Dynamic Pricing Is an Effective Strategy to Achieve Success in the Ecommerce Market

5 Nov.2018


Every one of us chooses to operate an eCommerce store to fulfil the prime objective of achieving customer retention, retention of an existing customer for any new product helps us a lot to save more.

One of the best ways to do this is to allow customers to know about the set pricing on a particular day in advance to keep them at a perfect pace with the increasing demand. Here comes the role of dynamic pricing.

What is dynamic pricing?

Dynamic pricing refers to time-based, surge or real-time pricing and it acts as a technique focusing on setting the product price in accordance with both supply and demand even within a small time frame. In addition, the concept considers other important aspects, which include customers’ perception, competitor pricing and overall brand value.

The logic behind the concept of dynamic pricing is a simple one i.e. it involves the act of markup pricing i.e. profit margin obtained from a specific product you want to sell. In accordance with the existing market, you will find variation in the percentage of markup value.

The technology and psychology behind it


Dynamic pricing includes many innovative technologies to provide a dynamic range of various products prices. Whenever e-commerce websites target prospective customers and realize that they fail to convert prospects into customers, they opt to remarket their offered markets. For this, business owners offer decent price reductions to convert any window shopper into a permanent customer.

In this situation, e-commerce sites use dynamic pricing to determine whether any person would purchase the respective product after he or she witnesses change in its price. Most of the auction e-commerce stores even use dynamic pricing to make the most from their customers.

For this, they apply special algorithms to increase the product’s price with each placed bid and sell the same to customers with unique ones. For the successful implementation of dynamic pricing strategy, you should hire e-commerce web developers intended for the identification of illogical errors to make your prices effectively dynamic. 

The psychology behind dynamic pricing

Even though dynamic pricing appears as an entirely new concept in front of us, it is not a new one. Instead, the pricing technique mentioned here has its deep root in the retail industry since its inception. Reason for this is that offline retailers have involved in practising dynamic pricing for a long time. They calculate the ratio of total expense to total revenue while sticking between them.

The mentioned old technique has adopted many innovative techniques to obtain a flexible price range but its cornerstone has always remained a common principle i.e. to earn the highest possible revenue. Dynamic pricing is of highly prominent in case of online platforms because the online market is not only highly agile, but it also allows easy access to information.

Why e-commerce marketers should go with it?


If you own or manage an e-commerce store, you should never overlook adopting a dynamic type of pricing model by the application of the right technology, as it has considerable influence on the success of your business. You may understand the significance of dynamic pricing for e-commerce marketers based on a few proven use cases, which you may face in the industry.

Demand-based pricing technique

Whenever the seasonal or general demand of your product offers remains low, you should eliminate the additional stock to avoid any extra cost. In contrast, when the demand becomes high, you should take benefit by increasing the product price to achieve higher profits.

Thus, demand-based pricing helps you to obtain benefits based on demand fluctuations prevailing in the market, such as the increase in prices in case of high demand or your competitors have the same products out of their stocks.

Time-based pricing technique

This technique involves a dynamic pricing approach that allows various e-commerce retailers to optimize their price in accordance with specific times of a particular day, specific month or year and the entire product lifespan available in the market. In this case, you will find time as a prime element instead of instant hypes in the products’ demand. Time-based dynamic pricing is useful whenever any particular product becomes outdated.

Electronic brands often use the strategy to boost the demand for their products’ old versions. For instance, whenever Apple launches any new version of its product, it intentionally lowers the price of its old version to entice a large number of customers.

Competitive pricing

Today, you will find more than hundreds of competitors in the market involved in adjusting their prices consistently. In this case, you have to monitor them and come up with the necessary actions in accordance with the present market’s competitive pricing technique.

In case you deny the competitors, you may not know whether you price at too much high or too low price and thereby, you may detach from the industry. This leads to low conversion rates, which adversely affect your business growth and your sales, as your competitors will work actively as per the available market trends.

How does it help to beat competitors?


Statistics have revealed that most of the online shoppers opt to compare available prices before they finalize their purchases by visiting/comparing different online stores. Furthermore, based on intense competition in the complete e-commerce sector, online pricing has proved to be a prime element to influence the entire purchase decision.

In this situation, it has become essential for every retailer to stay highly attentive based on both optimization and management.

Imagine a scenario where one among your competitors apply plenty of discounts and undercut the pricing. Positively, you may use the concept/technique of dynamic pricing to react to the respective discounting strategy automatically and thereby, regain the competitive status for one more time.

Your prices may sometimes become highly competitive whenever you compare them with the closest rivals. Even in some cases, an increase of only 10% or 20% would not cause any harm in the market competitiveness. With the aim to avail this opportunity, it is essential or you to choose fresh competitor intelligence along with the dynamic pricing.

Take away

To conclude, we should say that e-commerce stores should invest in both dynamic pricing and competitor intelligence whenever they make an investment in both of them, you will likely retain the overall competitiveness and enhance the overall profit margin significantly.

Author Bio:

Varun Patel is the founder and CEO of Coreway Solution, a global ranking offshore web development company which provides out-of-the-box IT solutions across the globe.

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