Dynamic pricing is a valuable yet misunderstood and under-utilized concept in Pricing. Some retailers dynamically reprice while others are reluctant for the fear of a race to the bottom. If done right, a dynamic pricing strategy unlocks an enormous competitive advantage.
Dynamic pricing provides an enormous strategic advantage to boost revenue.
Our winning customers and partners use our data to do dynamic pricing and win the eCommerce sale and return on ads. Per Bain, top performers are twice as likely to reprice. On the contrary, if unmanaged, it can be disastrous. If you allow automated repricers without setting up proper business rules, it will most likely result in erroneous data and lost revenue.
As a retailer, you may ask – how should you tactically and dynamically reprice for e-commerce? How should you dynamically price across your marketplaces like Amazon, Walmart, Google Shopping, and Target? How should you sync prices on your eCommerce sites like Shopify, BigCommerce, Magento, 3DCart, Yahoo, and others? How should you dynamically reprice across different countries and cities within countries? Here are our Top 5 suggestions –
1. Proactively Understand Strategy of Your Cluster of Competitors
You must cluster your competitors to create the right dynamic pricing strategy. If you are a global brand, you compete only with your peers and emerging brands. You don’t compete with one-offs resellers and small sellers. For example, if you are DSW, you compete with Foot Locker, Zappos and directly with the shoe company’s DTC business. You don’t compete with the one-off eBay sellers. You want to look at the reseller assortment and keep a pulse on your cluster of brand and retailer competitors.
2. Only Trust High Quality SKU Level Pricing Data to Feed Your Models
Match your SKUs to exactly the SKUs of your competitors at a product variant level. A Nike Air Jordan White size 9 shoe cannot be compared to a size 8.5. Likewise, a new product SKU must be compared with competitors’ new SKU and not refurbished. This is a hard problem to solve and one of the many reasons why Price Intelligence is complex. Beware of repricers that don’t give SKU-level matching at a variant level.
3. Correctly Setup Your Dynamic Pricing Algorithms
Set your dynamic repricing business rules wisely. Start with a floor price that your company wants to achieve. Then, apply on a granular level – by brand, category, geolocation, seasonality, and any important factors relevant to your industry. Account for product assortments. Factor in reviews and ratings of competitors. Consider inventory of competitors. If they are running out of stock quickly, you may not need to give the discount if you are the only seller with the product.
4. Select Your Market Specific Price Suffix
In the US, a 99 suffix (or 95 for some clearance items) works best, as research suggests. In China, you may have an 8 suffix and 4s as this article discusses. Understand your demographics, culture, and consumer behavior, and apply country specific and attractive suffix.
5. Master the Art of Smartly Increasing and Decreasing Your Price
Stay cheaper or more expensive than your competitor by a specific amount based on price range. If you are the only seller in the market, you are less immune to market and price change volatility. Many times, a retailer may not be the cheapest and that is okay. As a retailer, you don’t want to compete with those who may have made a pricing error or are clearing out old inventory, at a potential loss. Conversely, you don’t want to go too low on a popular profitable SKU that the market is about to run out.
In sum, eCommerce Dynamic Pricing Solutions provide an enormous strategic advantage when done right. We at GrowByData go through an implementation process to ask our customer’s similar questions to set them up for success in dynamic repricing. We match at the SKU level and give high-quality SKU-level data. We strongly advise customers to pick the right cluster of competitors and set the right floor prices. We account for shipping costs, new vs refurbished, and other nuances to provide retailers with the business rules they are most comfortable with in their day-to-day business. We factor in brand strength and product reviews into the mix, and lots more.
