How to implement a Smart Pricing strategy
01/25/2024 - Pricing strategy
Smart Pricing strategies involve continuously adapting prices to market conditions to boost profits. This type of strategy relies on setting a series of pricing rules that are applied based on competitors’ movements and supply and demand variations, as well as considering aspects such as seasonality. The result is changing prices that constantly adapt to circumstances to optimize sales.
To define an effective Smart Pricing or Dynamic Pricing strategy, you need to analyze various factors, such as competitors’ prices or user behaviour. This information will drive your sales catalogue price changes. Although it may seem somewhat expensive for an eCommerce company, this automated procedure delivers direct benefits to the company. These benefits include increased revenue and profit margin protection, time savings, increased team productivity, minimization of errors in administrative tasks, and greater control capacity. It will also help you achieve a more consistent brand image, since the price changes will follow patterns previously set by you, or your company.
First Steps in Smart Pricing: Define your goals and data sources
Firstly, align your pricing strategy objectives with the global eCommerce objectives. For example, this could be to increase profits or improve competitive positioning. These objectives may vary depending on what you want to achieve in each time period.
You must also identify any conditions that might affect the competitiveness of your prices. These will help you define your pricing rules. Each of these factors will constitute a data source that you must consider ensuring you always set the most appropriate price. One of the most significant determining factors is your competitors’ catalogues and prices. You will need to always know other companies’ prices for identical or similar items to yours, to respond to their movements and change your prices agilely and quickly. As you gather more and more information about other eCommerce, predictive analytics will enable you to anticipate the next steps in their pricing strategy and stay one step ahead of them.
Use an automated repricing tool
Managing and analyzing all this data and manually changing prices is a superhuman task for the team responsible. It can lead to errors, especially when the task needs to be done constantly, almost in real-time, as with large sellers like Amazon. The solution — and the best way to implement a Smart Pricing strategy — is to use automated repricing software with Artificial Intelligence.
These tools make analyzing competitors’ prices and other key factors possible. They then recommend the most appropriate prices at any time based on advanced pricing rules. For example, you can specify that your profit margin must always remain within a specific range, or that the price of a particular item does not exceed a specific value, even if the competitor’s does.
The most advanced software, such as Reactev, has an Artificial Intelligence engine to process millions of hugely diverse past and present events, detect correlations and patterns, and predict future situations with high precision. Every data and pricing decision is a learning tool to optimize future pricing and achieve higher profits. Use these tools to improve your Smart Pricing strategy and optimize your sales in the medium and long term.
Category: Pricing strategy
