05 Dec 2019
Oksana, copywriter
Bear in mind, the whole purpose of dynamic pricing isn’t all about making sales.
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typical variables in dynamic pricing determination

Price is among the key priorities when the consumers make their final decision whether to buy a product or not. Too expensive or too cheap offers can easily avert the buyers from your store. What if other stores have smaller prices? Or similar products of cheaper brands attract visitors more? The solution for not losing the client base is keeping track and controlling the costs on your website with the help of dynamic price strategies.

What is dynamic pricing?

The idea of selling goods at different prices that vary depending on customer demands is called dynamic prices or, in other words, price optimization.
To automatically update pricing, modern-day adaptive market algorithms use business intelligence and strategic analysis, along with supply and demand examination. This helps retailers to refine their costs and increase sales based on real-time information updates.

Dynamic prices are usually affected by product search results or outside conditions, for example, time or location. For instance, a model could alter costs on various occasions, such as expanding ticket costs sooner to the beginning of an event. Or then again, you could diminish costs for clients in explicit geographic locations.

Principally, dynamic pricing is regulated due to specific conditions. It’s based on search history and data analysis that calculates how much shoppers are ready to pay for certain goods based on these factors.

You are lucky to live in the era of big data. It gives the opportunity for e-commerce business owners to collect the necessary data for flexible price calculations easily.

The benefits of dynamic pricing

Implementing dynamic pricing as your principal digital strategy is a large step for keeping your business competitive regarding the price policy. A constant change is a golden rule of any industry, especially those concerning modern technology. Don’t want your e-store to trail far behind, keep up with the recent innovations.

Besides, keeping track of the information about the products you sell is a great plus for leading a successful and organized business.

How does dynamic pricing work?

You may ask in what way the dynamic prices might be calculated. For these purposes, the business needs special self-improving algorithms that take into account some of the variables below to build pricing policy:

elements of dynamic pricing software data manpower

Implementing dynamic pricing is far from simple task, as it involves analyzing diverse niches of your online business. The many sides of it include the following:

  • Market analysis for price competition
  • Analyzing profitability
  • Automated price management
  • Forecasting upcoming price trends
  • Customer analysis for personalized pricing

Dynamic pricing pitfalls

Watch out, here are some potential mistakes you’d better avoid on your way to dynamic pricing implementation.

Quantity is not always quality. Alternating the prices too often can become a motive for your clients to  “wait you out” for the lower price in. Even worse outcome may occur, – a complete ruining the customer trust in offers you provide.

In addition, it is not a road to success to rely entirely on your pricing technology. Let the machine do the most difficult steps, but don’t expect it to do all the work for you in a proper way.

Remember, the whole purpose of dynamic pricing isn’t all about making sales. Everybody can sell more by simply setting very low prices and waiting for people to fall for it. You should establish an aim to determine the exact sum which enables low consumer purchasing friction and high profit margin.

Elements of dynamic pricing


There are three main features, the right choice of which ensures the usefulness of flexible pricing.

If you want pricing software to work for you, it should be comprehensive, profound and intelligent.

With its help, you will be able to gather as much data as needed to build a pricing strategy. It is not less important to make meaningful information out of these data points and know how to use it for automated pricing predictions that can come in handy in the future.

To effectively implement your dynamic pricing strategies, you need to work with various data sources. Be specific with your targets as for the profit margin, revenue, and company growth. Once you overcome these milestones, go on to the practical implementation of your pricing strategies.

Although the automated processes are on the scene, it all needs manpower to run it. Here are three reasons why:

  • For determining which automation software will do in terms of collecting and processing data;
  • To make realistic decisions concerning pricing based on the processed data, together with automated predictions or suggestions;
  • To continuously maintain the software functionality.

Dynamic pricing tactics for eCommerce

Here our e-commerce development team gathered some of the most widely-spread types of dynamic pricing depending on your business’s needs.

Segmented pricing

Segmented pricing can target your business towards a larger market. To gain as much of the market as you can, by providing a wide range of prices. You could offer lower and higher versions of your goods to bring in revenue from customers with differing budgets.

Peak pricing

Peak pricing can bring you more profit by analyzing fluctuations in demand. Increase prices when demand is high or when your competitors’ stock is low. This strategy is very papular among Airlines and travel booking sites.

Time-based pricing

With the time-based pricing, eCommerce companies can easily adjust products’ costs according to the time of day or how long a product has been on the market. Retailers can increase the demand for an older product by making it cheaper.

Penetration pricing

If you are trying to penetrate a new product into the market but not sure how consumers will receive it, penetration pricing is the best solution for you. It allows you to set a lower price than the eventual market price in order to persuade consumers to try your product.

How to implement dynamic pricing into your eCommerce step by step

1. Align Strategy with Business Goals

If your business goal is to be a low-cost provider, be sure your algorithm and criteria align with offering low-cost items by setting price minimums and maximums below your industry’s average price point.

2. Consider All Pricing Factors

Measuring your product’s price elasticity helps you determine how sensitive demand is to price changes. This allows you to set an elastic (sensitive) product price range when setting dynamic price boundaries.
Another factor that should be considered is a product’s change in demand and seasonality. Any change in demand, like a volatile trend in fashion, will require a change in the pricing strategy.

3. Compare competitors’ prices

Get an inside look at which of your products are priced higher, but are still winning the market – this is your price premium. By taking advantage of your price premium, you’re able to continue selling products at a higher price that customers are still willing to pay to maximize your profits.

4. Use Relevant Competitive Data
Reliable competitive intelligence data requires you to start with relevant data. Trustworthy pricing software will ensure products are accurately matched from website to website

5. Test Pricing Strategies

By automating dynamic pricing and using a machine learning algorithm, you are able to completely remove human bias from your retail pricing. Additionally, using software makes it very easy to A/B test pricing strategies to optimize product pricing.

The price issue has always been among the toughest. Most people do pay attention to the numbers on the price tags, that’s why this topics must be taken up seriously. At SapientPro we tray to introduce automated processes an BI to make the business leading easier. Contact us if you need any aid or advice with creating a dynamic pricing strategy that will work for you.

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Attending the biggest professional Javascript conference in Ukraine, JS Fest 2019
Oksana, copywriter
Attending the biggest professional Javascript conference in Ukraine, JS Fest 2019
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