Your pricing strategy determines your earnings as well as how your customers view the products on your eCommerce website.
Some of them may appreciate that the price of an item which they keep coming back to your website for never changes, but a bigger number of customers will be thrilled to buy from your store if that item was priced lower.
Dynamic pricing and fixed pricing are both used by online retailers, but one of them just happens to offer more benefits than the other.
In dynamic pricing you adjust the price of your product based on its demand and supply in real time. Fixed pricing, however, is setting a price which doesn’t change regardless of reason or condition.
Why Use Dynamic Pricing?
You can get ahead of your competitors in the eCommerce race with dynamic pricing as it increases the demand for your products, and consequently improves your profit margin.
Because you can set tiered prices on your product for different types of customers, you can tap into a wider market.
Customers love that you are willing to adjust the prices of your goods, hence the reason they stay loyal to you.
Their positive reviews of your products even help drive traffic to your website and subsequently generate more sales for your business.
Checking the pricing strategy of your competitors as well as your product’s actual price in the market using a real-time price monitoring software makes setting a competitive price easy.
Imagine the significant amount of money you can save using that strategy instead of manually assessing the value of your product or hiring somebody to do it for you.
What about Fixed Pricing?
If there is high demand for your product within a well-defined target market, which guarantees gains above and beyond its market value, logic dictates that you use the fixed pricing strategy.
Businesses that offer seasonal products or services which require specialised tools and skills would normally use the fixed pricing strategy too.
However, this may not be the best approach to omnichannel retailing as it could hinder the growth of your business, especially online where shoppers have many choices.
If you want to constantly meet, if not exceed, your profit margin, then you have to aim for a broader market.
Even if your current customers are comprised of the richest people in society, you run the risk of losing sales the moment they start looking around your competitor’s store.
Factors Affecting Dynamic Pricing
This type of pricing strategy entails familiarity with the different types of customers.
Aside from their age, gender and location, you have to look at a customer’s shopping behaviour and lifestyle.
Split up compulsive shoppers, meticulous shoppers and returning customers, among others, into separate groups.
That way you can come up with segmented prices and assign them to each group.
Dynamic pricing, though, is not just about pulling down prices to make the consumers happy.
It also involves constant monitoring of the market price of your product, and how your competitors are dealing with it.
By taking all of these factors into consideration, you can rest assured dynamic pricing will increase your conversion rate as more customers will be interested to buy from your online store.
What pricing strategy are you using and how does it benefit your business?