Pricing is one of the most difficult tasks facing online retailers. Customers are willing and able to go to significant lengths to compare prices, and there are many comparison marketplaces that will do the job for them. Set prices too high, and sales will be lost to the competition. Set them too low, and retailers miss out on potential profits. Following a fixed price set-it-and-forget-it strategy leaves retailers vulnerable to being undercut by competitors.
Dynamic pricing is the answer. Dynamic pricing — the alteration of prices to reflect demand, supply, and the competitive environment — can help retailers set prices at just the right point to maximize sales without cutting too deeply into profits.
By altering the price of goods in response to the competitive environment, eCommerce retailers can generate more sales. eCommerce customers are more price conscious than ever, and small price differences can have a substantial impact on sales volume.
By pricing in line with the competition, rather than a “best guess” price or fixed promotional price, retailers ensure that profit margins are maintained at an optimal level.
And, with a smart dynamic pricing strategy that employs the best pricing intelligence, retailers are in a position to outperform competitors who don’t invest in a dynamic pricing solution. In many of the most competitive eCommerce niches, the big players — including Amazon — invest heavily in dynamic pricing. Competitors without dynamic pricing are at a disadvantage.
Managing dynamic pricing manually is possible, but it’s far from ideal. For an online store with a catalogue that exceeds a couple of dozen products, the amount of work that goes into maintaining a competitive pricing strategy can be a full time job. For larger stores, manual pricing is not practical, and even for smaller stores, managing the sort of real time dynamic pricing that maximizes sales is time-consuming and inefficient, especially if competitors use algorithmic dynamic pricing based on “big data” pricing intelligence.
Fortunately, there are excellent solutions for Magento eCommerce merchants to facilitate automatic dynamic pricing.
Wiser is a dynamic pricing engine that integrates well with Magento via an extension. Wiser is capable of automatically discovering competitors and tracking their pricing. It can then dynamically reprice items on a Magento store according to configurable filters and custom pricing rules. Rules allow retailers to undercut their competitors or even charge a small premium on top of competitors’ prices, in addition to various other pricing strategies.
Dynamic pricing isn’t the answer for every eCommerce store — it wouldn’t be appropriate for a premium brand like Apple, for example, but for the majority of eCommerce retailers with price-sensitive customers, it’s an essential tool.