The world is changing continuously and so are its pricing strategies. Dynamic pricing is a price setting strategy for your product depend on data analysis and flexibility. It allows changing the product price, depending on customers previous experience. Activities like past searches and product purchases are considered to generate a customized offer.
Previously it is used for the selected industries like airways, hotels, event tickets etc. Nowadays many brands or sectors are beginning to adopt dynamic price tactics. It helps increase conversions and boost their revenue.
We’ll discuss some different strategies to keep in mind before implement dynamic pricing.
History of dynamic pricing –
Now, if we look at the history dynamic pricing, in 1980’s American airlines used this concept for the first time. At that time it was not a popular or famous tactic and didn’t well used by industries.
But as the technology started to grow these tactics becomes common among e-commerce companies. So, this isn’t a new strategy but with every passing year technology advances, so does the way we use dynamic pricing. As a business owner, the possibilities for delivering more relevant pricing for their product has advanced.
How does dynamic price work?
Well, dynamic pricing gives business owner the flexibility to change the price of their product as per the market evaluation. It helps you to being updated about latest market trend and in increase your revenue.
Benefits of dynamic pricing –
If you are analyzing the pros and cons of dynamic price, you can conclude that most of its feature is good and helps you to increase the revenue. The only disadvantage is that overuse of advanced technologies in Dynamic Pricing software, which takes away the control of your organization.
Major benefits of Dynamic Pricing –
- Control on Pricing
- Provides Flexibility
- Saves a lot of Money
- Competitive Edge over others in the Market
Dynamic Pricing strategy –
There are many strategies for a dynamic price, that you can implement in your e-commerce business in order to increase your sales and for more revenue.
1. Segmented pricing –
It is one of the top dynamic pricing strategies for E-commerce business across the world. Segmented Pricing means dividing the product based on what customers are willing to pay for products features, quality, or warranty. It is not the only effective dynamic pricing tactic, but this strategy increases your conversions, along with higher profit.
This strategy was successfully applied by Apple during the launch of iPhone 5 where another model of iPhone 5S and 5C both had different prices and it was very successful. Instead of offering just one version of your product, offering a range of product can attract a large group of potential customers.
2. Peak pricing –
It is one of the popular Dynamic Pricing Strategies for eCommerce Growth which has been executed successfully by many businesses. As the name suggests, Peak pricing allows the business owner’s to decide the price according to product demand. You should increase the price when demand is high or when competitors have low inventory and vice-versa.
Retailers could utilize these tactics during the festivals when people have a high demand for various products for example gifts for their loved once, latest trend clothes etc. Retailers can increase their profit margin and increase their revenue.
3. Time-based pricing –
This strategy is mainly concentrated on when the customers are buying the product.
Does it sound familiar right?
Every airline and hotel are implements this strategy – the longer you delay in booking, the more the airline and hotel are going to charge.
This works because you don’t want to ruin your trip and you’re willing to pay more to get the right dates. you know early bookings always save money. This tactic is also used in Shipping, where if an order is time-sensitive, the customer is willing to pay High for speed post.
4. Penetration pricing –
This strategy is used when you are launching a new product on the market and you don’t know how the product works on the market. So this strategy says that before introducing a product you should analyze the market and adjust product price lower than your competitors. The lower price helps you to enter a market and attract customers. And once you gain your market you can increase the product price.
5. Seasonality –
Buying a winter jacket costs more in winter compared to summer, So you are aware of what seasonality means. When customers need a product more intensely than other time. Use this tactic to set your product price accordingly.
Ofcurs, You should not charge higher then it should be, but you can definitely do some research on what your customers are willing to pay and adjust accordingly.
We hope this article helps you resolve your confusion regarding Dynamic Pricing. Also, make a better strategy for your e-commerce business, which increases your revenue.
Read article How To Drive More Traffic To Your Online Store.