Online retailers are continually striving to get their products noticed in an increasingly crowded market. Whilst you may think you are offering great value, your customer will be only too happy to shop elsewhere if they can find a better deal. What remains obvious is that today’s customer doesn’t just want the easiest option; they also want the best priced purchase and they are willing to shop around to find it. Now, more than ever, price has a huge influence over consumer buying decisions. So what can you do to ensure customers spend their hard earned pennies on your site?
Well, Econsultancy recently published a report highlighting the effectiveness of dynamic pricing, a tactic used by Amazon and others to ensure that their pricing reflects real-time market value expectations. Yet it isn’t just the retail big-boys who can make use of this marketing method. Smaller retailers can also use dynamic pricing to ensure their offering is in line with their main competitors, and to decide when price adjustments will have the most impact on consumer spending habits.
What is dynamic pricing?
Dynamic pricing involves monitoring real-time market prices to infer the current expected value of your products. Customers are very good at shopping around and checking several different options before choosing which company to buy from. Retailers have now adopted a similar process to check their own pricing is in line with their competitors, and that their price offering remains appealing to their customers.
How to get dynamic pricing right
The key to getting results from your dynamic pricing is the use of accurate data. If you are basing pricing on your competitor’s current prices then you need to make sure these values are correct, or else you risk selling your products at a lower value than is necessary. For example, if you are monitoring prices to ensure you are always the lowest option and your competitor data is a week out of date, your products could be sold at a much lower price than they need to be if the competitor had changed their sales offer. Retail is a rapidly changing environment, and to guarantee your approach remains effective you need to base your sales strategy on the best data you can.
Keeping on top of price data is also time consuming, which is why several companies are now turning to automated price-tracking software over manual data collection. This software is capable of logging price data directly from numerous competitor sites for hundreds of products, several times a day, which eliminates the margin for error. These competitive intelligence tools provide the retailer with vast quantities of quality data, from price, to product availability and even delivery prices. Retailers can then use the software to automatically optimise pricing in line with pre-set rules, based on specifics such as minimum profit margins or limited-time offers, to save time and improve sales.
What are the benefits?
As a retailer, ensuring your products are the lowest priced is an easy way to drive high volumes of sales from your site. Monitoring competitor prices will also show when you are selling your products at a much lower price than a competitor, allowing you to raise prices without losing customer appeal if the rest of market remains at a higher price, and in turn generate greater profit. As well as giving immediate and accurate data, price-tracking tools can provide retailers with an invaluable market overview to help with pricing decisions. The most successful retailers are those who continue to use this information as part of a longer, over-arching price strategy to determine their market position and the value they offer to their customer, as well as on a daily basis to review any offers and reductions.