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How to Implement Dynamic Pricing

It’s evident that retailers need to utilize dynamic pricing to compete successfully online, with players like Amazon dominating the space. While dynamic pricing seems intimidating, fixed pricing causes businesses to miss out on profit and potential sales. 

Modern-day dynamic pricing uses pricing intelligence and competitive insights, along with supply and demand to automatically update pricing. It enables retailers to optimize their prices based on real-time inputs and maximize revenue. In this blog post, we’ll share how to implement dynamic pricing to get the best results. 

Align Strategy with Business Goals 

As always, your business goals should align with your strategies. The same is true for dynamic pricing, you should ensure your dynamic pricing rules are aligned with your company’s goals. For example, if your business goal is to be a low-cost provider, be sure your dynamic pricing rules and criteria align with offering low-cost items by setting price minimums and maximums below your industry’s average. All retailers should set pricing boundaries in their dynamic pricing model to ensure their prices align with their business goals and brand reputation. Setting price minimums is key to protecting your margins and ensuring you are maximizing revenues.

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Consider All Pricing Factors 

To successfully use dynamic pricing in a way that leads to long-term growth, you need to consider all pricing factors. Price elasticity, changes in demand, and competitor pricing are just a few of the factors to keep in mind. 

Measuring the price elasticity of demand of your products helps you determine how sensitive demand is to price changes. This allows you to establish a price range for elastic (sensitive) products when setting up boundaries for dynamic pricing. 

Another factor to consider is the change in demand and seasonality of a product. Any change in demand, such as a volatile fashion trend, will require the pricing strategy to change. Dynamic pricing guidelines should be in line with changes in the market. Pricing can jumpstart demand by attracting customers with low prices during the slow period while maximizing revenue with higher prices when demand is higher. 

Competitors’ Prices 

Your competitors’ prices are yet another factor to take into account – in fact, they are so important, they needed a section of their own. To build a successful dynamic pricing strategy, build an intelligent demand estimation engine fueled by competitor data. 

Utilizing competitive analysis, you get an inside look at which of your products are priced higher, but are still winning the market—this is where you command a premium. This can be due to excellent customer service, or a unique value offered. By taking advantage of your price premium, you’re able to continue selling products at a higher price that customers are still willing to pay to maximize your profits. 

Coupling competitive intelligence with elasticity, changes in demand, and historical sales is the beginning of an aggressive dynamic pricing strategy. 

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Use Clean Competitive Data 

Reliable competitive intelligence data requires you to start with clean data. Data mining is no walk in the park if done manually; it’s time-consuming and the data is prone to human error. Not to mention, the prices will be outdated by the time you’re done manually mining data. 

Reliable software will ensure products are accurately matched from website to website, but mediocre software may contain mismatched products. Inaccurate data leads to possible mistakes in pricing, such as accidentally pricing a $25 blouse at $75, which can turn shoppers away. 

Test Pricing Strategies 

Ultimately, retailers have the decision to build an in-house pricing solution or partner with a third-party pricing solution. However, the leading reason to outsource and automate dynamic pricing is the ability to easily test pricing strategies to drive revenue higher. 

By automating dynamic pricing and using a machine learning algorithm, you are able to completely remove human bias from your pricing strategy. Additionally, using software makes it very easy to A/B test pricing strategies to optimize product pricing. 


To succeed online, retailers should implement dynamic pricing into their pricing strategy. Utilize these tips to ensure your strategy is set up for correctly. Dynamic pricing is a powerful tool that maximizes your revenue and increases sales. Retail leaders have proven how effective it is and time is of the essence when it comes to this pricing strategy. 

Editor’s Note: Contributing writers are Matt Ellsworth and Patricia Montenegro. This post was originally published in September 2017 and has since been updated and refreshed for readability and accuracy.

Min-Jee Hwang

Min-Jee is the Director of Marketing at Wiser. She has extensive experience working with SaaS companies and holds a BA from Carnegie Mellon University and an MBA from NYU Stern.

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