Dynamic Pricing for eCommerce

28 February 2019 By 0 Comments

Dynamic pricing is the concept of offering goods at different prices and its strategy is adjusted based on real-time supply and demand. The practice of dynamic pricing is widespread in e-commerce. It can efficiently automate pricing decisions to maximize profits and bring all available data into perspective, and change their pricing strategy to best adapt to a dynamic environment. Consequently, it enables you to provide flexible prices for products and services and remain competitive with other marketers.

The art of dynamic pricing is sometimes referred to as price discrimination at the individual level, revenue management, and revenue management.

The Benefits of Dynamic Pricing

One of the biggest benefits of dynamic pricing is the ability to have accurate data that will adapt to changes in your marketplace. You have access to data that tells you how your industry is developing, and you can leverage that insight to support the rest of your business.

Let’s look at some of the major benefits of Dynamic Pricing:

  • Greater Control on Pricing.
  • Allows Flexibility and offering more level prices
  • Greater control on Pricing Strategy
  • Saves lots of Money.
  • Easy to Manage with the Proper Software.
  • Competitive Edge over others in the Market.
  • Enabler for Growth in Revenue
  • Faster response to demand fluctuations
  • Price changes take into account more factors including customer’s price perception, leading to long terms increases in sales or profits

Implementation Tactics of Dynamic Pricing

In order to implement dynamic pricing, you need a lot of information. This includes the initial conditions and the prices demanded by the competitors. In addition, customer information is also an important input. Customer price perception also plays an important role as this determines the profit margin you achieve.

Generally speaking, there are many Dynamic Pricing tactics that you can implement in your eCommerce business to increase your revenue. Let’s discuss some of the key tactics for it.

Time-Based Pricing

Time-based pricing is about determining the “best price” to achieve the best profit margins based on the availability demand and life of the product. It focuses on changing the price of the product according to the time of day or the longevity of the product.

Segmented Pricing

This is one of the most important dynamic tactics for online retailers across the globe. Segmented pricing means dividing the product into different levels and assigning them different prices.

Penetration Pricing

Penetration pricing tactic is probably the most common dynamic pricing strategy in almost every marketing strategy. You can use it when you launch a new product and you are not sure how people will react to it. This tactic means that you need to analyze the market trend and adjust your price lower than your competitors in order to enter the market.

Peak Pricing

This is one of the most popular dynamic pricing strategies for eCommerce growth, where customers pay an additional fee in times of high demand. As the name suggests, peak pricing means determining the price according to demand. So, utilities that charge higher prices at seasons generally use this tactic when demand is highest. If the demand is very high, you should set the high price and vice versa. The main purpose of top pricing is to regulate demand so that it stays within a manageable level of supply.

Summary

In this blog post, we tried to help you with a basic understanding of Dynamic Pricing, it’s Benefits and how you can use it to increase your overall profit margins, as well as the involving variables and the steps for implementing dynamic pricing.We hope this article will help you develop a better strategy for your eCommerce business that will increase your revenue.

Thanks for reading through this blog post. Any suggestions for further improving this would be cheerfully solicited.

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