask customers to leave more reviews. Don’t be pushy, though.

Strategy 2: Getting to the Buy Box
Suitable for: Playing the numbers game
For a customer, the quickest way to get to checkout is to click on the Buy Now option on the Amazon product page.

By getting to the Buy Box and staying there.

When it comes to the Buy Box, price is not the only consideration. Indeed, you want to aim for the lowest existing fare at that point in time, but other factors also come into the picture. This is why getting to the Buy Box takes time and patience. While there are some parameters like a lower shipping time that you can hack, you cannot force a better seller rating instantly.

• Reduce your shipping time to under fourteen days, or as soon as possible.
• Reduce the number of returns and replacements by conducting a thorough check of your products.
• Reduce your cancellation rates by providing accurate descriptions.
• While Amazon has never said it, products sold through FBA get to the buy box more often as they invariably have the shortest delivery time.
• Be sure to ask customers to rate you as a seller, by providing them with the right link to do so.

Strategy 3: Stable Pricing with Exceptions
Suitable for: Building a sustainable presence on Amazon
For some retailers, Amazon is not just one among other sales channels to gain visibility. It is the primary channel that can make or break their retail business.

For one, customers trust a moderate to high-value product more when its price doesn’t swing like a pendulum. Secondly, you’re looking to sell on Amazon for a long time to come. Reducing prices at every occasion may just not make you the kind of money you need to survive. In such situations, you would do well to keep the price stable and as close to the market value of the product as possible. This doesn’t mean that you shouldn’t make exceptions.

• The main aim of a price reduction should always be to increase your Amazon sales rank, which in turn can increase organic sales later.
• When you launch a new product, be sure to offer a discounted fare. Likewise, make bundled purchases lucrative by offering a price cut.
• Holiday season demands a sale from every retailer, so you shouldn’t make an exception either. During this time, traffic to the Amazon site is higher so you may also consider investing in sponsored listings.
• In all other instances, keep the price stable with few deviations.

Strategy 4: Value-Based Pricing
Suitable for: Private Labels
Simply put, a customer on the other end of the screen does not care about how much you have spent to manufacture or acquire a product, or what it might do to your bottom line to sell at a certain price.

Therefore, a cost + profit pricing model is not really appropriate for Private Label sellers on Amazon.

As a Private Label seller, your greatest advantage is that you are not competing with other retailers. In this case, your product’s price is an absolute parameter and should be determined solely by what your customers might want to pay.

• Get your Amazon customers to care about your Label as a whole. Create short, simple stories around each product and include them in the description.
• Tell them what other users say. Talk about durability and flexibility for bags and sources and processing for foods. Share user opinions as opposed to your perspective.
• Send “Thank You” notes and your contact information with each product you ship through Amazon. Listen to feedback. Pay particular attention to complaints about the cost.

Not Just Pricing!

Changing your prices, or your strategy, to suit Amazon’s requirements is just one aspect of the business. All of it would come to nothing if you do not maintain strict control over your inventory.

Take an example of a scenario when you’ve reduced prices drastically to match the competition and are now selling more products than usual. If you don’t have sufficient inventory, you will not be able to fulfil the orders in time, resulting in a bad seller rating which further pushes you off your selling streak.

To avoid such issues, always manage inventory with the help of inventory management software such as Primaseller. This way, you always have a perspective on inventory, get alerts when stocks run low and can manage orders without staying up all night.

Before you begin selling at all, even on Amazon, conduct thorough market research to understand what the ideal price could be. This saves you the need for adjusting prices once products go live, and no one thinks much of a product that gets consistently discounted over time.

Conclusion

Dynamic pricing refers to the strategy where firms set flexible prices that change according to the conditions in the market. The factors may vary depending on the needs and objectives of a business.

In most cases, factors like

• the market average price
• how major competitors price the product
• historical sales data that includes which price point generated the most demand in the past
• current demand
• future demand forecast
• patterns in customer behavior such as when do customers buy this particular product, the frequency of their purchase, seasonal changes in their behavior
• perceived value of the product
• customers’ willingness to pay

are of vital importance to a company’s dynamic pricing strategy.

Amazon’s pricing algorithm goes somewhere behind the scope of human capabilities. It brings machine learning, artificial intelligence, and big data analytics into play. As the first step, the company collects and analyzes big data, estimates future demand, and predicts future trends with the help of machine learning and AI technologies. With the knowledge they’ve obtained from analytics, the in-house pricing engine makes millions of price changes in a day. On average, a product’s price changes every ten minutes. sometimes the company sells some of its products at a loss. In those cases, they cover the loss by cross-sells, up-sells, or the future purchases of customers they lure in with below-average prices.Even if the newly converted customers don’t purchase a profitable product at first, they eventually become loyal customers because of the seamless shopping experience they enjoy.

An essential source of knowledge when making pricing decisions is customer behavior. Since Amazon has more data than any other retailer, the results they obtain from an analysis is far more accurate than others’.Now, think of a world that you can define your buyer personas and accurately estimate what they will need in the future. For Example:-

Say, one of your buyer personas is C level executives of the silicon valley. Next month, Apple releases its latest iWatch, which has the most advanced hologram technology. It can visualize the files that users have on other Apple devices so that business people can work anywhere and anytime.

You’re pretty sure that your buyer persona (that we’ve imagined together) is going to purchase that groundbreaking-technology product. You know that because the historical data in your hand says so. You also know the size of the target audience, again, thanks to the big data analysis.

Since it’s going to be a popular product, you can attract so many potential shoppers by offering a below-average price. Based on our hypothetical consumer behavior analysis, we also know that the ‘C level’ buyer persona has a tendency to buy additional products like accessories. You recommend iWatch accessories in various colors, and you sell them for above-average prices. You sold so many iWatch bands and cases that the profit you’ve made on those products surpassed what you’ve made on iWatches.

That’s exactly what Amazon does, according to an analysis by Boomerang Commerce, a company founded by Guru Hariharan, a former Business Leader at Amazon. You too must competitively price popular products since it’s the perfect way to attract a large number of customers to your store.

Amazon’s negative experience tells us something. Testing different prices on different demographic groups will annoy your customers. If you’re going to segment the market and differentiate your pricing policy, make it via personalized offers.

Like any other experienced retailer, Amazon integrates psychological pricing tactics into their marketing strategy. Price anchoring is one tactic Amazon applies to nearly all of its products. It’s a strategy where retailers display a higher price together with the actual one, to make the real price seem better.

The cheapest option is eliminated immediately because shoppers perceive it as inferior to the remaining options, and the decoy option is too expensive. Shoppers subconsciously choose the more expensive one of the original two products.

Apply the decoy pricing strategy yourself and test whether the demand for the targeted product actually changes. Take a step further and test different decoy options on the same two products, try to understand which option works best. It won’t cost you a thing, but it’ll give you an idea of how you can influence consumer behavior.

Amazon’s pricing strategy contributed largely to its dominance in the online retail industry. The retail giant’s success all over the world continues to inspire online retailers for years.