Retail TouchPoints: Five Trends to Anticipate in Dynamic Pricing
Through a special arrangement, presented here for discussion is a summary of a current article from the Retail TouchPoints website.
While many e-tailers may not have the resources of an eBay, Amazon or Staples, most can still tailor their pricing strategy to increase competitiveness online.
Here are some tips for bringing "Amazon Wisdom" to an online business:
Adjust your price according to the competition. If your competitors lower their price, follow suit. For example, maybe a top competitor has an item priced one cent below yours. Match that price. If this specific competitor goes out of stock, buyers will come straight to you.
Adjust price at a specific time of day. Online stores are not terribly different from those in a shopping mall. There is almost no traffic in the morning and little business in the afternoon. Evening is the peak time. Why not price a bit higher when most of the shoppers are ready to buy?
Adjust price according to web traffic. Measuring the traffic for specific items can indicate what products should be repriced higher or lower. Like simple economics, when the demand is low, the price should be dropped, and when the demand is high, the price should be raised. Web traffic will reflect profitable pricing decisions.
Adjust price based on conversion rate. Conversion rate is similar to traffic in that it indicates clearly when a product is not priced optimally. If there is lots of traffic and little sales, something is wrong. In this case, the price is usually too high. Conversely, items that get a fair amount of views with a high conversion rate can be marked up due to their inherent popularity.
Price according to sales velocity. In this circumstance, the price is based on how well the item is sold. For example, if you wanted to sell 10 units/week of a given product, the conversion rate goal would follow as 10 sales per week. To reach this goal, adjust your pricing according to the competition, time, traffic and conversion rate. This will require you to fluctuate the price and experiment with these strategies until you get to the designated sales target.
What advantages do online stores have around pricing optimization versus brick & mortar stores? Which of the suggestions mentioned in the article offers online retailers the greatest opportunity for growth? Are there others you would add?