Customers who feel cheated are a nightmare for every Ecommerce entrepreneur. After all, you've lost it forever. That is why carefulness in your pricing policy is essential. At the same time, flexible pricing can help optimize your margins and serve customers personally. Because the right price at the right time can also appeal to your customers and give that extra push to conversion. dynamic pricing, that's what we're talking about. There are proponents, there are opponents. The fact is that real-time price adjustments are widely applied in Ecommerce. How attractive and desirable it is dynamic pricing?
Customers who discover that they have paid more for the same product than another, at the same online store, will follow the principle of dynamic pricing not much appreciate. Customers, on the other hand, who have the experience that they pay the price they are willing to pay for your product range at that moment, can feel very satisfied about that. "I smartly timed my purchase." something like that. It's like haggling a hand-woven carpet in the souk in Marrakech for a bargain price. Deep in your heart you know better, but it doesn't matter.
How dynamic pricing works is difficult for customers to understand
The question is whether the price you pay as a customer is a matter of smart timing. because dynamic pricingprinciples are often difficult for consumers to understand. It just depends on what the strategy is and which algorithms are applied. On the other hand, what does it matter? When customers experience that they have paid the right price at the right time and are satisfied with your product and the fast delivery, the mutual goal has been achieved. Then a flexible pricing policy is indeed a good instrument in personalizing the customer experience.
Offering and selling the same product at different prices to different audiences. And automate that process with advanced software. That is dynamic pricing. This often involves self-learning software, controlled by customer data. It follows from this that having you in order customer data management processes is a prerequisite for a responsible and effective dynamic pricing-strategy. Very important, because visible and misunderstood price fluctuations can be at the expense of your business and reputation. If you do it right, by permanently moving along with your market and competitors, for example, a dynamic pricing policy can actually generate customers. Moreover, there is a chance that your webshop will be appreciated because of the always current, competitive prices. A recommendation to buy from you.
Price differentiation becomes one of the key competitive factors in Ecommerce
We mainly know the automatic adjustment of prices based on customer data, urgency, scarcity, competition and so on, from the world of airline tickets, hotel accommodations and travel arrangements. However, we also see real-time price differentiation increasing for other products and services. Amazon is the great forerunner in this. Millions of items change price per minute according to McKinsey & Company die useful do's and don'ts online around dynamic pricing in retail. According to the marketing and sales consultants from McKinsey will dynamic pricing become one of the most important competitive weapons that online retailers can use in the post-corona era. Most important advice: be transparent, do not offend your customers and let only high-quality and relevant data determine your pricing policy.
Roughly dynamic pricing subdivided into two directions. First of all, you can adjust the actuality of your prices to differentiated customer and target groups. With the right software you can run complicated algorithms on this, but you can also use existing statistics. Think of factors like zip codes, locations, other demographic information. But also the type of smartphone or tablet that potential customers use. By testing with different price levels, you can find out whether one 'customer type' is willing to pay more than the other. By the way, you are on thin ice with this. It smells like discrimination. Resistance to real-time price differentiation usually pertains to this form. Whatever you think about it, as an entrepreneur you don't want a swell about this. Let alone legal tug-of-war.
The number of dynamic pricing options is almost endless
The second method is based on factors such as time, urgency and scarcity. This form is often used, especially in the travel and ticket world. Suppose the date of some musical spectacle is getting closer, and there are still a relatively large number of tickets available. Then it makes sense to experiment with different prices, with search behavior and other customer data driving policy. Customers will accept this form more easily. This is because it appeals to the well-known mechanism of supply and demand. Moreover, it seems as if the customer is playing the game himself. Consider the idea of smart purchase timing.
Personalization solution software typically facilitates multiple data-based machine learning algorithms. Depending on you dynamic pricingstrategy, choose software that optimally matches it. The possibilities are almost limitless. So it is very important to know in advance what you want and to frame the options. Once the right software has been implemented, you hardly have to worry about price dynamics. After all, the essence is that you almost completely automate the process.
Based on your criteria and all available data – customer data, web analyses, stock data, but also real-time market and competition information – the 'right prices' at the 'right time' are visible on your various sales channels. Incidentally, the correct price does not necessarily have to be the lowest price. If you have a good product and a strong brand reputation, a slightly higher price can actually work in your favor. Then factors such as reliability, ease of payment, transparency and fast, free delivery are decisive. In that case, it is a shame to bet on low prices, because that will unnecessarily be at the expense of your margin.
An effective pricing policy stands or falls with the quality of your data
Whatever your strategy, an effective, dynamic pricing policy that serves an optimal customer experience on the one hand, and your sales figures and margins on the other, stands or falls with the application of data. The more data you manage to bring together in an integrated data system and the better your monitoring and analysis tools do their job, the greater the chance that your pricing policy will contribute to further personalizing the customer journey.
Dynamic pricing has been widely used for years, but that says nothing about whether it is a morally responsible online sales technique. You would say yes. Because customers decide for themselves whether or not they want to pay a certain price for your product. In complete freedom. If they don't like the price, they can look at the competitor, wait for Black Friday, for example, or not buy. It's that simple. At least it's that simple seems the. The reality is that consumers are not that crazy about the phenomenon. Nobody likes the idea of being "tricked out". If the prices in your own webshop are visibly higher than those on Amazon, where you also run a shop, this is at the expense of your reputation.
5 questions that precede your dynamic pricing strategy
A sales strategy based on real-time price differentiation can contribute to the desired personalization of the customer journey and better margins. But there is also a risk of failure. And there is a moral side to the story. Therefore, care is required. Critical questions should precede your pricing policy.
- Do you know your target group and existing customers well enough to be sure that dynamic pricing is of added value?
- Does real-time price differentiation contribute to your competitive position?
- Does dynamic pricing match the dynamics of your market and your brand values?
- Is your data management environment intelligent and robust enough to execute the right strategy?
- Are the technology and scalability of your existing Ecommerce platform calculated for reliable performance?
If you can answer yes to those questions, nothing stands in the way of devising a suitable strategy. Once you have these clear, you can take concrete steps to compare personalization solutions and see which solution best supports your dynamic pricing goals. Go to the offer.
