Amazon Pricing Strategy: A Complete Guide for 2025

Selecting the right pricing strategy on Amazon can determine your product’s success or failure. Let’s break down each major pricing model, how it works, when to use it, and its potential benefits and risks.

1. Cost-Based Pricing

What It Is:
Cost-based pricing is a straightforward approach where you set the price based on the cost of goods sold (COGS), plus a fixed profit margin. For example, if your product costs $10 to source and you want a 40% margin, your final price would be $14.

Why Use It:

• Ensures you’re never selling at a loss.

• Easy to calculate and maintain.

• Suitable for sellers with predictable costs.

Risks:

• Ignores competition, customer demand, or perceived value.

• May price you out of the market if your costs are higher than others.

Best For:
New Amazon sellers or brands managing fixed-cost products.

2. Competitive Pricing

What It Is:
Competitive pricing means setting your product price based on what other sellers (especially top sellers) are charging for similar or identical items.

How It Works:
You monitor your competition and adjust prices regularly to remain competitive—often using tools or Amazon’s own “Automate Pricing” feature.

Why Use It:

• Helps maintain visibility in crowded categories.

• Good strategy for resellers or those without strong brand differentiation.

Risks:

• Can lead to unsustainable price wars.

• Thin margins if you’re constantly undercutting.

Best For:
Retail arbitrage, wholesale sellers, or those competing on brand-name products.

3. Value-Based Pricing

What It Is:
This strategy prices products based on the perceived value to the customer, rather than costs or competition. You’re charging what the product is worth to the buyer.

Why Use It:

• Allows higher pricing when products solve a unique problem or deliver a special experience.

• Focuses on brand strength, product quality, and emotional impact.

Risks:

• Requires a strong brand and marketing to justify the price.

• Can misalign with market if perception is not managed well.

Best For:
Private-label brands, innovative products, or niche items with little direct competition.

4. Dynamic Pricing (Amazon PPC-Compatible)

What It Is:
A constantly adjusting strategy where prices fluctuate in real time based on factors like demand, competition, seasonality, and inventory levels.

Why Use It:

• Keeps you competitive around the clock.

• Maximizes profit during high demand and adjusts during slow periods.

How It’s Done:
Often requires repricing software like:

• RepricerExpress

• Informed.co

• Seller Snap

• Amazon Automate Pricing Tool

Risks:

• Complex to manage manually.

• Over-reliance on automation can hurt margins if not monitored.

Best For:
Large catalogs, high-volume sellers, competitive categories.

5. Psychological Pricing

What It Is:
This strategy taps into customer psychology—e.g., using prices like $19.99 instead of $20 to make the product feel cheaper.

Common Techniques:

• Charm Pricing: Ends in .99 or .97 to make it appear more affordable.

• Anchor Pricing: Showing a higher MSRP next to a discounted price.

• Decoy Pricing: Including a high-priced item to make others seem like a better deal.

Why Use It:

• Proven to improve click-through and conversion rates.

• Influences buying decisions subtly.

Risks:

• Doesn’t work for all product types (e.g., premium products may need round numbers).

• Can seem manipulative if overused.

Best For:
Consumer electronics, fashion, home goods—essentially any competitive category.

6. Penetration Pricing

What It Is:
A short-term strategy where sellers list products at below-average prices to gain traction, reviews, and early sales.

Why Use It:

• Helps new listings rank quickly.

• Boosts review acquisition and buy box wins.

Risks:

• Low or negative margins.

• Difficult to raise prices once buyers are used to low costs.

Best For:
Product launches, entering competitive niches, or expanding into new categories.

7. Premium Pricing

What It Is:
Price products above market average to signal superior quality, exclusivity, or luxury.

Key Considerations:

• High-quality branding and packaging are essential.

• Social proof (reviews, influencer support) adds value.

Why Use It:

• Higher margins.

• Appeals to status-conscious or quality-focused customers.

Risks:

• Requires a strong marketing effort.

• Vulnerable to undercutting by budget competitors.

Best For:
Luxury, boutique, or custom brands with a loyal following.

8. Economy Pricing

What It Is:
Offering products at the lowest possible price, targeting price-sensitive shoppers. Think “no-frills” products that compete purely on cost.

Why Use It:

• Appeals to bargain hunters.

• Works for commodity-type or generic items.

Risks:

• Slim margins.

• Difficult to scale profitably without high volume.

Best For:
High-volume sellers, generics, or essential everyday products.

9. Skimming Pricing

What It Is:
Start with a high price point during the launch phase, then gradually lower it over time as competitors enter or demand drops.

Why Use It:

• Maximizes profit from early adopters.

• Captures consumer interest based on exclusivity.

Risks:

• High initial price may limit early adoption.

• Works only with truly innovative or in-demand products.

Best For:
New gadgets, seasonal products, or limited-edition items.

10. Bundle Pricing

What It Is:
Selling multiple related products together at a discounted total price (compared to buying individually).

Why Use It:

• Increases average order value.

• Moves more inventory at once.

• Helps with cross-selling slow-moving products.

Tips for Success:

• Ensure products complement each other (e.g., yoga mat + resistance bands).

• Use “virtual bundles” via Amazon’s Brand Registry tools if you fulfill via FBA.

Best For:
Brand owners with a multi-SKU catalog, FBA sellers, or gift-oriented products.