In e-commerce dynamic pricing could help you to increase your profits so what is dynamic pricing and what are the advantages of dynamic pricing in your E-commerce.
Dynamic pricing, also referred to as surge pricing, demand pricing, or time-based pricing is a pricing strategy in which businesses set flexible prices for products or service based on current market demands. Businesses are able to change prices based on algorithms that take into account competitor pricing, supply and demand, and other external factors in the market. Dynamic pricing is a common practice in several industries such as hospitality, travel, entertainment, retail, electricity, and public transport. Each industry takes a slightly different approach to repricing based on its needs and the demand for the product.
Timing and competitor price tracking is the key for dynamic pricing .For E-commerce businesses bellow 1 Mio USD turnover (annually) daily based timing could be enough. But you have to give response to daily price changes.
What are the Advantages of Dynamic Price Tracking
With Dynamic Pricing a company is much more flexible in offering the right price to the right customer, at the right time, for the right product. Examples of advantages of Dynamic Pricing are:
- Upselling: use low prices to attract customers, and sell additional high margin products and/or services
- Specific prices for targeted customer segments: e.g. different prices for households and businesses
- Specific prices for specific sales channels: e.g. different prices in online and offline retail
- Specific prices for specific periods: e.g. different prices at the weekend and weekdays
- Optimal discounting strategies: to make sure that all inventory is sold
This flexibility in offering prices allows companies to increase:
- Margins
- Revenues
- Market share
- Utilization
Dynamic pricing allows you to capture all three markets. Selling at a high price to those willing to pay it and capturing the entire market by also offering the same product at a discount price.
There is little public/scientific research available on the financial benefits of dynamic pricing. Several articles quote that Forester Research estimates that dynamic pricing may increase profits by 25%. However, the source of this claim cannot be found.