What are market dynamics and how to optimise your prices?
11/16/2022 - Dynamic pricing
Market dynamics are the movements of supply, demand and other forces that influence the pricing of all e-commerce businesses. Knowing market dynamics and keeping abreast of changes is essential to the profitability of any brand or retailer. Controlling the context in which your company operates will help you react more quickly to changes. It will also help you be prepared to compete with competitors with optimal prices and an effective overall pricing strategy. We explain how market dynamics affect online stores’ operations.
Don’t forget that market dynamics do not only determine companies’ price changes. They also affect the way customers react to price changes and how suppliers respond to changes in demand. Ultimately, any slight change in market dynamics will mean that the different players that make up online commerce will react in one way or another. Knowing these moves is key to the way you adapt and to your growth.
Your goal is to identify the optimal price at any given time
Within market dynamics, to encourage business development, your objective must be to set optimal prices to obtain maximum profit. These optimal prices should be attractive to consumers, better than competitors, and cover all your production costs and expenses. In turn, the optimal price must be variable, as are the market dynamics themselves, to adapt to supply and demand conditions. To determine the optimal price, you can consider the following:
- The perceived value, i.e., how much customers think each of your products or services is worth.
- Competitors’ prices. These will help you choose similar, higher, or lower prices depending on your objectives.
- The demand curve. This varies based on consumers higher or lower level of price-sensitivity and the socio-economic context.
Pricing with dynamic pricing software
How do you identify the optimal price and adapt to market dynamics at any given time? With advanced dynamic pricing software. These tools collect millions of data about the market. For example, the level of demand or competitors’ prices and offers launched at the time. They recommend the most appropriate prices. They follow advanced pricing rules based on the e-commerce’s core variables, such as profit margins, conversions, or company positioning. By using powerful algorithms, the combined analysis will allow you to define an effective pricing strategy that boosts consumer engagement.
The most advanced tools, such as Reactev, allow you to segment prices by product and customer to give each buyer persona a price they are willing to pay. They consider multiple factors that condition market dynamics to ensure the company’s performance and productivity are as good as they can be.
Category: Dynamic pricing
