Have you thought about implementing a dynamic pricing strategy, yet aren’t sure how your e-shop sales will benefit? We wrote down some advice to help you understand dynamic pricing in more detail.
With the rise of online business models and intelligence tools, companies around the world have found ways how to adjust prices by using different pricing strategies. Dynamic pricing is one of them.
Long gone are the times when the only possibility of changing prices was by replacing physical price tags on products. E-commerce has brought us new ways to efficiently market and sell products or services.
Implementing dynamic pricing strategies has been gaining popularity among retailers in different e-commerce industries, e.g. in transportation, accommodation or in retail.
Dynamic pricing gives online retailers the possibility to adjust their prices to real-time supply and demand so shop owners and project managers can react quickly to rising or falling popularity of store products. The goal is to increase prices and keep the sales growing.
But, here's the thing.
How is it possible to keep your margins and customers happy at the same time?
Rise to the top with a dynamic pricing strategy
1. Work with elasticity of demand in mind
Dynamic pricing is a great way how to react promptly to online market demand and supply. Change your product prices in accordance with website traffic, conversion rates, seasons, discounts and sales goals.
Analyze behavior of your customers, their conversion rates and set flexible prices for products or services based on current market demands. Increase prices while demand is high or drop prices when demand is low.
2. Find and set optimal prices
Competing on lower prices gives you competitive advantage when competing with other shops for price savvy customers. However, it's not always the case that lower prices mean more sales. Additionally, lower price can turn into smaller margins and thus smaller profits.
It's important to find the sweet spot for the optimal price for your products. Optimal price is determined by several factors, such as brand value, price elasticity or competitor prices.
3. Use conversion analytics
Work with your e-shop historical data to recommend optimal prices for your products. Find out how many viewers of your website turned into buyers. When conversion rate of visitors to buyers is low, drop the price and monitor how it influences your sales and ultimately profit.
An intelligent tool like FutureMargin helps you compare and analyze data and recommends the best price your customers are willing to pay.
4. Implement a pricing intelligence software
Are you still tracking competitor prices manually? Leave time-consuming processes and save time with a savvy pricing intelligence software. It will become your best virtual business analyst, helping you rise to the top and have a well-defined pricing policy for analyzing data online.
5. A/B test your pricing strategies
As with all business or marketing strategies, use the power of running different A/B tests and find out which of the strategies you implemented work the best for your shop.
6. Compete against giants
By implementing a dynamic pricing strategy and using the right price intelligence you can start competing against giants like Amazon. Big companies have been successfully using dynamic pricing for years now. Take better control of your pricing strategies.
7. Respect your customers
Dynamic pricing certainly does not mean that for pricing your products you should focus on varying prices between customers of different demographics. Such methods can be perceived unfair and you might lose customers, credibility and brand perception value. Focus on the markets demand and decide on real-time prices.
Defining and implementing a savvy dynamic pricing strategy powered by a pricing tool will save you time and increase sales of your store. Analyze your historical data and find the optimal price to keep your margins and find the most appropriate price for your customers.
FutureMargin is a conversion analytics software that measures and guides your systematic product pricing and increases your e-commerce profits. Available as a Shopify app or as API.