How to employ dynamic pricing to find the optimal price

Why do dynamic pricing? 

The techniques of dynamic pricing are based on two principles: the monitorization of competition prices and the automatization of price changes in your catalog depending on the established parameters for your business. And all this with a clear objective of balance: on one hand maintain a constant flow of buyers and on the other hand, obtaining the maximum profit for each of your sales. 

Reaching this point of efficiency is possible thanks to price intelligence for calculating the best price of every product according to the market’s supply and demand. In the calculation a few factors intervene such as the seasonality, the type of product, the quantity of stock, the profit margins of your business, and the price sensitivity of the consumer. Some of these values are directly obtained from tacking competition; others, however, should be established by the price strategist, as they are different for every business.

4 keys for doing dynamic pricing in e-commerce 

A dynamic pricing strategy, as you can see, needs the definition of the points that will form part of it.  Therefore, to employ dynamic prices, you will need to take hold of these four keys: 

• Select your competition. Wrongly identifying who your online competition really is could decrease the efficiency of your strategy. Do not only think about those that have the same business model as you; keep in mind all business that sell the same products in similar conditions to users. This way you will not lose unfilled opportunities to improve.
• Establish maximums and minimums. This is a fundamental step to marking the profit margins that you need to obtain for every sale, as well as the maximum and minimum prices that you do not want to exceed or fall short of. This will allow you to not sell below the minimum profitable price for your business and avoid creating a bad image due to excessive prices for your potential buyers. 
• Organize your stock in catalog. The number of ready units is a key value when planning your pricing strategy. Before making modifications to prices, it’s necessary to find out what stock your store has, both for making a sales and income previsions correctly and for preventing stock outs. 
• Analyze tendencies for promotions and offers. The fluctuations both in sales and in competition prices help you to identify tendencies within the market. It is essential to know when users will be more worried about the acquisition of a product and when their purchase will be most necessary, as well as when they will be ready to pay for the same product. Analyzing this reality helps you plan promotions and other offers within your pricing strategy that allows you to be perceived as the most attractive e-commerce.   

Your best ally: a dynamic pricing software 

In the middle of this tide of data and formulas, the pricing strategy should mark the way to follow during the campaign. To today, there exists tools that, precisely allow to carry out both the planning and the management of prices in e-commerce having all the necessary variables for the business.  

A dynamic pricing software like Reactev, for example, obtains all the data about your competition an organizes it thanks to its system based on big data and artificial intelligence. Furthermore, this same 360º tool is what allows for automatization of changes in your dynamic pricing strategy for every product in your catalog though the included parameters.

Definitely having a dynamic pricing tool will make tasks like obtaining data and automatization more accessible to convert into a disruptive retailer. If you want to know more about the tool and how you can adapt it to your business, fill out a demo.