This can be anything from manual competitive analyses or formulas on Excel spreadsheets. One's decision might be to round it up to levels like $55 or $55.50, or maybe to better align with the purchasing behaviors of online shoppers to something like $54.90.Ī holistic dynamic pricing strategy should also cover this psychological pricing aspect to avoid friction throughout the buyer's journey.ĭynamic pricing is crucial for profitable e-commerce growth.Įven though it may sound quite sophisticated, all sizes of e-commerce companies can adopt a dynamic pricing strategy with a systematic approach.įirstly, companies must identify the manual processes involved in their price-setting operations. It's simply rounding down or up those figures. There's an effortless yet elegant way to overcome this issue. Therefore, when a shopper encounters a less rounded price point like $54.47 (primarily the result of an arithmetic calculation made by a pricing engine), they find it less natural and seamless to interact with than a well-rounded figure like $55 or maybe $54.50.įill your whole webshop with such "calculated" prices, and you'll have the same unnatural (literally robotic) feeling across all of your price tags. Ending up with very "robotic" pricing figures.Į-commerce pricing is closely tied to human psychology, as that very human psychology majorly dictates the purchasing behaviors of shoppers. The right approach and functionality require the capability of separating those out-of-stock listing prices among other actual prices and excluding them in pricing optimization calculations.Ĥ. Treating these out-of-stock prices as actual competitor prices may misguide dynamic pricing engines. The e-commerce market may resemble a jungle regarding data published by merchants across the competitive landscape.Ī common dodgy tactic from some merchants is setting ridiculously low price points for items that are out of stock and can't even be added to the cart on the product page. Not taking stock availabilities into account. They must continuously evaluate their results and reiterate their rules and strategies.ģ. To aim for optimal results, merchants should select and set specific dynamic pricing rules and strategies for particular products by brand, category or other specific characteristics like top 10 best-selling items. Therefore, this "1% cheaper than all competitors" strategy for all products would be a suboptimal approach. Others may have a different pricing image among customers, so even a more aggressive position would yield the optimum results. That's a significant pitfall because some products within the assortment may not necessarily need to be priced that aggressively. In the context of dynamic pricing, a merchant may wrongly set to be 1% cheaper than all the competitors out there for its entire assortment. The blanket approach means considering each product's pricing characteristic the same and applying prices for all products, like 20% off across all items. Unfortunately, some e-commerce merchants still consider pricing as one of those to-do tasks that they check and forget. Applying blanket strategies across the assortment.īlanket price-setting is one of the least favorable yet widely adopted pricing approaches in the market today because it's pretty easy to execute. By doing that, merchants can get the full benefits of dynamic pricing: setting competitive and profitable prices for their stores.Ģ. To make sure dynamic pricing works in the way intended, it needs to incorporate the COGS data and consider that level as a threshold. Merchants may observe skyrocketing sales figures that only eat away from the business, as every other purchase will eventually get written down as a loss. After a certain point, their prices start falling under the critical cost (COGS) threshold. The only reason why dynamic pricing may start eroding profit margins for the sake of competitiveness is that in some applications of it, companies applying it (or, even worse, vendors who are providing services for it) neglect the cost and profit aspect of retail.
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