A key marketing concept is that your pricing should reflect the quality of your goods. Think of Hermes with its hand-stitched leather handbags, some of them costing thousands of dollars; a mass production handbag from Walmart obviously doesn’t have the same construction quality or branding. “You get what pay for,” as they say.

But when you’re selling on Amazon, how do you assess the quality of your products against the other sellers? (That is, assuming you don’t have an existing brand like Hermes, Louis Vuitton, Gucci or Dior.)

One way to do it is the way a lot of customers do it; look at the reviews. If you provide a backpack that looks pretty similar to two or three others, and it’s the same size, but your reviews are five-star and the other guys only get three or four stars, you can charge a higher price because customers are clearly saying it’s higher quality.

Since social proof such as customer reviews are the most influential factor on potential buyers’ assessment of whether or not to buy, this is quite a reliable way to look at your products.

Another way to do it is to look at whether your product provides more features. For instance, if you sell a camera with a bigger zoom than the competition, more megapixels, and so on, you can charge a higher price. (Though of course in marketing terms you should really be looking at the benefits to the customer – better and clearer photos, in this case.)

You can do some quite detailed assessment of competitors’ products just by looking at their Amazon product pages. But in some cases it might be worth buying the product to carry out a more detailed comparison.

There’s a twist to “You get what you pay for,” though, which is that people often tend to assume that a low price indicates a low quality product, or even a counterfeit (in the case of Louis Vuitton luggage or Hermes handbags). That’s a problem if you have good quality but you want to reduce the price to increase sales or to launch a new product.

The answer to that is to keep your headline price the same, but use discounts, coupons, two-for-one offers, or loyalty offers to give your customers a break. You’re presenting the discount as a gift, and you might want to limit in some way – to customers who have already bought from you, to regular customers, to customers who can collect a certain number of point or coupons, or to a single sale week. The more limited, the more special the gift is; a two-for-one in the supermarket is kind of boring, a “first five customers for the new Tesla pay nothing” promotion would make the headlines! (And, as you can imagine, it wouldn’t reduce the value of Teslas at all, because no one would believe that zero was the ‘real’ price.)

Many things in economics are quite rational. Prices aren’t. People actually believe that there’s a ‘right price’ somewhere – in the Middle Age it was believed that the ‘right’ price actually existed as part of the natural order. It can be interesting to ask people what they think is the price for a quart of milk, a gallon of petrol, a Manhattan apartment; chances are they will have a price in mind. It might not relate to the real world. Many of remember how much a Hershey bar cost when we were young, and for some people that’s half a century ago!

So remember that the price/quality equation for your products isn’t just about facts, or what the customer actually pays; it’s psychological, too. That’s why you need to give it real thought!