Price Management

“Everyday Low Pricing” vs. “Dynamic Pricing Strategy”

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   J.C. Penny recently introduced their “Fair and Square Everyday Pricing”, promising simple everyday low pricing for their products and doing away with the traditional dynamic pricing model. The results to date have been dismal, share prices have dropped and J.C. Penny is once again shedding customers like they are going out of style

What went wrong? In a nutshell, by abandoning traditional dynamic pricing strategies, J.C. Penny has essentially boxed itself into a corner.Under their “Fair and Square Everyday Pricing”, they did away with the “usual” format that customers were used to – coupons and seasonal discounts and decided that pricing was to be determined by a series of “tiers”. In today’s day and age, with brand loyalty a thing of the past, consumers follow pricing. By committing themselves to their “Everyday Pricing” and abandoning the “normal” pricing strategy their customers were used to, they were unprepared to react when their competitors lowered prices and real-time market conditions changed. “Everyday Low Pricing” can work, if the prices are actually the lowest in the market – such as Amazon or Walmart (which don’t rely on the typical seasonal discounts and coupons). In the case of J.C. Penny, their prices were not actually the lowest out there, and they did not develop the intelligence tools to ensure they would be able to adapt as their competition introduced seasonal discounts and coupons.

What can be learned from J.C. Penny’s failure from an e-commerce perspective?

E-commerce is an incredibly and increasingly full market. Online stores must compete through a variety of channels (search, comparison shopping, marketplaces, etc.), and face a constant battle to maintain their visibility. Unless the product is something truly unique, or there is a unique experience provided (such as great customer service), for most consumers, the deciding factor is usually pricing. E-commerce businesses that are able to develop a dynamic pricing strategy which can respond swiftly to changes in the market will be able to capitalize on this crucial deciding factor by offering prices which accurately reflect “real-time” market conditions.

In order to develop such a dynamic pricing strategy, online retailers must ensure that they have the necessary competitive intelligence tools to make informed decisions based on market supply and demand.

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Better decisions can only come from better data.

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