Dynamic pricing is a valuable yet misunderstood and under-utilized concept in Competitive Price Intelligence. Some retailers dynamically reprice while others are reluctant for the fear of a race to the bottom. If done right, dynamic pricing provides a strategic advantage.
Dynamic pricing provides an enormous strategic advantage to boost revenue.
Our winning customers and partners use our data to dynamically reprice and win on sales 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 ecommerce? Here are our Top 5 suggestions –
1. Understand your Cluster of competitors
You must cluster your competitors and compete accordingly. If you are a global brand, you compete only with your peers and emerging brands. You don’t compete with one-off and small sellers.
2. Match at a Variant Level SKU
Match your SKUs to exactly the SKUs of your competitors at a 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. Set right Dynamic Pricing models
Set your 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.
4. Select the 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 behaviour, and apply flexible and variable rules.
5. Increase or decrease Price
Stay cheaper or 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 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, Dynamic pricing solutions provides an enormous strategic advantage if done right. We at GrowByData go through an implementation process to ask our customers 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 cost, new vs refurbished, and other nuances to provide retailers with the business rules they are most comfortable within their day to day business.