What’s an effective pricing strategy for an online marketplace? How do you set your prices? Are your prices too high or low? Is your product portfolio generating the profit value you are expecting? Setting prices for online products and services can be a difficult task. The price you set directly affects the demand for your products and also the margin per unit. Meaning, modifying your prices is a quick fast way to sell more goods or to earn more profit for every item sold.
However, very few online businesses pay close enough attention to how they set and manage their prices. Many companies establish their price arbitrarily. For example, pricing without any rules is a very common pricing practice. So is picking a number out of thin air or merely imitating the competition’s pricing. All of these bad pricing practices, in short, lead to cash flow and/or P&L issues.
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 fulfilment 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 analyse 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.
Ah, the price of a product. It’s an issue that confounds many a retailer and brand, and it’s easy to understand why. Set your pricing thresholds too high, and you’ll be quickly outpriced. Dip too low, and you risk losing out on a mountain of revenue potential. When it comes to pricing on marketplaces, there’s no such thing as a simple calculation. Virtually every product you price will involve a complex equation with numerous variables, including how much stock you have, the brand image you want to uphold and the prices your competitors are using. And then, once you have all of that figured out, there are three more big issues to factor in 1) Price Parity, 2) MAP Policies, 3) Product Performance.
If there’s one thing marketplaces remain strict on, it’s pricing agreements. For most sellers, that means the total price offered for a product — including the item price, shipping, and discounts — must be at or below the lowest total price offered on any of your other online sales channels. In other words: You can’t list an item for one price on Amazon and another on eBay or BuyNatural. These marketplaces need to guarantee that sellers are presenting their best offers to shoppers and take the issue of price parity seriously.
The risk of product suppressions, listing removals, and even account suspensions is high for any seller that fails to abide by strict policies — even if it happens accidentally or unknowingly.
As a growing number of manufacturers shift toward direct-to-consumer marketplace sales, many are leaning heavily on minimum advertised price (MAP) policies to keep prices competitive and prevent brand erosion. The implications of these comprehensive guidelines can be significant.
For retail partners, MAP adds a layer of complexity when competing on e-commerce marketplaces. Fail to comply with a brand’s minimum threshold for advertising a product—even if it’s to stay on par with other, lower-priced listings—and you risk harming or even losing a profitable relationship.
Brands, meanwhile, face difficulties when it comes to monitoring and enforcing policies. One study found that just 20% of retailers always abide by MAP, and that nearly 40% never do.
To remain truly competitive on price, you’ll need to understand where current demand stands. If a particular product isn’t performing well during a slow season, for example, it’s highly likely that the price needs to be adjusted down. But when demand is sky-high and the orders are flying in fast, that’s a sure sign that it’s time for a price increase. In between are all sorts of other product performance variables that can influence when it’s time to make a price slightly higher and lower. Over time, these tiny tweaks can add up to make a big difference in overall revenue.
Bottom line: Pricing on marketplaces must be continually monitored to remain both compliant and competitive.
When it comes to the saleability of a product, pricing is everything. Getting the price “just right” can unlock a mountain of revenue potential, and becomes paramount when you want to:
Win Top Spots
On marketplaces like Amazon, eBay, Google and Walmart, most sales are happening in the buy box and best offer positions. Beating out tens of millions of sellers and listings to win those top spots requires a structured pricing strategy that makes it easy to continually monitor the competition and adjust prices accordingly
Prevent Product Erosion
A single dip in price can cause a big ripple effect if it’s not caught quickly. Staying apprised of MAP violations as they occur means there’s ample time to respond before lower-than-advised prices start to seep into more listings and marketplaces.
Remain in Good Standing
Failing to remain compliant with marketplace agreements can turn price parity into price disparity, with unintended violations resulting in account suspensions and even withholding of funds. A solid pricing strategy can help prevent these and related problems, and keep your seller rating high.
A robust pricing strategy will ensure you stay ahead of seasonal and marketplace-specific opportunities to get your products in front of purchase-ready consumers as they flock to their favorite online shopping destinations for well-known deals and promotions.
Meet Real-Time Demand
With consumer interests constantly shifting, it’s imperative to have product prices automatically adjusted based on the latest buying behaviors and trends. A strong pricing strategy designed to match sales velocity can help ensure you’ll keep inventory moving, no matter the season.
The days of simply listing a product on marketplaces are long gone. What you need now is a competitive pricing game plan — a full suite of proactive strategies virtually guaranteed to keep you ahead of other sellers in your space. These eight best practices will help you achieve just that.
Best Practice #1: Use Penetration Pricing to Get an Initial Boost
Penetration pricing can be an excellent way to price a product to sell, especially if it’s a new product in the market or facing steep competition. Penetration pricing is all about pricing low to increase sales at the expense of margins. It’s viable for your own website because you have fewer restrictions from the marketplace and more digital real estate to advertise, promote, and explain your strategy.
Overall, it can help increase interest from consumers, fend off competitors who can’t price that low, or improve brand loyalty among shoppers due to the perceived value gained by the low price.
Best Practice #2: Regularly Audit Agreements
The best way to avoid price disparity on marketplaces like Amazon and eBay? Pay attention to the details. Take some time to pull out the agreements you’ve signed with each marketplace and locate the sections related to pricing and price parity.
It can be easy to overlook some requirements, so it’s important to audit your pricing strategy for anything that might get you in trouble with your terms of agreement. Just making staff aware of the requirements in your specific agreement can go a long way in ensuring compliance and preventing account suspensions.
Best Practice #3: Centralize Marketplace Management
Whether you log into multiple accounts or rely solely on individual marketplace interfaces, managing marketplaces in silos makes it incredibly challenging to streamline your pricing strategy. The lack of a centralized view can lead to gaps in data, inconsistencies in pricing and delays in diagnosis.
How will you know when your Amazon price becomes higher than what you have listed at eBay or Google Express? What will happen when your MAP policy is being violated on not just one but five marketplaces? Consolidating multichannel efforts into a single, streamlined platform can prevent small issues from becoming big problems.
Best Practice #4: Reprice Compliantly
Most sellers know to automate repricing. But how many have created a cross-channel repricing strategy? Sellers with the biggest competitive edge are those using multiple repricers, with checks and balances in place to ensure adherence to price parity requirements. Using this approach, each repricer can act independently to come up with the best decision for a marketplace and then have the lowest price applied everywhere.
Best Practice #5: Leverage Deals and Promotions
Most marketplaces have their own versions of deals you can use to get products in front of more buyers. Depending on the platform, you might see opportunities to take part in free shipping promotions, order discounts, BOGO deals, giveaways, discount codes, sales events and more.
Generally speaking, it’s always a good idea to participate in marketplace promotions. For marketplaces that don’t offer these opportunities, you can offer discounted pricing on your own by modifying your sales price from time to time. And when a MAP policy prevents you from coming down on price, be sure to offer free shipping.
Best Practice #6: Use Flexible Pricing
Imagine for a moment that you’ve just made a bold prediction: We will sell at least x units per SKU within the next month. You’re not just stating a goal, but know that, at any given moment, your products will be set at just the right price to meet current buying trends.
By using dynamic pricing, you can have product prices automatically adjusted based on recent sales trends. If sales dip, so does the price. When orders occur with more frequency, the cost of that item goes back up. This best practice is an important one, as it ensures your pricing matches real-time demand.
Best Practice #7: Prioritize MAP Policies
It may be tempting to place MAP policies on the backburner, but successful sellers know how important compliance with these agreements can be. For items that are sold by an array of retailers on numerous marketplaces, product intelligence tools can make it exponentially easier to monitor pricing across channels.
Best Practice #8: Watch for Opportunities to Bundle
Bundling products into single-SKU offerings isn’t just a best practice for competitive pricing. It’s also a great way to differentiate from the competition. For example, there will be plenty of times when a consumer will be considering just one of your items. But if they see your promotion for an even better deal — a discounted three-pack, for example — there’s a good chance you’ll land an even bigger sale. By grouping popular products into competitively-priced packages, you can inspire consumers to stretch their wallets.
Best Practice #9: Monitor Competition Constantly
Today’s marketplaces are designed to empower online shoppers. Searching for a single product can yield a dozen or more results, and if your listing doesn’t rise to the top it’s unlikely to be seen — let alone clicked.
To get pricing right, you’ll need to know your competitors, their pricing and how it changes.
Successful brands and retailers understand that staying ahead of pricing trends requires competitive data analytics that are easy to grasp at a glance. For this reason, visualization dashboards and benchmarking tools are key. Select analytics tools that provide deep insight into how your pricing stacks up to the competition in straightforward, uncomplicated reports — day after day and hour after crucial hour.
Best Practice #10: Run Exclusives and Specials
Another practice that can help you get cut through and sales is running exclusives and specials. Since it’s your own marketplace store, you can decide to offer an early-bird special, a loyal-customer special, or another tactic whenever you want. Perhaps a surprise Saturday sale or a crazy Tuesday offer – as long as it fits into your brand’s DNA then. go for it.
Look at exclusives, set some product bundles or products that are unique to a specific marketplace store. This allows you to price them higher due to the rarity in the market, or use these exclusives as a way to reward loyal customers or launch a new product. You can also give you discount codes via social media or email. It’s your own site, so there are plenty of options to play with prices. Test out different options that match your overall brand and price position.