Your Competitor Just Dropped Their Price... Now What?

Sometimes the fastest way to get more sales is also the fastest way to lose your business. 😬

I see this happen with Amazon sellers all the time.

Sales slow down.

A competitor drops their price.

So the seller does what feels like the obvious thing:

Drop the price.

Then sales pick up.

“See! It worked!”

Except there’s one small problem.

They’re making less money on every sale.

And sometimes, they’re losing money on every sale.

That’s not a growth strategy.

That’s paying Amazon to help you move inventory.

I Learned This Lesson the Hard Way

Years ago, I watched a business owner get into a pricing battle with a competitor.

His product was selling for $39.99.

The competitor dropped to $37.99.

So he went to $35.99.

The competitor went to $33.99.

He went to $31.99.

You can probably guess what happened next.

Sales went up.

His profit went down.

And then his competitor dropped the price again.

It became a race to see who could make the least money.

That’s when I like to ask:

“What exactly are we trying to win here?”

Because revenue isn't the same as profit.

And units sold aren't the same as money in your pocket.

Here's the Trap

Let's say you sell a product for $40.

After Amazon fees, product cost, shipping, advertising, and other costs, let's say you keep $10.

That's a healthy $10 contribution per sale.

Now you cut the price to $35.

You might think:

“It's only a $5 discount.”

But you didn't just lose $5.

You lost 50% of your profit.

Your $10 profit just became $5.

Now you need to sell twice as many units to make the same gross profit dollars.

That is the part sellers miss.

A small price cut can create a HUGE change in the number of sales you need to maintain your profit.

And if your ads get more expensive?

Ouch.

If Amazon fees change?

Double ouch.

If your conversion rate doesn't improve enough to make up for the lower price?

Now we're talking about the business equivalent of stepping on a rake. 😅

Before You Lower Your Price, Do These 5 Things

1. Know Your Break-Even Price 🎯

Don't guess.

Know your numbers.

Figure out:

• Product cost

• Amazon fees

• Fulfillment

• Advertising

• Shipping

• Returns

• Discounts and coupons

• Other variable costs

Then calculate what you actually make per order.

Your price should not be based on what “feels competitive.”

It should be based on what keeps the business healthy.

2. Ask Why Sales Are Down

This is HUGE.

A sales problem isn't always a price problem.

Maybe your main image isn't strong.

Maybe your listing has poor reviews.

Maybe your competitors improved their images.

Maybe your ad traffic changed.

Maybe your keyword rankings slipped.

Maybe demand is simply lower.

If you treat every sales problem with a price cut, you're using a hammer to fix every problem.

And not every problem is a nail.

3. Improve the Offer Before Cutting the Price

Instead of immediately saying:

“Let's get cheaper.”

Ask:

“How can I make this offer better?”

Maybe you can improve:

• Your main image

• Your title

• Your bullets

• Your A+ content

• Your packaging

• Your bundle

• Your coupon

• Your product quality

• Your customer experience

Sometimes the best way to compete on price...

is not to compete on price.

4. Watch Your Competitors

Competition matters.

But don't blindly follow it.

Your competitor may have:

• Lower product costs

• Better supplier terms

• Higher conversion rates

• Lower ad costs

• More reviews

• A different business model

You don't know their numbers.

So don't copy their price and assume their economics are your economics.

Their price is their problem.

Your margin is yours.

5. Protect Profit Per Order

Here's the number I want you watching:

Profit dollars per order.

Not just revenue.

Not just sales rank.

Not just units.

Profit.

Because that's what eventually gives you the freedom you started this business for.

And let's be honest...

Most Amazon sellers aren't doing this because they dream of having the world's biggest pile of cardboard boxes. 📦

They're doing it because they want more freedom.

More income.

More choices.

Maybe one day, the ability to walk away from the 9-to-5.

That requires a profitable business.

Not just a busy one.

The Big Lesson

There are times when lowering your price is absolutely the right move.

Maybe you're clearing old inventory.

Maybe you're launching a new product.

Maybe you're testing price elasticity.

Maybe the data clearly shows that a lower price will create enough extra contribution to make it worthwhile.

I'm not saying:

“Never lower your price.”

I'm saying:

Never lower your price without knowing what happens to your profit.

That's a very different thing.

Because the goal isn't to win the Buy Box.

The goal isn't to brag about your unit sales.

The goal isn't even to have the cheapest product.

The goal is to build a business that makes money.

So the next time your sales dip and you feel that little voice saying...

“Just lower the price.”

Stop.

Take a breath.

Open your numbers.

Then ask:

“Will this make me more money, or just make me feel better because I see more orders?”

That one question can save you a lot of headaches.

My Rule of Thumb 💬

Don't chase sales. Chase profitable sales.

That's how you build an Amazon business that lasts.

Andy Splichal
Founder & Managing Partner of True Online Presence & Author of the Make Each Click Count Book Series

P.S. Overwhelmed by Amazon ads? I get it. Most sellers are throwing darts in the dark. If you want a pro in your corner running your PPC while you focus on growing your brand, let's hop on a call.
👉 Schedule your call here — we’ll see if it’s a fit 👊

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