#295 - Playing the volume vs price game
Built by Business: Amazon FBA, E-Commerce, Brand Building
Andy Isom | Amazon FBA Seller & Agency Founder
4.9 • 816 Ratings
🗓️ 1 November 2023
⏱️ 21 minutes
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Summary
It's important to know metrics such as profit margin and conversion rate, but the most important metric you need to know is how much you're earning. In this episode, I talk about the difference between high price, high profit margin, but low volume and low price, low profit margin, but high volume and which strategy would be the best for your business.
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Transcript
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| 0:00.0 | It's important to know your profit margin. It's important to know your conversion rate, your click theory, all those metrics. |
| 0:05.6 | But at the end of the day, you get paid in dollars. So what really, really matters when it's all set and done is how many dollars did you keep? |
| 0:16.2 | Right? For every sale, for every hundred sales at the end of the year, after your expenses, that goes |
| 0:21.5 | in your pocket. That's the money that pays the bills. That's that money that pays for the toys |
| 0:25.2 | and the trips and whatever, right? |
| 0:33.0 | What's up, guys? You're listening to another episode of Selling on Amazon with Andy Isam. |
| 0:38.3 | In this episode, we're going to talk about playing the volume versus the price game. |
| 0:45.3 | Guys, this is a complex strategy or game, I guess we could call it, which really comes down to a big math equation. Let me illustrate what this |
| 0:58.0 | episode is all about. Let's say you're selling a product at a premium price point for your |
| 1:03.4 | market. You're selling your product for $40 with great profit margins. Let's say you're getting a 40% |
| 1:09.8 | profit margin. The rest of the competition, |
| 1:12.4 | the rest of the market is selling anywhere from $8 to maybe $25. So you're significantly |
| 1:19.5 | higher price than most of the marketplace. Now, your conversion rate on your listing is a lot |
| 1:26.0 | lower because, again, you're selling at a |
| 1:27.5 | premium price. So not as many people are going to convert and purchase your product. Maybe you have a |
| 1:31.8 | 3% conversion rate. Whereas the median conversion rate for that market, that product, for all the |
| 1:38.0 | other competition, again, selling at a much lower price point is closer to 15%. Much higher conversion |
| 1:42.9 | rate, because again, it's $8 or $10 or $12 and yours is |
| 1:46.7 | $40. So of course it's going to be a higher conversion rate. But we know that if we're in business, |
| 1:51.4 | we don't get paid in profit margin percentages. We don't get paid in conversion rates. We get paid |
| 1:57.7 | in dollars. Now, all those percentages, those ratios, those metrics, they're important. |
| 2:03.9 | It's important to know your profit margin. It's important to know your conversion rate, your click |
... |
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