Optimizing profit by Dynamic Pricing

02/01/2015

Angela de la Vieja

Dynamic Pricing is a pricing strategy designed to use flexible prices depending on market offer and demand. This technique is known in certain industries such as Flight booking, in which prices change depending on certain issues such as booking in advance and available sits. The mentioned strategy is not exclusive on the airline industry, and it can be used in other many industries like retail. The first retailer applying this strategy is Amazon, which achieved a great increase in profit by estimating the optimum selling price of its most popular products. In essence, the invoicing of an e commerce is just the number of units sold times its final price, thus if we can maximise any of this points we will be boosting our profits.

How can we apply this strategy properly? As we mentioned at the beginning of this article, dynamic prices have to give response to the offer and the demand on a particular moment. In order to do so, we ought to know on one hand the reference price of a product (offer) and on the other hand the impact of this price in our shop (demand). Both issues can be measured using an intelligence pricing software, as we will explain in following lines.

The first step would be to know, for each one of our products, what is the reference price indicated by the competition. Based on this price and applying our pricing policy we will change our selling prices, analysing its impact on generated profit. Is the sales increase we got through a decrease of price big enough to increase our profit? In this case the intelligence pricing algorithm will adjust our strategy in order to change prices to achieve a point in which our sales and selling price are generating maximum profit.

We can simplify the previous point saying that Dynamic Pricing is just a succession of A/B test in our products prices, estimating by each one of them what is the ideal selling price.

Knowing and understanding the meaning of the data produced by our business is essential to optimize our systems.

11/11/2022

Consumer behavior: How can behavior tracking be effective for setting the right pricing strategies?

Behavior tracking is becoming massively popular today. As a result, pricing strategies born from studying consumer behavior are a merchant's dream come true. If done right, it can conquer every market for the business quickly. With abundant data available, the strategic makeover of the pricing models is becoming easy for companies.

What is behavioral tracking, and how is the data beneficial in pricing?

For a quick understanding, behavioral tracking refers to gaining in-depth knowledge and insights into consumers through their web data. Their browsing habits, spontaneous decisions, shopping interests, and preferences come under behavioral tracking.

How can enterprises use customer behavior data?

Companies can use customer behavior data as a tool to strengthen their hold on the market. A customer’s preferences, values, and tendencies allow businesses to work in sync with them through the collected data. Apart from this, customer behavior can also aid in:

Tailoring customer needs for customer retention

Personalization is becoming the heart of a company’s growth. No matter in which area an enterprise is functioning, tailoring the services, products, and solutions is becoming increasingly crucial. Uniqueness and personalization attract the crowd like no other.

Increasing the overall value

One of the best ways customer behavior data affects a business is by upgrading the value of customers for the business. The customer’s characteristics allow the company to target the people that match the business prospects well.

Optimizing every type of content

Everything that is up for digital display requires content. You must have seen companies unveiling their products or services through advertisements and making the initial public appearance. Two essential sales strategies – upselling and cross-selling comes through content optimization.

Pricing Strategy

Last but certainly not least is the influence of customer behavior data on the pricing strategy. The pricing strategy essentially constitutes content derived from data analysis. Companies need to have a dynamic approach to the pricing system to attract the right customers.

17/02/2015

Saint Valentine’s Day, always a good opportunity

V-Day is looming, a long-awaited date for all and also a good occasion for the eCommerce. According the study conducted by Prosper Insights and Analytics, it is forecasted the average consumer expense that day will be the highest in last years. Furthermore, 25% of them will buy online, which means an increase of 4% regarding 2014 (The US department of Commerce). This is, therefore, a key date where market competitiveness increase and which could be assumed as a big opportunity for our business or, a big fail if we do not adopt the correct strategies.

How to turn this event into an opportunity? To achieve this goal, we need to adapt our prices to this hostile environment, i.e. we need to develop an appropriate Dynamic Pricing strategy that allows us to adapt our prices to the variations produced in supply and demand and to position us ahead of our competitors. In V-Day, the frequency in changes will be higher, carrying it out each hour or even each minute. It is estimated that 65% of leader retailers have the ability to respond quickly at these variations, such Amazon. For this reason, it acquires great importance the correct use of a software specialised in price motorisation of competitors. Do not miss the time and adapt your business to new adversities.

28/12/2022

Which are the best footwear marketplaces to sell on?

Footwear marketplaces are booming. The last decade has seen the launch of new specialized marketplaces with millions of different users. Among them are Spartoo, Sarenza and Farfetch, portals with international reach. Their main value is that they unite hundreds of footwear brands, as well as offering clothes and accessories. Although each has its own characteristics, they are all vertical marketplaces, i.e., they focus on a specific area, and their sales categories are interrelated. For sellers, these portals provide an opportunity to expand sales channels and drive the globalization of their e-commerce business. We explain how to sell on these footwear marketplaces so that you can assess whether they align with your plans for the future and then start defining a possible pricing strategy.