Raising Prices: Prioritizing Profitability on Amazon

A Shift in Focus

Over the past 8 years, most businesses and brands selling on Amazon were focused primarily on revenue growth – especially during the Covid lockdown period.

With cheap money easily available, and the Amazon marketplace growing at an incredible rate, profitability took a back seat to aggressive revenue growth.

This has changed dramatically the past several months.

Brands are now coming to us with a much different goal: profitability. One of the best levers we have for profitability is raising our product’s prices.

We gradually raised prices for this brand by 30%, and we saw an increase in both profitability and total sales.

“Isn’t Amazon where customers go for the lowest prices?”

Brands often fear that raising prices will make them noncompetitive, leading to a drop in revenue and market share. This is often due to Amazon’s now outdated reputation as the place customers can find products at the lowest prices.

However, we have seen that, if done correctly, we can raise prices gradually without a decrease in sales. In fact, in many cases, an increase in price has lead to an increase in sales.

You may be thinking, "This doesn't make any sense". Why would customers be equally or more willing to buy the same product if it is priced 30% higher?

Amazon shoppers are looking for brands and products they can trust

Amazon was once the place you went to find the best deals, but in recent years it has evolved in many ways:

1. Higher price = higher perceived value

Customers are now focusing much more on quality products. Customers are willing to pay more money if they think the product will reliably meet their needs. When customers have no other information to work with, price becomes the primary tool for judging a product’s quality.

2. Customers are loyal to brands they discover on Amazon

If a customer buys a product on Amazon and it meets their expectations, they are likely to buy that product again. If the customer can identify and remember the brand they bought it from, even better. Amazon makes this easier by saving all orders in an easy-to-find page on their site.

The ideal long-term goal is to direct those loyal customers to your own website for future repeat purchases.

3. Stand out from the pack

With so many competing products in any given Amazon category, it can be easy to blend in with the crowd of similar listings.

Raising prices, while simultaneously improving the quality, design, and conversion rate of listing pages and brand stores to match, will differentiate you from the pack and help you stand out during a customer’s search.

4. More room for promotions to drive sales and awareness

Another way to stand out in search and in paid ads is to offer promotions to customers. Discounts and Deals are available and have a significant positive impact on how many people see and buy your products on Amazon.

Promotions have green and red badges that force a customer to notice them. By raising our base price, it allows more room to participate in advertising, promotions, deals, and Prime exclusive events like Prime Day and Black Friday.

Do not miss out on these enormous opportunities for brand awareness just because your profit margins are too thin.

Where to Start?

If you do decide it’s time to raise prices, it’s important to do so carefully. We help our clients examine their business and competitors objectively, completing a full rationalization analysis on each SKU. This helps us decide if each SKU is viable to be sold profitably on Amazon, and what prices we should set each SKU.

It is also very imprortant to track profitability and other metrics in real time to make adjustments as quickly as possible. We do this using our profitability dashboard (pictured below), which is only available to Granitsa clients.

Granitsa’s Profitability Dashboard helps us make decisions and track profitability goals

Using the these tools, we have been able to raise our clients prices by an average of 20-30% over the past 6-12 months with great success. This has allowed our clients to use that increased profit to launch new products and to optimize other parts of their business.

Amazon can be a huge boost to your business instead of a constant headache.

Reach out to us at info@granitsa.com for more info
or schedule a free consultation here: granitsa.com/schedule