Rule-Based Repricing vs Algorithmic Repricing

rule-based-vs-algorithmic

There are two kinds of people in this world: those who follow the rules, and those who break them. When it comes to your eCommerce business, the best option is to adopt both concepts and use them to your advantage. However, nothing is perfectly 50/50, and whether you break more rules than obey them depends on what you’re hoping to accomplish with your business

Now we aren’t talking about any rules that could ruin your business. Commission and trade laws should definitely be respected, among others. However, the rules start to bend when you get to your company’s pricing strategy. It’s best to be as flexible as possible, which usually includes automated repricing.

Repricing comes in different forms: rule-based and algorithmic. Both of which are effective ways to stay ahead of the competition, but the right choice is going to vary across retailers. In this blog post, we’re going to lay out the biggest differences between rule-based and algorithmic repricing in order to help you find the one that will work best for your pricing strategy.

Living by the Rules

c6da5ff0fafc66d3a8d22e9a48eb72bb
Rule-based repricing gives you full control to change your prices throughout the day. It requires you to manually set up rules against competitors and see the effect on your bottom line. You can price above or below by percentage or currency and measure the results each day.

Different scenarios will call for different kinds of rules. You can price in accordance with competitor prices, or you can set rules for different factors, like seasonality or time of day. The rules you set for your products will not interfere with one another, but rather they will work together to make sure your price is optimized.

You can also set a rule that will maximize your price if you don’t have any matches against competitors. This means you would have no competitive pressure when it comes to your price, so the rule will change the price to your previously established maximum allowed price. That way you can milk the most profitability out of these products.

Algorithmic Repricing

render of a colorful glossy flow chart diagram
If rules sound too robotic and labor-intensive, you should consider algorithmic pricing with a dynamic pricing strategy. It uses algorithms to completely automate the repricing process and continuously optimize your prices. It uses the same idea as rule-based pricing, but takes more factors into account to make sure you aren’t missing out on any pricing opportunities.

When it comes to automated repricing, algorithmic repricing is about has hands-free as you can get. This is because the algorithm can be self-learning, meaning it will continuously optimize itself to perfect your pricing with little to no obligatory human interaction.

Screenshot-2014-06-30-14.40.10
Dynamic pricing algorithms take multiple factors into account to establish prices that are appropriate for your brand. It monitors competitor and seasonality trends to determine your product’s elasticity. From there, it estimates demand and crafts your prices around that potential reach. Instead of cross analyzing rules, it takes various factors into account to make sure your price is optimized throughout the day.

Rule-based and algorithmic repricing are accomplishing the same goals, but their executions are vastly different. If you are looking to have more control in your repricing process, rule-based repricing is up your alley. Algorithmic repricing is the way to go if you are unsure about your own analysis, as it can make sense of more data than the human mind ever could.

More often than not, algorithmic repricing is the most profitable option for retailers. Rules can limit your store’s true potential, which is why they are often made to be broken. You can break them and get ahead with a dynamic pricing strategy.

If you’re interested in learning how algorithmic repricing can improve your selling process, check out Wiser’s dynamic pricing engine, WiseDynamic.

the_blog_footer2

About Wiser

Wiser provides a complete suite of solutions to give retailers, brands, and manufacturers the edge to stay both competitive and most importantly, profitable.Want to learn more about what Wiser can do for your business? Sign up for a 14-day trial here.

Photo Credit

Photo Credit

0
Share
Arie Shpanya

Arie is the COO, Executive Chairman, and Co-Founder of Wiser, a dynamic pricing and merchandising engine for online retailers and brands. He has extensive experience in business development with a focus on eCommerce (eBay and Amazon), and is a guest blogger on Econsultancy, VentureBeat, and more.