Understanding Dynamic Pricing
Dynamically pricing products is a strategy used by businesses that consistently increases and decreases prices based on external variables.
As a result, this pricing strategy is sometimes referred to as surge pricing or real-time pricing. Basically, the tactic is to offer the same item at different price points in various circumstances.
Pricing using Time
This is the most popular type of dynamic pricing.
Companies use this strategy to charge more when offering a faster service or delivery. For example, when customers pay more for fast delivery.
Also, time-based dynamic pricing is popular among online retailers who sell seasonal products. For instance, brands that sell beachwear increase prices during the summer and decrease them in the winter when there’s a lull.
Using Competitors as a Variable
As the subheading implies, this strategy focuses on the prices of competitors as a way of setting prices; it relies on the going market rate for the item.
A competition-based model is typically employed in highly saturated markets since minor price changes may be the key differentiator for many customers.
Changes in Demand
Issues in the supply chain unavoidably cause dramatic price changes.
What makes this kind of strategy powerful is that consumers have limited options due to a lack of competition from other companies that offer the same products or services. In these cases, companies need to be able to change prices quickly.
Advantages of Dynamically Pricing Products
When properly executed, dynamic pricing has been proven to be one of the most effective pricing models. Let’s go over some of the many important ways dynamic pricing is helping companies capture new markets and grow.
Empowers the Staff
When there’s a spike in demand, companies that employ dynamic pricing can afford to give a higher wage to their staff that has to deal with more work.
Enables Companies to Launch Enticing Offers
Discounted prices are a great way of getting rid of the number of overstocked products.
Get an Edge Over the Competition
Companies often undercut the competition by making timely price adjustments. Having the ability to instantly change the pricing strategy in response to market developments helps buttress a company’s position.
Customer Profiles Are Useful
Analyze the customer avatars of your leads and customers to create a better pricing strategy.
Customer profiles are the foundation of every successful dynamic pricing strategy. Companies, especially in the retail space, should update their pricing models as they make changes to their avatars.
The customer avatars should include the needs, goals, and pain points of your customers. The idea is to allow them to help you craft an effective pricing strategy that allows your company to offer higher or lower prices for different products in order to boost sales volumes from clients with different traits.
Rules Engine Are An Integral Software Component
Companies need a software app that enables employees to add all the relevant factors and data points to make changes to prices as soon as new market conditions come about.
These software solutions rely on business rules engines to instantly calculate prices using pre-defined rules. They are popular with businesses because changes to the prices and criteria can be made by non-technical staff members without relying on any support from IT.
Hello, My name is Shari & I am a writer for the ‘Outlook AppIns’ blog. I’m a CSIT graduate & I’ve been working in the IT industry for 3 years.