Precision pricing during inflation
11/03/2022 - Price optimization
A precision pricing strategy involves highly competitive pricing based on the company’s actual costs and profits. It does not look for meaningless price rises to increase company profits, but a gradual and measured increase in revenues in the medium and long term. This is the right strategy at times, like now, when inflation is rising, and when uncontrolled price increases affect the market and consumer satisfaction. Precision pricing can help you grow profitably with a positive brand image by better adapting to the wider context. To apply precision pricing, start by setting your immediate e-commerce goals and analysing your current pricing strategy and results. Then consider the following factors:
How to implement a precision pricing strategy
- Fine tune your metrics and study the costs and profits of each product and service in your catalogue. Precision pricing works is effective it is based on each item’s actual manufacturing and shipping costs.
- Use demand forecasting systems. Knowing when demand for raw materials and final products will increase helps e-commerce businesses better plan their purchases. This helps reduce their costs, as prices often rise in peak demand. You are also exposing yourself to the potential risk of stock outs with the consequent risk of losses.
- Classify your products according to their features and perceived value. Before setting prices, organise your catalogue to see more clearly what prices you can raise, by how much, and which should remain almost unchanged. With precision pricing it is not right to raise prices by 5% across the board, each product, and each price, reacts differently.
- Find out more about your consumer’s behaviour. You need to know how price-sensitive your customers are and what behaviour to expect when prices change. This is especially true during rising inflation when consumers are more sensitive.
Armed with this information, you can also more accurately segment your customers. This will help you choose which customers to aim a price at, such as discount campaigns or seasonal offers.
The value of dynamic pricing tools
Precision pricing and all the data analytics involved are impossible without advanced dynamic pricing tools. This software allows you to collect a vast volume of data about demand and competitors. It then processes it using deep learning techniques. It then uses the data to predict and react to changes in the market agilely. It recommends the right prices for each moment and situation following complex pricing rules based on variables such as profit margin, conversions, or competitors’ prices. These price fluctuations will be key to boosting e-commerce growth.
The most advanced tools, such as Reactev, ensure that price positioning in the market is a priority in all strategies. It will set a different price for each product, whether there are thousands or millions, fulfilling the objectives of precision pricing.
Category: Price optimization
