The benefits of a variable pricing strategy

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Beneficios de una estrategia de precio variable


Profile picture for user Maria Jose Guerrero

Maria Jose Guerrero

Pricing must be dynamic. Changes in the prices of products and services of an e-commerce business boost the optimisation of sales. This is the basic principle of a variable pricing strategy, which aims to adjust prices to market and consumers' needs to increase the company’s profits. Here at Minderest, we explain its benefits and what you need to consider before implementing it. 

When implementing a variable pricing strategy, factors such as demand, competitors’ prices, region, or seasonality tend to be studied, to review and modify item prices regularly. New pricing models suggest that other more consumer-dependent elements be considered, such as users’ behaviour, the resultant sense of urgency or increased convenience, or the effectiveness of engagement campaigns. These factors can also contribute to the success of a variable price campaign. 

For example, you can raise the prices of a product or service without increased demand as long as you announce that it will only be available for a limited time. This creates a sense of urgency that speeds up the final purchase decision, and increases the price that customers are willing to pay. Ultimately the aim is to sell the product to the customer at the right time at the best price.

What do variable pricing strategies bring to e-commerce businesses? 

As we have seen, the main benefit is the optimisation of sales by implementing appealing prices depending on the time and context. They also reduce the risk of losses by adjusting to changes in supply and demand. In addition, from users’ responses to price changes, one can calculate the elasticity of demand and anticipate behaviour in future scenarios. 

On the other hand, through a variable pricing strategy, companies can achieve a better positioning against the competition by offering more attractive prices and adapting quickly to competitors’ price changes.  

The main disadvantage is that users may observe arbitrary price rises and drops if price changes do not follow a clear objective and strategy. This can affect the brand image of the e-commerce business. It can create a sense of distrust among users, who will look for other brands that give them an increased feeling of security.

What do variable pricing strategies bring to e-commerce businesses?

How to implement a variable pricing strategy 

  • Segment your database and analyse your demand volume. 
  • Analyse market trends and the impact of seasonality on demand.
  • Set a minimum and maximum price based on the value of each product or service. 
  • Monitor competitors’ prices to adapt to them. 
  • Assess the ability to run a marketing campaign linked to these new prices. 
  • Carefully evaluate the results obtained, then you can gradually optimise the strategy and achieve higher profits. 

As a final recommendation, you can use an automated dynamic pricing tool to help speed up decision making. Current software evaluates supply and demand, and the historical price of the e-commerce site itself, to recommend the optimal prices for each item. In turn, their  self-learning ability allows them to be ever more precise in setting prices according to the market’s needs.

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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. 


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.


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.