There’s no doubt that dynamic prices are the future of e-commerce. The question is, are you capable and ready to start using dynamic pricing in your e-commerce today?
Table of contents:
- Dynamic pricing is the future of e-commerce
- Example of how to approach dynamic pricing
- Four steps to implement dynamic pricing
Dynamic pricing is the future of e-commerce
The vast majority of the well-known and global e-commerce work with dynamic pricing and have been doing so for quite a while, placing great demands on the smaller e-commerce that want to compete in a highly competitive marketplace.
Not surprisingly, Amazon is an excellent example of state-of-the-art usage of dynamic pricing. Of course, Amazon has become a leader and pioneer in dynamic e-commerce pricing, but many followers are catching up with the giant market leader.
To get better insights into dynamic pricing, read our 5 examples of how eCommerce stores use dynamic pricing.
How did it all start?
American Airlines started using dynamic prices as the first ones back in 1980. Dynamic prices are characterized mainly by being flexible and personalized. Also, they change according to the demand and other factors such as the competition, subsidiary products, and buyer’s habits. Today, many companies across various industries use dynamic prices instead of static prices to improve their rentability in case of fast changes in supply and demand.
Example of how to approach pricing
Every e-commerce should optimize its prices with dynamic pricing. Since the online buyer can compare prices on a specific product with just a few clicks on the internet and across various retailers in different countries, e-commerce stores need to be competitive; otherwise, they lose potential customers. Based on our experience working with a lot of different e-commerce, we know that each e-commerce is unique in terms of how it wants to compete in the market.
You might think starting with dynamic pricing is a huge step, or that your e-commerce business might not be ready for it at this moment. But it's worth mentioning, that you might already be using dynamic prices of some sort. It is basically a technical term for fluid prices and includes other marketing tactics such as promotions, weekend sales, or loyalty programs.
However, suppose you have never applied promotions, other sales tactics or are just a newly started e-commerce business. In that case, you will most probably want to start small and build on your pricing strategy.
Working with and implementing dynamic pricing is not necessarily something that happens overnight. However, with a platform like PriceShape, you will be able to introduce dynamic pricing from one day to the next without having to make significant changes to your e-commerce business or organization.
In fact, according to HubSpot, 80% of online consumers see price as the most crucial factor when shopping online. So closing your eyes when it comes to pricing hardly seems like the right strategy.
If you want to know more about creating proper price strategies for your e-commerce business, read our blog post - price strategies: what is it and how to apply them?
Four steps to implement dynamic pricing
Most importantly, implementing dynamic prices is a synthesis of a good strategy and pricing software.
Let’s dive into the necessary steps to get you going.
- Set up specific goals for your retail
Firstly, you want to determine which goals you want to achieve. It could be how much you want to sell, what revenue you wish to accomplish on each product, etc. It isn't hard to sell more by lowering your prices, but the whole idea with dynamic pricing is to have the correct prices for your products at the right time. Learn from the insights you get from the PriceShape software, define your objectives, and you will quickly be ready to have dynamic pricing in your e-commerce.
2. Simple is the key to get starting with dynamic pricing
Next, take a look at your goals and align them with your new price rules. Whether your goal is visibility or you want to dominate the market, you might set competitive prices on your most popular products. It all depends on your needs and there isn't a one-size-fits-all. Start simple with pricing and build your e-commerce business as you gain experience. You can start by creating simple price rules for a few products. Then with time, make it more sophisticated by applying more complex price rules and adding more products based on your experience with how your customers are reacting to your prices. Over time, you gain new insights, learn about the data, and develop an excellent ability to track your products’ prices.
3. Keep track of your competitors’ prices
Your competitors’ prices are essential, as you can use it as an analytic tool to set your prices dynamically. Data about your competitors shows you which of your products are priced higher but are still winning the market or which products are priced lower, and you might be losing potential profit. This data is an advantage for you to have. Using competitor-based pricing is a standard method. Still, you can find dozens of different approaches to choose from, such as value-based pricing, which considers the customer perception of the product, or cost-plus pricing, which is a prevalent method based on the product’s production costs + the margin you want.
4. Test your dynamic price strategies
Once you know how to start applying dynamic prices, you have to start testing your pricing rules to see if you achieve the goals you set up in the beginning. After that, it’s also essential to monitor your pricing to be sure that they stay updated. After that, you can add dynamic pricing to more products and make more complex rules. The easiest way to test pricing strategies to drive your revenue higher is to outsource and automate pricing with a pricing tool. At PriceShape, we can help you with implementing dynamic pricing efficiently. With our software, you will have the opportunity to tune your price rules to match precisely your business needs and run it all automated, so everything works like a clock. To adopt a dynamic approach requires continuous learning about your industry, competitors, and customers. Stay focused on what these data mean for your products’ prices.
Soon you will start hitting your goals, and you will be able to recreate your strategy and reach new heights.
If you have an e-commerce store, sell on Amazon or other marketplaces, it's worth automating your prices and getting dynamic pricing. PriceShape is the right pricing tool for getting started; it gives you the ability to create price rules and adjust prices based on real-time data and insights about your competitors.
Integrate PriceShape with your eCommerce store today.