Dynamic pricing is a process that collects, analyzes, and acts on big data in order to price intelligently in real time. This technology used to only be available to giant companies who had the biggest wallets and most innovative talent. That’s because it requires complex algorithms that must take into account many external factors like time of day, supply, and location which translate into the best price. Now dynamic pricing is widely used by retailers in all industries around the world because it has proven to be useful in improving profit, revenue, and sales. Fluid pricing is a must for retailers because showrooming and price comparison is on the rise, with 96% of smartphone users planning to showroom in the future. In order to not get left behind, retailers must have flexible pricing that can react to competitors, sales volume, and more.
What Impact It Has on Brand Value
While some retailers may not have the resources of the retail giants, they can still be competitive and price for profit with an effective strategy. Using price intelligence software is becoming the new standard and this has introduced an ongoing challenge to figure out what pricing strategy is best for each retailer’s purposes and brand identity. Inconsistent prices (especially prices relative to competitors) take a toll on the overall perceived value of a retailer’s products. A solid pricing strategy can be a great way to maintain brand value by avoiding price wars.
Who’s Getting Ahead and Being Left Behind
Amazon has positioned itself as a pacesetter, repricing at least every 10 minutes. While Amazon does boast huge market share, it no longer has a monopoly on pricing strategy. Many other retailers are starting to understand the importance of pricing intelligence: 22% percent already use pricing software, 7% plan to start in the next 6 months, and 29% plan to implement in the next year. But what about the other 34% of retailers? Dynamic pricing adoption has been increasing year over year and there’s still time for these retailers to get up on the pricing revolution. Many retailers are getting with the price intelligence times and reaping the benefits that used to be reserved for the industry’s big dogs.
Implementing dynamic pricing can get murky in stores because when a consumer sees that a lower price is available after they’ve already made their purchase, it’s a sure way to lower customer satisfaction. Another similar issue is when stores have different prices online compared to the ones displayed in store. Retailers must have a consistent pricing strategy across channels because on average it takes 12 positive interactions to make up for one negative customer experience.
Why Retailers Should Consider It
One way that retailers are using dynamic pricing in stores and keeping loyal customers happy is through mobile apps. Safeway is a great example of a grocery store that encourages shoppers to download their app to get added discounts that they wouldn’t have access to otherwise. It is kind of a hybrid program because it acts as a loyalty program that provides added value for customers who give a bit of personal information (email address and location) and it changes the prices of many products on the spot.
Dynamic pricing is revolutionizing retail and making it possible to increase profit significantly. Whether in-store or online, retailers are understanding the value of pricing intelligence and using it to improve their bottom line.