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The Secret of Amazon’s Pricing Strategies

Amazon’s sales are more than one trillion dollars annually. How have they managed to become so successful?

Their secret is psychological pricing. There are a number of techniques they use that are worth considering in your own business if you want to be more competitive.

The Value of 9 and 7

Studies have shown that the most successful marketing numbers are 9 and 7. It might not seem like it, but there can be a huge difference between $4.99 and $5. People tend to identify with the lower amount of $4 even though the price is nearly $5, and are therefore more willing to buy.

The second most popular number, 7, is good for this type of pricing, such as $9.97. It also works really well for round numbers, with popular online pricing being $7, $17, and so on for eBooks, products and services, rather than $9 or $19. If you are not going to add cents to your price, make it something with a 7.

Amazon uses these two strategies when they are setting their prices. But as you can imagine, they have a number of other tricks up their sleeves.


Amazon will discount popular products, but boost the price on less popular ones. In this way, they create the perception that they offer good prices on everything, which is of course not the case.

Loss Leaders

They will also create loss leaders; that is, items they are willing to sell cheaply in order to get people to buy other items. They will offer deep discounts in their Gold Box offers, which act as a lure to get people to shop and buy more.

“Letís Have a Sale” Sales

Amazon will invent a reason for a sale. They can be tied to the holidays, or for no reason at all other than to stimulate sales. Often, these sales are limited time offers (LTOs) – items on sale for only a short time.

This psychological pricing strategy is based on people not wanting to miss out on a great deal. The Gold Box items are on sale, but the clock is ticking and the quantity might run out.


Amazonís recommendations to you are based on your previous purchasing history, but while those items might be attractive, they are not usually discounted. However, Amazon is relying on its reputation as a reliable seller with good customer service as the means of getting you to buy even if they donít offer rock-bottom prices.

Free Shipping, and Prime

You also get free shipping in some cases, and Prime membership entitles you to both free shipping and other perks like TV shows, music and audio books, for one low annual price. Studies have shown that Prime members spend a significant amount more each year than those who are not, so Amazon wins here again.


Bundling groups two or more products together for a discounted price compared to what you would pay separately. It may seem like a good deal, but beware. When it comes to electronics, for example, Amazon might lure you with a great price on a flat-screen TV, but the accessories they offer such as headphones, cables and so on, are not competitively priced at all. You could do much better if you shopped around. However, many people like the convenience of one price for all and will gladly pay for a bundle and think they got a bargain.

Amazon are pros when it comes to selling and have built up their impressive business in only a few short years, starting completely from scratch. Study their psychological pricing methods and see which make sense to apply to your business. Then watch the sales flow in.


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