Marketplace Pricing: Dynamic Product Price Strategy

With the vast number of products available to purchase online, consumers have more choice than ever, and it can be easy for brands to struggle to manage and follow up on the available data, especially when setting pricing on marketplaces. However, online shoppers will now regularly compare sellers to find the best prices, content and advertising are not the only contributing factors to a successful online strategy. Brands that are seeking sustainable results in sales must establish a structured pricing strategy.

Why Is Marketplace Pricing Important?

The way products are priced and perceived by shoppers will impact a brand’s online presence and credibility. According to recent research from BigCommerce, most sales on Amazon now happen through search with more than 70% of those occurring on page one. But taking the time to set the right product pricing strategy can be challenging for many sellers. Setting price thresholds too high will enable competitors to outprice your products, whereas prices dropping too low can lead to loss of potential revenue. When dealing with marketplaces, setting product prices often involves considering numerous variables like brand presence, stock and fulfillment capabilities, profit margins, competitor prices, and more.

An effective pricing strategy will also assist brands with accounting for other aspects that will influence the selling process like product performance, price parity, and MAP policies. For instance, to remain consistently competitive on price, sellers must perform ongoing product performance checks to analyze current demand. This helps to identify listings that are not performing well due to slow-selling seasons or identify fast-selling products and adjust prices accordingly. The process will also help to make incremental changes over to meet revenue goals and maintain stock.

Pricing agreements can also be notoriously strict when dealing with multiple marketplaces. Most merchants are restricted and cannot offer higher prices for a product compared to any other sales channels. As platforms like Amazon, eBay, or Walmart are focused on providing the best possible experience and offers to their shoppers, price parity can become an issue and should be consistently monitored to avoid the risk of listing removals, product suppressions, or even account suspensions.

Setting Your Strategy

As soon as a product listing becomes available to the public, customers can easily research pricing and compare items with competitor products. Therefore, for sellers to maintain competitiveness on marketplaces like eBay, Wayfair and Amazon, their strategy must be reasonable and versatile.

Although the approach will vary for each brand, extensive research should be performed to find a pricing strategy that is competitive and profitable. Considering the highest and lowest prices for each product will create a good indicator of the average price point that should be maintained. Product acquisition costs like customs, shipping, payment methods, FBA or return fees, and commissions, should also be checked before setting a final number to ensure profitability is maintained even when the price fluctuates.

Amazon sellers and merchants that use pricing software can also benefit from using dynamic pricing rules that readjust the price of each product depending on supply, demand, and market conditions. Product prices are more frequently adjusted through the assistance of machine learning so that sellers can adapt to changing markets, especially in categories that are prone to volatile pricing fluctuations. The option to adjust prices creates an opportunity to captivate and convert new buyers without increasing the manual workload. By setting dynamic pricing strategies, sellers can develop automated rules to guarantee that product prices are consistently set below or above competitors. Whether it’s winning the Buy Box with the lowest price, or standing out from competitors with premium price tags, dynamic pricing rules can help keep products competitively positioned.

It has also become commonplace for companies to collect data from users to create custom prices that will vary depending on purchase history, browsing habits, product preferences, location, and more. Adopting a more customized approach to pricing based on user metrics is another method effective for establishing a more personal connection with each shopper and increase the chances of achieving a conversion. In fact, research by Epsilon discovered that 80% of consumers are more likely to purchase from a brand that provides a personalized experience.


Recommended Best Practices

Because brands can no longer succeed by just listing products on marketplaces, a proactive pricing strategy can help maintain high organic rankings and conversion rates. To help with optimizing your strategy, our team of marketplace specialists have assembled their guidance on the best practices to follow.

Consolidate and centralize channel management

Managing products across multiple marketplaces can be challenging without a central system interfacing with each channel. Streamlining pricing strategies in a silo can lead to inconsistencies, gaps in the data and can cost sales in delays. An automated system can manage MAP (minimum advertised pricing) policies to remove violations, in addition to ensuring that prices remain compliant with each marketplace price agreement. Regardless of the strategy, consolidating channels into a single, streamlined system will help prevent small and big issues from becoming long-term problems.

Monitor competitor pricing

Because most modern marketplaces are designed to provide a positive experience for their online shoppers, users have convenient access to a myriad of brands and products. Searching for a product on a marketplace like Amazon can produce thousands of results, and if a listing is not present on the first page it will often not be seen or clicked.

To give your products the best possible chance of having the right pricing, it’s vital to research competitors’ prices and how they fluctuate. However, analyzing data to discover price trends without visualization and benchmarking tools is a time-consuming process, so we recommend selecting an analytics tool, or a partner like Highlands, that can provide insight into competitor pricing.

Set flexible pricing systems

Sellers that have the option to use dynamic pricing strategies should take the opportunity to set a policy that can adjust pricing based on sales trends. This would allow software tools to lower prices during slow sales periods, then increase the prices as the order frequency increases.

Use deals and promotions

All marketplaces have the option to set some sort of deal to promote products to more buyers. It is generally good practice to participate in marketplace promotions whenever possible, leveraging options for free shipping, order discounts, giveaways, sales events, and more.

Create competitively priced bundles

Combining products into a virtual or single-SKU bundle can provide a boost for competitive pricing. It can help appeal to customers looking to find the best price for an item and assist with converting customers that may otherwise be reluctant to purchase one of the items separately.

Stand Out with Your Pricing Strategy

Sellers equipped with the right pricing strategy have a better opportunity of outselling their competition. By setting the highest and lowest price boundaries correctly, brands can gain more control of their entire product range across various marketplace channels and their ever-changing consumers’ preferences. More importantly, the right strategy can prevent small mistakes leading to losses in profitability.

Sellers should also not forget that the effectiveness of their strategy for increasing conversion rates will be influenced by the level of optimization on a product page, the category or type of item listed, and existing customers. Don’t be afraid to experiment with different rule sets to see what works best with your particular target customer.

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