1 September 2016

Does dynamic pricing momentum ecommerce?


Price is one of the main elements that determine the conversion, especially in the online environment. Users dive sites of various retailers, in search of the most irresistible price.

It is an achievement to find the lowest price. A practice that e-commerce giants well known and used as a trump card to play at will, dominating the market and further increasing its balance of benefits.

A great example of this practice is Amazon, who changes the prices of their products approximately every 10 minutes, which allowed in 2013 to increase its profits by 27.2% over the previous year, generating a turnover of 44 billion Dollars.

Does dynamic pricing momentum ecommerceOther retailers can benefit from the advantages of this technique. There are software that continuously record prices of their competition and allow re-adapt its pricing policy accordingly. 22% of these traders already applies dynamic pricing, while 7% plan to incorporate before the end of the year, and another 36% will thus by 2015.

Types of Dynamic pricing

We can find different ways of implementing dynamic pricing. Let’s look at some of them:

Maximum price. This will depend on the demand for the product, inventory or competition. Thus, in holiday season, the most demanded products can raise your price, or lower, depending on the inventory available to the competition.

There are also specific peaks in demand for products, as could be the World Cup, when customers demanded all kinds of merchandising related to your favorite team.

Pricing function of time. This technique is to set a value to the product or other, depending on the season, or time of day.

Following the example of the World, after removal of our selection, the demand for t-shirts with the team colors plummeted, and thus the value of the product. The same is true in sectors such as technology, when, approaching the launch of the latest model, the previous version depreciates significantly.

Penetration pricing. They are useful when we will launch a new product to market, and we are not sure what their acceptance. Thus promoting a considerable discount on the final price, we get the attention of the target audience, and encourage purchase. Upon completion of this period of testing, we can set the final price, discount discarding their release.

Prices segmented. They apply to the different ranges of the same product, creating from the simplest version, to the premium. A practice that we can see for example in Apple products, with its wide range of MacBooks, iMac or iPhone desired.

Thus, the Dynamic pricing is a strategy that attract customers, and significantly increase profits, available to both large and small retailers. The possibilities are endless, everything depends on the resources and creativity to optimize this technique.