What are the do's and don’ts of dynamic pricing?

Posted on 17 January by Simon Gomez in Dynamic pricing

Implementing a dynamic pricing strategy for an eCommerce business is an excellent decision. With the correct factors in place, you can increase your sales and margins with this tactic. However, some retailers with little experience with dynamic pricing apply it to their stores, and they do not obtain benefits.

On the other hand, we’ve seen cases where dynamic pricing has worked and where it’s gone very wrong. So, to help you, these are the dos and don’ts of dynamic pricing.

Dos

1- Plan

For a dynamic pricing strategy to work, you first have to choose which products are part of the dynamic pricing strategy. Everything is done for a reason, and the same concept applies here. You first have to analyze everything and think everything through before jumping into the strategy.

2- Adjust it

When you have done this, it's time to publish your strategy, but you cannot forget about it. You must check and tweak it when it is necessary. Adjust your profit margins, both minimum and maximum. PriceTweakers helps you with that because our software lets you create pricing strategies and set minimum margin per product, brand, etc. so that you can never sell below your purchase price or desired margin.

3- Take advantage of inventory

Using your competitors’ stock availability and yours is perfect for dynamic pricing. If you have more products available than your competitors, you can take advantage of that and raise your prices. Moreover, if you have a bunch of stock on a product and it is not selling, you can decrease your product prices to move those items and increase your sales. In summary, knowing your stock and your competitors helps you with your dynamic pricing strategy.

Don’ts

1- Destroy your margins

Dynamic pricing aims to increase your sales and profits. But some companies when, changing their prices go below their profit margins. That ends up hurting the company because they are losing money. That is a sign that you are applying dynamic pricing wrong. Also, if customers perceive price changes as random or unfair, they will shop elsewhere.

2- Do not use incorrect data

To create a dynamic pricing strategy, you need information regarding your competitors, like their selling price. Of course, manually doing it takes a lot of time and leaves a margin of error. A mistake here is bad because that will guide your strategy in the wrong direction.

That is why programs like PriceTweakers help you retrieve the best data from your competitors, and you can create pricing strategies to increase your sales.

3- Do not change your prices for the sake of it

Just because one of your competitors is constantly changing the price of a product you both have, you cannot do the same and enter that game. Dynamic pricing requires planning, and that's why you cannot copy what your competitors are doing. They might be doing something different than you or having a strategy you do not know.

Conclusion

Sellers must pay attention to dynamic pricing because it is one of the trends in eCommerce. Also, as more people shop online, building this strategy will help you maximize your profits. But it also needs care and attention from your or your team. Follow these steps to ensure you won’t fail. PriceTweakers is the perfect tool if your company is interested in dynamic pricing. We help you with the setup, and we offer you additional services to increase your profit margins.