Pricing, Seasonal Fluctuations & Understanding Market Trends

pricing-strategy

If you’ve spent any amount of time selling on Amazon you’ve probably realized by now it isn’t a cakewalk. It’s much more like a wild ride, rife with challenges that even the most experienced business people get surprised by.

One unpleasant surprise is being greeted by seasonal fluctuations and the end of your grand opening “honeymoon period.” This usually means you’ll experience an unprecedented drop in sales and rankings. A number of factors contribute to this; competition, price wars, conversion history, market trends and so much more.

But what can you do? Is there a way to stop this?

Truthfully I don’t think there is. However, you can safeguard your business by understanding a few key principles.

Every Product is Seasonal

First, you must understand that almost every product will have its hay-day for awhile, then drop down into a more predictable range. The reason is because every niche, every category and every product is constantly growing in competition. And until your brand becomes a household name, it is your piece of the market share pie that gets dug into.

This should not deter you, however. Understanding this from the outset means you can formulate a schedule for releasing new products, so as to fill out your catalog and regularly profit from that hay-day period. Then, when the dust settles, you should have a number of products all doing predictable numbers at a steady pace.

Market Trends Drive Everything

Whether you sell trendy products or not, trends drive all sales. In fact, trends are so volatile that a simple news report can end sales for one product or boost them for another. These trends can be a good thing, but you also need to understand what they are saying.

As an example, let us look at the lion’s mane pet costume. This simple headpiece is as seasonal as it gets. A friend of a friend started to sell these just before Halloween one year. Sales were decent for the holiday, but weren’t great after that…until the product got picked up by a major news outlet. The news piece drive the product into the trend spotlight, carrying it well beyond Q4. This likely won’t last forever, but it was a great bit of luck for all sellers, including the ones that jumped on the gravy train after the trend got picked up.

Conversely look at what happened to a lot of weight-loss supplements after Dr. Oz’s credibility got called into question. Now, not every trend your category experiences will be as drastic as these two scenarios. Likely you’ll simply see very slight shifts. Suddenly you’ll notice all the listings on page one for your main keyword feature an electrical option, where last year they were all manual. This may mean sales for you could continue to increase, or decrease depending on whether your product fits the trend. Just knowing these things shift, and paying attention to your market will help you make better decisions.

Price is a Major Factor

Well duh, right? Everybody knows price is huge. But perhaps you don’t realize the impact it has on EVERYTHING; buyer sentiment, brand image, conversion, etc.

The problem is, most teachings on the subject are very black and white. Many say charge a premium price to make your brand appear to be of higher quality. The problem there is, when your brand is entirely unknown you cannot expect people to pay more for your products.

On the flip side many say price your products really low to be an extremely competitive bargain. While this is great for conversion rates, it also has its share of downsides. Mainly, it sets an expectation of that value for your product. This can affect your brand image in a way you may not want.

Testing price is (or should be) a regular part of your optimization efforts. You’ll find that the market not only reacts differently to your products at different prices, but will also react differently to price changes.

To give a personal example, I started selling my first product at a fairly premium price. It was mid-ranged for the niche, but overall somewhat expensive. It did massively well for about six months. Then sales dropped dramatically as lower priced competitors swarmed in. I drastically decreased my price to stay competitive. After sacrificing my margins as much as I could, I still only landed at mediocre sales and ranking.

This lasted for about a year, and as I introduced new products in the same niche, the space continued to become exceedingly competitive. For a long time I couldn’t seem to break this mediocre ceiling I appeared to be under. I upgraded everything; images, copy, search terms, etc. Nothing seemed to change anything.

Then I decided to take a different approach. I started raising my prices again. A couple dollars every few days. And lo, sales slowly increased. Now, I fully expect to hit another ceiling, but the great part about increasing your prices is your margins also increase. Your deposits become larger and you end up with more capital to reinvest.

In a constantly changing marketplace, your price could shake things up just enough to spur on new sales and more profit. So remember to ABT…Always Be Testing!