Dynamic Pricing: Explode Your Profit Margin

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One of the keys to the success of e-commerce is the race to get the best price. The different online shops adjust the prices of their products more and more in order to get more market share. In order to beat the competition it is necessary to compare products in order to implement an ideal pricing strategy.

After doing a price study of the competition, it is time to take action. You cannot get the best price if you have to manually scan the web for rivals’ products. To do so, there are tools that allow you to monitor the web for competitors’ products. Within this software is also integrated a program that allows you to update the price of your products automatically. These are the well-known dynamic pricing tools.

This analysis gives you a global vision of your vertical that you can use to your advantage, identifying patterns that allow you to anticipate the movements of the competition and act accordingly. The deep knowledge of your vertical is a tool that lets you know more about your store’s products, their elasticity or where they are in their life cycle.

Using the Dynamic Pricing tool

Dynamic pricing programs allow you to instantly adjust your product prices to remain competitive and improve your conversion rate. They work through “connections”. These can occur in three ways:

  • Automatic: From the EAN-European Article Number code, the application tracks the competitors and groups the connections directly.
  • Semi-automatic: If your competitors’ products do not have any standardized labelling system, the software proposes connections by comparing images, text or similar characteristics. You should always accept suggestions to add them as connections.
  • Manual: By copying the URL of a product advertised on the web you can make a manual connection to add it directly to your competitors.
  • After adding all the competitors’ products it is time to design a strategy based on the rules of the dynamic pricing application to get the best price.

    There is a rule that will be above the others, this is usually to maintain a specific profit margin in all occasions. The rules that are established go from the general to the particular, with the latter having more weight when implementing the strategy.

    These rules can be, for example, to always have your products 3 euros cheaper than your competition. The rules can be more specific, defining the products according to labels or choosing a specific competitor -or the competitor with the lowest price in the market-.

    When you have finished designing your pricing strategy, you can save it under a certain name, choose whether to receive alerts when your rivals modify their prices to update your article feed, and stay competitive. You can customize the alerts to see if the price changes are incremental or not. If your competitor lowers the price of a product on day 1, you will receive the alert, but if it stays the same the next day, you will not receive a second alert.

    Because there are many highly seasonalised markets, you can save a market strategy and activate it only when specific campaigns occur. This option can be useful if you have an e-commerce such as toys-almost half of the sales occur between November and January-or weather products-mountain or beach products.

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