As a retailer or e-retailer, the world of marketing and selling your goods, products, or services is swiftly changing. These expected changes are difficult to keep up with. And it’s only more severe in the case of e-retail. The Internet is the quickest and most effective way of reaching out to your customers, but it doesn’t wait for anyone to catch up.
Welcome the concept of Dynamic Pricing. Most e-commerce and retail industries have turned to this latest pricing strategy in order to increase their profit and attract and keep loyal customers. So, what is this strategy and how can you best use it for your retail business?
What is Dynamic Pricing?
As the name suggests, Dynamic Pricing is a strategy that involves having a constantly changing cost of products and goods. It’s also known as real-time pricing. It involves collecting and analyzing data on the fly and altering prices to best ensure a profit. As more data keeps coming in, the prices of certain goods and items are altered accordingly.
The reason for this kind of pricing is quite simple. As market demand changes, so do the prices — such that more customers are inclined to make a purchase. How often the changes happen depend on a lot of factors. You as a retailer or e-commerce owner, can decide if you want the prices changed every week, every day, or even by the hour/s.
Dynamic Pricing: The How-Tos
Most e-commerce providers rely on pricing bots — written down with certain rules of the business and pricing algorithms in place. These bots collect and analyze data in real time and change the price to the best possible option.
Depending on the kind of retail service you have, the rules of your business that directly influence sales and profit might differ. These could include the time of the day/day of the week, the location of a majority of your customer base, and the rates offered by your competition.
These details may seem elusive, but we live in a world with Big Data. The technology and analytics we have in place make these massive calculations easier to get through. You may even be able to have customer profiles that tell you how much certain customers in specific locations are willing to pay.
How Can You Best Utilize It?
As a business owner, the first thing you must consider is that digital pricing isn’t illegal or unethical in any way. Many customers or surfers of the World Wide Web have fully accepted the existence of Dynamic Pricing. Dynamic Pricing examples are particularly evident in the airline and hotel industries. And when once a comparison has been made to fixed pricing, customers wouldn’t mind the change. This is also beneficial to them in the long run.
It is a simple method to skyrocket your profit, especially in e-commerce, because the process of changing the price is quick and easy. It is no longer a laborious task. Besides that, you also have a direct feedback on how your customers react to certain trends that come and go. You have a direct control over what sells as well. If you have a large inventory of products you must sell out, a decreased pricing is sure to gather benefits.
Besides, if nothing, just look at some of the most successful e-retail businesses such as Amazon. In 2013 alone, the site was having upwards of 2.5 million price changes under their Dynamic Pricing strategy. Statistics show this is the quickest way to secure a profit. As a retailer, an online presence marked with Dynamic Pricing is sure to strike gold.