One topic of discussion that I regularly have with clients is regarding their pricing structure. Should they be cheaper than their direct competitor? Should they raise their price as it’s Christmas? The answer is simple: opt for flexible, dynamic pricing – a strategy that many online retailers are beginning to adopt
The truth is, no two retailers offer the same customer experience and added value. Where one retailer can get away with offering a rock bottom price with next to no customer service and cheap, slow shipping, another will sell items at a higher price whilst comforting their customers through the shopping process and providing an additional layer of service – whether it’s next day delivery or free gift wrapping – that sets them apart.
Dynamic pricing gives e-commerce sites the chance to set flexible prices for their products and services based purely on market demand at the time.
Subsequently, a client’s pricing strategy can then factor in seasonality and competitors’ prices to take full advantage of the fluctuating external market demands.
Take Easter for instance. In October and November, sales for toy bunnies and chicks are likely to be very low, which means retailers are likely to have to work harder for a sale by dropping their prices.
However, come March and April time those rabbits and chicks will be flying off the shelves – at considerably higher prices due to the market demand. Put simply, if you know a product will receive a high volume of interest – or in digital terms, impressions – it’s possible to adopt a dynamic pricing structure to increase the price and your revenue to boot!
It’s a process that seems to work very well for even the biggest online retailers of all, Amazon. They are known to change the prices of its products as often as every 15 minutes; and although the company misses out on even more potential profit by keeping its prices ultra-competitive, they’re supremely popular with consumers that see a product they look on the High Street and then nip online and nab it for a cheaper price – known as ‘showroomers’.
So how can the average online retailer keep up with the likes of Amazon I hear you ask. Never disregard a good special offer. Discounts and promo codes are a great way of maintaining a sustainable profit margin.
While you may be selling a product significantly cheaper than a direct competitor (after the discount) you have the ability to upsell related products and services that can make up for profit lost from the promotional discount.
As part of a successful e-commerce strategy repricing software can make a huge difference; after all, we don’t all have the luxury of internal resources of an Amazon-type conglomerate!
Repricing tools give online retailers freedom to adapt their pricing structure in real-time depending on the market conditions. Lord knows the consumer market can be an unpredictable and often volatile one at times, so it pays to stick to the age-old ‘be prepared for anything’ mantra.