The Pricing Blog by Omnia Retail
03.06.2020
What is a Value-Based Pricing Strategy?
Out of the “basic” pricing strategies, value-based pricing is one of the harder to pull together. It requires deep research into your target audience, the broader market as a whole, and competitor product offerings. The...
Out of the “basic” pricing strategies, value-based pricing is one of the harder to pull together. It requires deep research into your target audience, the broader market as a whole, and competitor product offerings. The research is well worth the effort though. When you execute a value-based pricing strategy, you not only have a flexible strategy that follows market demand, you also learn significantly more about your target audience and competitors. Like this post? Today’s is part of a series on pricing strategies. We already have content about the high-runner strategy and charm pricing, if you want to read more, but keep your eyes open for more content like this in the coming months. What is Value-Based Pricing? Value-based pricing is also known as value-added pricing or perceived value pricing. Utpal Dholakia, a marketing professor at Rice University, defines value-based pricing as, “the method of setting a price by which a company calculates and tries to earn the differentiated worth of its product for a particular customer segment when compared to its competitor.” Value-based pricing is somewhat of an umbrella term for any pricing strategy that considers the value of a product in the eyes of the consumer and market. By using a value-based pricing approach, companies can build a framework that leverages their brand, product features, audience demographics, and market position. Set up Value-Based Pricing for your Business Request a free demo Cost-based pricing vs. Value-Based pricing Value-driven pricing and cost-driven pricing are two very different strategies. Cost-based pricing is the most straightforward pricing method. It is easy to implement. All you need to do is consider the costs per product, then add a desired margin on top of that. With cost-based pricing, there’s no consideration for how your product compares to others on the market or how your target audience perceives the product. If your costs are too high and the resulting market price doesn’t match the expectations of consumers, then you will be outpriced. Value-based pricing is more nuanced. This strategy uses the economic principles of demand and considers internal information as well as external factors. With extensive research into the target audience, greater market, and product specifications, you’ll create a pricing strategy that’s flexible, supports your brand image, and considers all market factors. Advantages and disadvantages of Value-Based Pricing Value-based pricing strategies are not easy to set up, but they are the most advised pricing strategy for a reason. Advantages of value-based pricing Considers internal and external variables: Value-based pricing looks at several different factors to make sure you consider all relevant factors when creating a price. In many ways, it is more strategic than cost-based pricing because it lets you differentiate yourself from the market. Better understanding of the playing field: Value-based pricing requires a lot of research. This research gives you a better understanding of your audience, competitors, and market. More insights: The research you do on the competition and needs of your target audience can spark ideas for product development. Higher profits: In a value-based pricing method, you “maximize” your price by asking the highest possible price you can based on perceived value. This maximizes profits; you, as a producer, capture as much “consumer surplus” — the difference between value perceived by a consumer and the price of a good — as possible. Disadvantages of value-based pricing Complex: A value-based pricing can be difficult to implement because it is a complex process that involves lots of research and analysis. Time consuming: Because there is so much research and analysis involved, creating a value-based pricing strategy takes time to set up. How to set up a value-based pricing strategy Now that you know what a value-based pricing strategy is, it’s time to start creating one. Here are all the steps you need to follow to begin building your strategy. 1. Research your target audience How is the value of a product determined? Through meticulous research. Unfortunately, there is no simple price-value equation that you can apply across the board. Instead, you have to rely on research, which is the foundation of every value-based pricing formula. You can start in a few different places, but in a competitive market, perceived value is determined by consumers. That’s why we recommend beginning with researching your target audience for a clear understanding of how the product affects their lives. This research will be a combination of demographic information on your audience combined with qualitative information you can glean from interviews. Sure, you want to know what the income level is of your target audience, but it’s more important to know the problem you’re solving with a product, and what they are willing to pay to solve that problem. You may already have a lot of insights in your organization from product development research, so reach out to the product team to ask for insights. But don’t be afraid to reach out to your existing customers to ask more questions, especially if you are in charge of marketing these products. You should create strong connections with your existing customer base to understand how they view your product, what features they are missing, and get other feedback. 2. Research your competitors Many companies believe that value-based pricing is all about the value of their product. But the reality is that your product’s value is only relative to the market, and you need competitor pricing information to build a value-based pricing strategy. If your product is €900 more expensive than your next closest competitor, you’d better have some justification. If there isn’t enough value created in the product (and its marketing), consumers will opt for the cheaper alternative. That’s why competitive research is the second step in value-based pricing. At this point, your goal is to look at the next best alternatives on the market and understand what makes your product different. At this point you’ll want to look at actual features of the product. Ask yourself if your product... Lasts longer than the next best alternative Looks and feels like it’s made out of quality materials Offers more features (like a longer battery life, for example) Costs more to make than the competitor’s Is priced higher than the market average Again, you may have a lot of these insights from your R&D team, so go ahead and review the competitor products. You can also use a price comparison software to help you get more market insights. Price elasticity and value based pricing strategies Price elasticity data is extremely useful in the research phase of building a value-based pricing strategy. “Omnia can calculate the price elasticity of a product and uncover the consumers’ willingness to pay for a product,” says Jelmer Reijerink, an Omnia Consultant. “If you can access this data, you’ll be able to uncover even more insights about how the market responds to your product.” 3. Determine the value of your differentiation You’ve done all the research. Now it’s time to put a quantitative value on the different features you uncovered in step two. To do this, ask yourself how much the key features on your product are worth. How much is extra screen space worth? What about a longer battery life? What about better quality materials? Assign an amount that reflects how much that feature is worth. You don’t need to assign value for every single product feature; you only need to calculate the value of the features that make your product different. This is a brilliantly simple way to avoid doing a lot of unnecessary work. Related: How to define your commercial objective 4. Craft marketing and pricing campaigns that meet your target market’s needs After understanding the needs of your audience, your competitor’s alternative products, and where your product stands, you can create a value-based pricing strategy that is optimized for your product. What is a value-based pricing strategy in marketing? Start with marketing. The first thing marketers need to do when building a value-based pricing strategy is to decide whether to add value or focus on features. This is where you need to get strategic. There are two basic value-based pricing strategies. Good value pricing strategy A good value pricing strategy focuses on features, not value. The goal is to make consumers believe they are getting a good product at a fair price. When creating marketing campaigns for these types of products, marketers don’t need to focus on building a lot of additional value. Instead, create a campaign that very clearly solves your consumer’s problem and how your product solves it. Highlight how the features of your product solve these problems. Good value pricing is great for more “basic” products that don’t have a lot of extra fluff. These products also tend to be less expensive and may be susceptible to the ropo effect. Value added pricing strategies Value-added pricing and marketing strategies, on the other hand, focus on building the perceived value of a product. This is often done to justify a higher price. Unlike a good value pricing strategy, a value added strategy focuses on what makes a product different and unique. You definitely want to look at features, but the focus of your campaign should be more on the benefits. So, if you’re a marketer creating a campaign for a luxury or high-priced product, it’s time to dust off your textbooks and revisit Maslow’s Hierarchy of Needs. Add value at the top of the pyramid: focus on how your product makes someone feel. Will the product boost their social status? Will it help the consumer reach their full potential? Build value around these ideas. Example of a value added pricing and marketing strategy One of the most famous examples of a value added strategy is De Beer’s Diamonds’ famous tagline “A diamond is forever”. The line, written in 1947 by Frances Gerety, forever changed the diamond business and helped justify the exorbitant cost of engagement rings. The campaign reshaped the way we look at diamond rings — De Beers framed the product as something that was an essential demonstration of love. To this day, diamond engagement and wedding rings are, for many people, an essential part of a marriage. It’s an accomplishment to purchase or receive a ring, and it’s a demonstration of social belonging and love. What about brand value? To consumers, value is based on several key factors, one of which is brand. This is especially true for luxury brands. Whether it’s a Louis Vuitton purse or Nike Air Jordans, brand value goes a long way in justifying a high price. Retailers might also want to consider their perceived brand value when building a value-based pricing strategy. If you offer a luxury or premium service as a retailer, you may be able to raise your prices. But factoring brand value into your value-based pricing strategy is tricky. It’s difficult to calculate brand value in a way that lets you quantitatively add value to every product in your assortment. Your “brand” is more of feeling about your overall company, not the individual products you offer. That said, brand value is an important part of your commercial strategy, and you want your prices to reflect your brand promises. As such, a value-added strategy is a great way to build brand value across your assortment and justify higher prices. Conclusion The key to successful pricing is to match the product with the consumer's perception of value. And while cost-based pricing is a simple framework for a pricing strategy, it doesn’t consider the consumer at all. That’s why value-based pricing is so powerful — it factors in every part of the pricing and marketing mix. Once established, a great value-based pricing strategy strengthens your brand promises, stays agile in the market, and gives you more insights into what customers want from your product.
What is a Value-Based Pricing Strategy?10.03.2020
What Happened on Day One of Amazon NL?
It finally happened — Amazon.nl made its debut on March 10, 2020. The much-anticipated moment certainly brings a new era to Dutch e-commerce. But unlike many other markets Amazon has entered, the Netherlands already has...
It finally happened — Amazon.nl made its debut on March 10, 2020. The much-anticipated moment certainly brings a new era to Dutch e-commerce. But unlike many other markets Amazon has entered, the Netherlands already has a highly-developed e-commerce sector. Amazon doesn’t have the first move advantage in our country, and this makes a huge difference on its impact on the market. We were curious about how Amazon’s debut would influence the market, so we did what we do best: crunched some numbers. Amazon’s early influence on the Dutch market: what happened on Day One? Day One is an Amazon philosophy that founder Jeff Bezos pushes relentlessly. The idea is that in order to succeed, Amazon can never stagnate. He stresses that everyone in the company should maintain a “Day One” mentality — a mindset that’s customer obsessed, agile, inventive, and innovative. So what happened on Day One of Amazon's launch in the Netherlands? On Amazon’s first day in the Netherlands, we analyzed the top 10,000 products in the electronics category (according to popularity). We evaluated how many were present in Amazon’s product offering and the top four Dutch retailers in this category. The retailers we analyzed (aside from Amazon) were: Bol.com Coolblue Mediamarkt Wehkamp We were also curious about how Amazon.nl differed from Amazon.de, which had previously been available to Dutch consumers. To evaluate this, we took a snapshot of the Dutch market on March 9th, 2020 (the day before Amazon.nl’s launch). We refer to this throughout this piece as Day Zero, and used it as a baseline for what happened in the Dutch market the day Amazon launched Amazon.nl (which we refer to as “Day One”). In the end, we looked at all this data through three major lenses that echo Amazon’s proposition: Assortment size (measured by the number of EANs offered) Price (measured by price comparison) Strategy (more specifically Amazon Prime) Number of EANs offered: Day Zero vs. Day One On Day Zero, Amazon.de had 5,885 of the top 10,000 products (in the electronics category) in its assortment (59% coverage). By comparison, Bol.com offered 7,003 (70%). Bol was followed by Coolblue (42% coverage), MediaMarkt (26%), and Wehkamp (20%). In total, the five webshops combined (Amazon.de, Bol.com, Coolblue, Mediamarkt, and Wehkamp) had 8,931 of the top 10,000 EANs. Day Zero: Amazon.de compared to top 4 Dutch retailers Webshop Number of top 10,000 products offered Percentage of top 10,000 (rounded) Amazon.de 5,885 59% Bol.com 7,003 70% Coolblue.nl 4,223 42% Mediamarkt.nl 2,599 26% Wehkamp.nl 1,994 20% This data tells a clear story. While Amazon.de had great coverage of products on Day Zero, the Dutch market was able to fight this giant marketplace. In fact, Bol had significantly more product coverage than Amazon.de. But how does that compare to Day One of Amazon.nl? On Day One, the five webshops combined had 8,805 of the top 10,000 EANs. Amazon.nl only offered 4,560 of the top 10,000 products (46% coverage), a full 1,000 products fewer than Amazon.de offered the day before. Day One: Amazon.nl compared to top 4 Dutch retailers Webshop Number of top 10,000 products offered Percentage of top 10,000 (rounded) Amazon.de 4,560 46% Bol.com 7,143 71% Coolblue.nl 4,305 43% Mediamarkt.nl 2,628 26% Wehkamp.nl 2,019 20% This number is not surprising, and Amazon NL even stated that it takes time to build an assortment. This number is likely to rise as more Dutch companies begin to sell on the platform. It is important to note that Wehkamp’s performance in this analysis appears lower than the company’s actual performance. The reality is that Wehkamp is a fashion-focused company. Wehkamp does have some electronics items, but unlike the other companies in this analysis, electronics are not a major part of its commercial strategy. Price comparison: Day Zero vs. Day One According to Simon Kucher & Partners, 44% of Dutch consumers will only buy from Amazon if the price is 10% lower (or more) than their favorite local hero. If Amazon can make market prices more attractive (which it most likely can) consumers will understandably use the platform. We wanted to know if Amazon could reach that 10% mark, and wondered how Amazon.nl’s prices compared to Amazon.de’s. On Day Zero, and on the products that Amazon.de offered that Dutch retailers also offered, Amazon.de had a lower price for a whopping 73% of the overlapping EANs (3,645 of the shared 4,942 EANs). Day Zero: Amazon.de vs. Dutch retailers Amazon.DE vs... Number of EANs offered by both Number of EANs where Amazon offers a lower price Number of EANs where NL retailer offers a lower price Number of EANs where NL retailer and Amazon.de offer same price Bol.com 4,307 3,228 998 81 Coolblue.nl 2,980 2,459 480 41 Mediamarkt.nl 1,650 1,239 373 38 Wehkamp.nl 1,214 913 286 15 Top 4 Dutch retailers combined 4,943 3,645 1,190 108 To contrast, at least one of the Dutch retailers offered a lower price on 24% of these shared EANs (1,190 of the total shared 4,942 EANs). In some cases, Amazon and another company may have offered the same price on a product, and that price was the lowest on the market. In this situation, this EAN was separated into its own category: “Number of EANs where NL retailer and Amazon.de offer the same price”. This only occurred on 2% of EANs that the companies shared (108 EANs in total), which is likely the result of a localized pricing strategy. After looking at the Day Zero data, we compared this to what happened on Day One with the launch of Amazon.nl. Day One: Amazon.nl vs. Dutch retailers Amazon.nl vs... Number of EANs offered by both Number of EANs where Amazon offers a lower price Number of EANs where NL retailer offers a lower price Number of EANs where NL retailer and Amazon.de offer same price Bol.com 3,447 2,257 899 291 Coolblue.nl 2,203 1,684 361 158 Mediamarkt.nl 1,146 770 255 121 Wehkamp.nl 794 532 168 94 Top 4 Dutch retailers combined 3,852 2,416 1,061 375 Again, the overall numbers were lower, and so were the percentages. Of the 3,852 shared EANs across the entire market, Amazon offered a lower price on 2,416 (64%) of these products. Dutch retailers offered a lower price on 27% of the shared EANs, a slightly higher number than compared to the German counterpart of Amazon. It is worth noting though that, at least for Bol.com, the price difference wasn’t that large. Our analysis showed that Amazon’s products were only 3% lower on average than Bol’s prices. The close proximity of price is only one piece of evidence that shows Amazon is clearly taking a localized pricing strategy. More evidence? Look at the number of products that were the same price on Amazon.nl and across the top 4 Dutch retailers. It’s nearly more than double the number of products that Amazon.de and Dutch retailers shared on Day Zero. Even more evidence? Take a look at the screenshot below. You can see there is a large price difference for the same product on Amazon.de and Amazon.nl. Overall, Amazon is pricing itself much more aggressively in the German market, and prices in Germany are roughly 7% lower than the Amazon.nl store. Lowest price on the market After establishing how prices compared across retailers, we wanted to know who offered the lowest price on the market for products. Day Zero: Amazon has lowest price on 42% of products On Day Zero, of the 10,000 popular products we analyzed, either Amazon or one of the top four Dutch retailers carried 8,931 of these products. For 7,809 products, at least two retailers offered the same EANs in their stores, meaning there was inherent competition on price. For 1,122 products though, only one retailer offered that EAN in their store, making that store the lowest price by default. We looked at the 7,809 products to see who had the lowest price point: Amazon.de or a Dutch retailer. Of those 7,802 products, Amazon.de had the lowest price on 42%. This far outpaces the next most price-competitive retailer (Bol.com), which had the lowest price on 22% of the products. However, what’s more interesting is the percentage of each store’s offers that were the lowest. Looking back, on Day Zero Amazon 5,885 EANs in its electronics assortment. Of those 5,885, it was the lowest price for 3,753. This means that Amazon was the lowest price point for 64% of the entire section of its assortment that we analyzed. Day Zero: who had the lowest price on the market? Retailer Number of EANs in top 10,000 Number of EANs that were lowest on the market Percent of EANs offered that were also the lowest price point Amazon.de 5,885 3,753 64% Bol.com 7,003 1,957 28% Coolblue.nl 4,223 757 18% MediaMarkt.nl 2,599 778 30% Wehkamp.nl 1,994 557 28% For Day One, 6,295 products had inherent price competition. Again though, it’s more interesting to compare what percentage of each shop’s assortment was actually the lowest price on the market. Day One: who had the lowest price on the market? Retailer Number of EANs in top 10,000 Number of EANs that were lowest on the market Percent of EANs offered that were also the lowest price point Amazon.nl 4,560 2,791 61% Bol.com 7,143 2,801 39% Coolblue.nl 4,305 946 22% MediaMarkt.nl 2,628 1,024 39% Wehkamp.nl 2,019 678 34% In this second data set, both Bol and Mediamarkt’s numbers look much higher, but this is influenced by the elimination of Amazon.de data on the Day One analysis. Amazon’s Day One strategy: Amazon Prime There were several indications of Amazon’s strategy on Day One. The most notable is Amazon Prime. Amazon Prime is, in many ways, the key to Amazon’s strategic success. The project was so important that Jeff Bezos pulled team members from other high-value projects during the busiest time of the year back in the Winter of 2004. In fact, it was so important that Bezos announced it at a Saturday morning meeting in his boat house with the starting team — it couldn’t even wait until Monday. Prime was a gamble, and many in Amazon didn’t see how the economics of Prime could work, but Bezos pushed forward with the initiative. And it paid off. According to a recent survey by Consumer Intelligence Research Partners (CIRP), more than 100 million people in the United States have an Amazon Prime account, and Prime members spend double the amount of non-Prime members — an average of $1,400 per year. Prime is Amazon’s most lethal weapon, and the company seems to be luring Dutch customers in with the service from the start. Dutch customers can try Prime for free for 30 days. After that it only costs €2.99 per month. In most markets, Amazon costs somewhere in the range of €8 per month. High-runners Amazon also seemed to pick fast-movers for deep promotions. This is called the high-runner strategy, and is in line with what Amazon has done in the past. We saw this on several products today, including some Sony headphones, which are the number one selling electronics product on the Dutch market. The truth is that we expected this. What was far more fascinating today was the market reaction to these changes. Bol.com, for example, also dropped its price on those same headphones. How Dutch retailers can react While consumers may stay loyal, Amazon will change the Dutch market significantly. It’s our expectation that local players (like Bol, Coolblue, and Mediamarkt) will interact with this new player. Bol.com’s fast response on the Sony Headphones will become the new norm. Dynamic pricing To start, you can expect the market to become more dynamic and competitive. Pricing is incredibly important to Amazon. The company uses a high-runner strategy, so it adjusts prices to appear more attractive to consumers. With this strategy, Amazon prices aggressively on highly-elastic items to draw traffic to the site. Once on the site, Amazon will sell these elastic products at a discount, but will often bundle them with other products that are less-elastic and sell at the full price. This strategy is advantageous in that Amazon makes profit on the non-elastic items. But it also helps solidify Amazon’s price perception as the e-commerce outlet with the lowest prices on the market. The high runner strategy comes with a high frequency of price changes. To keep up, retailers and brands need to invest in their ability to update prices at a similar rate. Bol has already proven itself capable of responding to Amazon’s price changes and strategy by dropping prices on high-runner items. If you can’t beat them, join them If you don’t want to compete against Amazon, another option is to use the marketplace to your advantage. Amazon is a great channel that draws tons of consumers, so it might be an interesting place to sell your products. To learn more about selling on Amazon, check out the Complete Guide to Selling on Amazon in 2020. Key lessons for selling on Amazon If you want to sell successfully on Amazon, you need to think about how you can make the customer’s life better while also serving your business goals. As some parting advice, here are some steps to help you get into that mindset. 1. Define your commercial objective: Your commercial objective is an explanation of why your company exists and what your overarching goals are for the company. Your commercial objective extends beyond your products, and touches every single area of your organization, from your hiring all the way to your pricing. It’s similar to a company’s mission statement and is something you should consider carefully to set yourself apart from the competition. To define your commercial objective you need to analyze the market, think about your goals, and design a plan to achieve those goals across your entire organization. 2. Create a harmonious strategy How can you achieve your goals while also giving customers the best experience possible? Discovering the right balance for your company is the recipe for Amazon success. The commercial objective only works well if you can make it actionable. After deciding what you want to do, you need to consider how you’re going to do it. 3. Think from the consumer’s perspective Amazon is, first and foremost, a company that’s obsessed with the consumer. You should do everything in your power to give consumers an above-average experience. 4. Use tools to keep your products aligned with your strategy Tools can make or break your experience on Amazon, especially if you want to sell a high volume of items. Consider competitor intelligence tools to track product prices and repricing tools to keep your prices up to date. Tools can also be consultancy; if you’re an individual seller it might not make sense to hire an Amazon consultant, but if you’re a larger company that wants to learn more, it might be worth investing in consulting help. Conclusion Amazon’s launch in the Netherlands was not as grand as we expected, but that may be a strategic move. Day One demonstrated that Amazon.nl does have the power to influence the market, but also that Dutch retailers can fight back with the right technology. We’ll keep monitoring what happens with Amazon over the next few weeks and provide regular updates on how the Dutch e-commerce market changes, and provide more commentary as we go Curious to read more Amazon related content? Check out some of our other articles below The Strategies Behind Amazon's Success: Learn how Amazon became 'the place' to buy products online. The Complete Guide To Selling on Amazon: In this guide we answer some of the top questions we hear about Amazon and give helpful hints on how to succeed on the platform. How Does Amazon's Search Algorithm Work: Find out how Amazon connects their shoppers with relevant products as quickly as possible.
What Happened on Day One of Amazon NL?09.03.2020
How Does Amazon's Search Algorithm Work?
Amazon’s search algorithm is a sophisticated system that has one goal: connect shoppers with relevant products as quickly as possible. If you can engineer your way to the top through organic search, it’s a free way to...
Amazon’s search algorithm is a sophisticated system that has one goal: connect shoppers with relevant products as quickly as possible. If you can engineer your way to the top through organic search, it’s a free way to improve sales and support brand visibility. And the good news is that this is possible through Search Engine Optimization (SEO). With some work and critical thinking, you can get your listings to appear favorably in Amazon’s search results. This article details everything you need to know about Amazon’s search algorithm: how it works, what’s important to consider, and how to boost your overall visibility. To learn even more about Amazon, check out our Complete Guide to Selling on Amazon in 2020. How does Amazon's search algorithm work? At its core, Amazon’s ranking algorithm is similar to Google’s search algorithm. It analyzes search queries for keywords, then tries to match customer desires with relevant products. Every day, Amazon tries to find relevant, informative, and trustworthy content to deliver to its customers. Amazon’s relationship with consumers is different than Google’s though, and as a self-contained platform it has access to a huge amount of data to use for search engine results. Increase revenues with Amazon Repricer Software Read more Amazon A9 ranking algorithm Designed by A9, a subsidiary company of Amazon, Amazon’s search algorithm’s sole purpose is to connect shoppers with the product they’re looking for in as little time as possible. It’s built around the same philosophy as Amazon itself: deliver the best customer experience possible. Since Amazon’s goal is first and foremost to deliver a spectacular customer experience, it analyzes several different pieces of information to determine which products appear at the top of search results. The information the algorithm considers when determining product ranking include: Keywords: does your listing have the search terms consumers look for? Sales conversions: do your products sell well? Customer reviews: are customers happy with your products and service? Performance history: do you have a record of sustainable sales? Delivery time: do customers receive their products quickly? Price: are your products priced competitively? Amazon’s ranking algorithm evaluates a broad amount of criteria to determine who appears on the first page of a search, which is a lucrative place to be. Your products will be seen by more people, and you’ll be more likely to win the Buy Box. How do I find my Amazon ranking? To find your sales rank, search for the product on Amazon.com, locate your listing, scroll down to the “Product Details” section, and find the information for “Amazon Best Seller’s Rank.” This number is the ranking of the product in the category in which it is listed. How do you increase visibility on Amazon? There are three fundamental parts to your overall strategy that will help increase your visibility on Amazon. 1. Optimize your listings for SEO Optimizing your listing for keywords is the easiest way to get started increasing your visibility across the marketplace. One of the main things Amazon considers when deciding which products to display for a search result is keywords. This is for the obvious reason that consumers will type certain keywords into the search bar and want to be connected with relevant products immediately. You should learn what those keywords are for your products so you can start getting your listings in front of the right consumers. There are two ways to do keyword research. The first way to do keyword research is completely free: it’s to think logically about what keywords your target market might use to find a product like yours. If you’re selling a camera, for example, a logical place might be to start with “camera” or your brand’s name. The second way to do keyword research is more scientific. It involves using tools that tell you exactly what consumers search for in Amazon. These tools, like KeywordTool.io, MerchantWords, Viral Launch, and others can give you detailed information like search volume, frequent words, and related products. Some keyword tools are free. Some keyword tools have costs associated with them. You’ll be able to find one at any price point. Once you’ve determined which keywords you want to use, integrate them into your product title and listing in a way that’s organic and informative. Don’t be spammy though, because it quickly makes consumers suspicious of products. Keep your writing natural, and user-focused. Always follow best practices for SEO writing. Take some time to dive into what your target market searches for on the platform, what your competitors do to capture sales, and where there are opportunities for your product to shine. 2. Build better pages for increased sales conversions Optimization doesn’t end with keywords. After driving people to your listing through keyword research, it’s time to convince them to buy from you. You can do this by creating better product pages that clearly explain the features and benefits of your product. One of the variables that the A9 algorithm evaluates when deciding who to list in the top results for a search query is sales conversions. It does this for two reasons. First, the listings with best sales conversions are the listings that customers seem to deem the best solution to whatever it is they search for. Second, listings with high sales conversions also make Amazon the most money, whether that’s through fees or advertising sales. This gives Amazon even more incentive to push these articles to the top to drive even more sales. How can I increase my online sales on Amazon? There are several ways to increase your sales on Amazon. One of the easiest is to make sure your product listings provide enough information for consumers to make informed buying choices. To do this, evaluate your product description. Does it have keywords tactfully incorporated? Is it interesting to read and compelling? Does it answer questions consumers may have about your products? Make sure that all these components are included in the product description, and add bullet points, if possible. Additionally, look at the photos in your listing. Are they bright, clear, and inviting? The best photos on Amazon show all the details of a product and how it should be used. You can also include video in your listing to showcase your product even more. When you create a listing on Amazon, you can add a maximum of eight product photos to the page. You can add more engaging content though by paying for Amazon A+ Content, a service that lets you add more images, video and other multimedia content to your page. 3. Get great reviews Reviews are another logical way to improve your visibility across the platform (and increase your online sales on Amazon). If you have a high number of reviews, it’s a signal to Amazon that people enjoy your product and find it useful. If it’s useful for customers, Amazon will favor your product over others. Reviews help with more than just visibility though. When you get honest reviews, you can learn what customers like about your product or what they don’t like about the product, all feedback you can incorporate into the next iteration of your product. Are Amazon reviews important? Reviews are important for ranking well in Amazon’s search algorithm. In many cases, they’re more important than the actual brand of a product, as Fred Dimyan, CEO of Potoo Solutions (an e-commerce consultancy), explained in an interview with Wired . In the interview he points out the rise of direct-to-consumer or direct-to-Amazon brands like Cali White toothpaste that crush industry giants like Crest and Colgate. But Amazon’s rating system is not as straightforward as it appears. The search algorithm doesn’t just take a simple average of the available ratings. Instead, Amazon uses advanced machine learning to look for relevancy of ratings. It looks at the average star rating, of course, but also considers (among other criteria): How recently reviews were posted How frequently people post reviews Whether the reviews are from “verified” purchasers The algorithm calculates a star rating based on all this information and displays it on your listing. Surprisingly though, reviews are not as important as you may think. Skubana analyzed the top 3,000 organically-ranked Amazon pages and found that the number of reviews varied dramatically among top-performers. The company found that quality of reviews was significantly more important than the quantity of reviews, and that all the top items had overwhelmingly positive reviews regardless of the absolute number of reviews. The lesson: don’t focus your energy on getting a huge number of reviews. Focus instead on getting the best reviews you possibly can by providing a great product experience. Authenticity Amazon’s A9 algorithm tries to verify the authenticity of reviews. It’s easy enough for sellers to hire a clickfarm or freelancers to go and leave false reviews on products to boost visibility. Amazon recognizes this, and tries to prevent it with sophisticated detection methods. To combat this, Amazon launched the Amazon Vine program where Sellers can give products away for free in exchange for unbiased reviews from verified users. To enroll in this program, you will need to contact Amazon directly. Amazon SEO is only part of your marketing mix SEO for Amazon is an incredibly powerful tool in your marketing mix, but if you rely exclusively on SEO, you might be disappointed with your results. The sad reality is that keywords can only take you so far. The importance of advertisements has skyrocketed in the last three years. Even big brands have increased their Amazon ad spend to stay at the top of search results. Check out our Introduction to Amazon Pricing article for more information on this. This doesn’t mean that SEO isn’t a worthy investment. It just means that it’s only a part of marketing on amazon.
How Does Amazon's Search Algorithm Work?13.06.2019
3 Things Brands Need for a Successful D2C Strategy
A new trend in retail is the rise of the number of brands entering the direct-to-consumer (D2C) space. Instead of selling their products to retailers, who then turn around and sell their products to consumers, some...
A new trend in retail is the rise of the number of brands entering the direct-to-consumer (D2C) space. Instead of selling their products to retailers, who then turn around and sell their products to consumers, some brands are now skipping the retailer and going straight to shoppers. And in a new marketplace where it’s easy to connect with consumers via e-commerce and social media, it’s easier than ever to do. The Internet and e-commerce have shifted how we shop, and brands need to respond accordingly to keep up with market demands. No matter the reason why more brands are entering this space, one thing is certain: this leap directly to consumers means brands are now in uncharted territory. The channel also creates some conflicts between brands and retailers, who might see your new D2C strategy as a threat to their bottom line, and a poorly-planned strategy can have disastrous consequences on your brand perception. So what do brands need for a successful transition into the direct-to-consumer world? Here are the 3 things you need before you get started. 1. A crystal-clear reason Before diving directly into the D2C world, make sure you have a solid understanding of why you want to enter this competitive marketplace. For some brands, it’s a matter of data. In the current marketplace, retailers tend to hold their consumer data close to their chests as their main competitive advantage. If you open up a D2C channel though, you can gather consumer data to help you improve your relationship with consumers, get product insights, and spur product innovation. Another reason many brands are making this move is to protect their brand name and offer a better brand experience. In a marketplace where product quality is evening out, brand loyalty and perception might be the key to many consumers’ hearts. Since retailers, not brands, dictate shopper experience in-store and online, brands can understandably worry about their image and price perception. The move directly to consumers, then allows brands to exert a certain amount of control over the market that they previously couldn’t attain. Finally, a new D2C channel can simply be an avenue to more sales. If consumers have more chances and ways to buy, it might boost your bottom line. No matter the reason, if you’re a brand and you want to move into the direct to consumer space you should thoroughly understand why you want to make the move. This will help you create better strategies within the market so you can achieve your goals and align your commercial strategy. Additionally, you might find that a retailer might be better suited to help you achieve your goals. If you want to ensure a better brand experience, for example, a retail partnership could help both parties grow. 2. A multi-channel brand strategy After clarifying why you want to go direct-to-consumer, it’s time to set up a multi-channel brand strategy to establish how you’re going to execute your plan. A strategy is all about a certain choices that you make in order to drive profitable growth. There are multiple moving parts to a strategy, but at its core is a goal of what you’re going to do, and a plan for how to achieve that goal. You should think about: Which channels do we want to cover, and how will we win those markets? What are my goals and aspirations for each of my channels? Is one channel better suited to achieve a certain goal than another? How do we want consumers to perceive our product in each channel? What do we need as an organization in order to make those wins? These are just a few of the questions you’ll need to consider. And without help, the multi-channel brand strategy can quickly get overwhelming. At Omnia, we recommend you use a consultant to help you sort through your strategy and come up with an easy plan to follow. To see who we trust to help you with this, take a look at our Partners page. Differentiating your assortment Your multi-channel brand strategy needs to cover all of your sales channels, not just your direct-to-consumer one. Your retail channel is a huge part of that. If you’re selling directly to consumers, you immediately become competition to many retailers. And when retailers are your biggest buyer, how can you reap the benefits of selling directly to consumers without fracturing your relationship with retailers? One of the easiest and best ways, according to Roger van Engelen and Jean-Paul Savelkoul of our partner marketing agency A.T. Kearney, is to differentiate your assortment. In other words, you should offer retailers different products than you offer to consumers. What this looks like in practice is creating personalized, tailored experiences for consumers who come directly to your brand, while the retailers take care of the mass sales of more generic products. In the end, you as a brand can still gather consumer information and protect your brand identity, while retailers can still make mass sales on your high-performing products. A great example of a company that does this exceptionally well is Nike. 3. A multi-channel pricing strategy A multi-channel pricing strategy is a natural result of a multi-channel brand strategy. As you figure out how each sales channel will benefit your brand, it will be easier to set prices and make marketing bids that reflect your goals. If you want to position your brand based on perceived product value, you’ll probably use higher prices. If you want your brand to be known as the cheapest source for goods, you’ll likely use charm pricing. Your price point in the D2C channel should reflect your overall commercial strategy, of course, but it should also align with the rest of the retail market for two reasons. First, your price affects your brand image. Pricing yourself drastically higher or lower than retailers and the rest of the market will confuse consumers and negatively affect your price perception. Consumers might feel cheated by one source or the other, and won’t know where to place the value in the product. If you make this mistake, regaining consumer trust and value is a hard hurdle to overcome. Second, pricing yourself dramatically higher or lower will also affect your relationship with retailers. If your D2C price is notably lower than the rest of the online retailers selling the same product, you instantly undercut your biggest customers. Brands, dynamic pricing, and the D2C market Keeping your prices aligned with retailers for every product in your assortment at all times is a daunting task, to say the least. That’s why Roger van Engelen, Principal at A.T. Kearney thinks that a dynamic pricing software is essential for brands that are creating D2C sales channel. “In my opinion, brands need to have dynamic pricing before they start selling directly to consumers because it will prevent them from agitating their retail customers. This, in turn, protects brands from triggering a price-markdown war, which helps protect brand price perception.” - Roger van Engelen. See interview. Most major retailers already use dynamic pricing to manage their online stores and keep their products competitively priced. Brands, on the other hand, can use the software to follow a market price within extremely tight limits. This not only keeps your relationships with retailers friendly, but also prevents you from kick-starting a market-wide race to the bottom. Protect your brand and your relationships with Dynamic Pricing Follow the online marketplace, automatically adjust your prices, and keep your prices aligned with your retail customers in just a few clicks. Dynamic Pricing for Brands keeps you aligned with your partners and strategy while giving you more data on your consumers. Try Dynamic Pricing free for 2 weeks and see for yourself how you can build a better brand-to-consumer strategy. Click the button below to get started.
3 Things Brands Need for a Successful D2C Strategy17.01.2019
What is a High-Runner Strategy?
How do companies like Amazon maintain such a huge market share and keep their prices low without losing profits? The answer is in their pricing strategy. Amazon — and many other organizations that seem to offer low...
How do companies like Amazon maintain such a huge market share and keep their prices low without losing profits? The answer is in their pricing strategy. Amazon — and many other organizations that seem to offer low prices while staying profitable — adhere to a special strategy called the “high-runner strategy.” So what is a high-runner strategy, and is it the right pricing strategy for you? In this post we’ll give you a short introduction to the high-runner strategy, then help you figure out if it’s the right option for you. What is a high-runner? A high-runner product is another term for the top-performing products in your store. These are the products that have the highest numbers of views, clicks, and purchases, and which are eagerly sought after by the public. They are generally highly elastic and extremely sensitive to market price changes. A great example of a high runner product is a top-of-the-line smartphone. A €50-100 difference between these products (a 10%-20% discount on a €500 item) will make a great difference in the number of clicks and purchases. The greater the discount, the greater the volume of sales Take a look at the example search for a Samsung TV— which listing do you think consumers will click on first? Most consumers will choose the cheapest option — in this case the €544 TV. The other retailers are severely overpriced for this product, even if they’re only priced 4.59% (€25) higher than the lowest competitor. The high-runner strategy With a high-runner strategy you discount heavily on these high-visibility products to increase the number of clicks to your site. This increases the amount of traffic on your site as well as the number of sales on that product. This is just the first step of the process though, and if you did this for every product in your assortment you’d end up losing money on margins. That’s why the beauty of this strategy lies in what you do with the increased traffic. Cross-sells and up-sells Once you have this traffic on your site, present consumers with up-sells and cross-sells on inelastic products at full price. This is where you make your margins. Going back to our television example, retailers could show customers a wall mount and an HDMI cable as add-ons during the checkout process. Many consumers who are already spending €544+ on a television won’t think twice about these products or stop to compare your prices to the competition. Instead, they’ll go ahead and add them to their cart and pay for the convenience of a packaged delivery. They’re also paying for the assurance that the products work well together so they won’t need to go through the hassle of returning a defunct product. Curious to see of a high runner strategy is the right pricing strategy for you? Contact us Price perception Another way to use the high-runner strategy is to drive consumer perception about your store. This is Amazon’s strategy, and it’s partially what’s responsible for the company's global growth. If you consistently advertise yourself as the lowest price on a variety of high-visibility items, consumers will associate your store with low prices but high-quality products. As a result, you’ll become their default store for any of their needs in your niche and increase their loyalty to your store. Amazon has asserted itself as a one-stop-shop for almost any product a consumer needs. But if you look at its actual prices, many of its products are competitively priced with the rest of the market. The same is also true in reverse, and it has an even bigger effect. If you’re consistently overpriced on high-runner products, consumer loyalty will shrink. Final thoughts The high-runner strategy is a powerful way to change your company’s price perception and capture more sales. When done correctly, it’s an effective way to drive customer loyalty and increase profits through cross-sells and up-sells. But it’s not the right strategy for every retailer. If you want the public to see you as a top-of-the-line retailer with high prices, then this is not the strategy for you. Instead, you might want to charge premium prices as a sign post for your product’s quality. If the high-runner strategy is right for your business, you need a tool to help you manage prices and ensure that you stay competitive. Omnia’s suite of pricing tools help you keep track of your products and automatically adjust prices and bids so you are always priced according to your strategy. Curious to learn about other pricing strategies or interested in our Amazon guide series? Check out some of our other articles below: What is Dynamic Pricing?: The ultimate guide to dynamic pricing. What our the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Value Based Pricing?: A full overview of how price and consumer perception work together. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers. Here’s What You Need to Know About Psychological Pricing (Plus 3 Strategies to Help You Succeed): Modern day pricing is so much more than a numbers game. When thought about correctly, it’s a powerful way to build your brand and drive more profits. How to Build a Pricing Strategy: A complete guide on how to build a pricing strategy from Omnia partner Johan Maessen, owner of Commercieel Verbeteren. The Strategies Behind Amazon's Success: Learn how Amazon became 'the place' to buy products online. The Complete Guide To Selling on Amazon: In this guide we answer some of the top questions we hear about Amazon and give helpful hints on how to succeed on the platform. How Does Amazon's Search Algorithm Work: Find out how Amazon connects their shoppers with relevant products as quickly as possible. Price, The Most Important P in the Marketing Mix: In this article we'll look at the relevance of the 7 P’s in today’s online marketing context.
What is a High-Runner Strategy?Sign up to be the first to get information from Omnia.
Sign up now