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Sofia Kondrat - Talented Content Manager At Gepard PIM
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Sofia Kondrat
Content Manager at Gepard
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eCommerce eCommerce Strategy eCommerce trends

What is Dynamic Pricing in Retail & How to Manage it?

4 min read
Published: July 9, 2024

Have you ever had to pay different prices for a ride on the same taxi route? Then you have already felt the real-life dynamic pricing example in your own skin: the greater the demand, the higher the rate the algorithm offers.

What is dynamic pricing, and for what reason has dynamic pricing grown in popularity? What dynamic pricing strategies can help attract more profits without destroying customer loyalty? And how can this process be managed and optimized?

You will find all the answers in our today’s article. So, let’s go:)

What is Dynamic Pricing in Retail?

eCommerce dynamic pricing is an approach to valuation in which the price of a product changes in real time depending on changes in various factors: demand, supply, exchange rates, customer geolocation, etc.

The main goal of the dynamic pricing strategy is to constantly set a competitive price that includes the maximum possible business profit, taking into account the market situation.

What are real life dynamic pricing examples in retail?

Global giants such as eBay and Amazon use various dynamic pricing algorithms to achieve two goals: to attract as many customers as possible and to increase profitability.

According to Business Insider, Amazon changes prices about 2.5 million times a day, meaning that the cost of a single product is revised on average every 10 minutes. For sure, some customers may complain about such an outrage, but this Amazon dynamic pricing strategy increases profits by 25%.

What is another dynamic pricing example in eComemrce sector?

MediaMarkt, a European electronics company with over 500 stores, implemented dynamic pricing in their brick-and-mortar locations using electronic price tags. To maintain customer trust, they offer partial refunds if an item’s price drops within two weeks of purchase. This approach addresses the potential customer dissatisfaction associated with frequent price changes.

For what reason has dynamic pricing grown in popularity?

The rise in popularity of retail dynamic pricing has been influenced by several key factors:

For what reason has dynamic pricing grown in popularity?

The rise of data analytics tools lets retailers gather and analyze tons of info in real time. This data-driven approach helps them make smart pricing decisions based on consumer behavior, seasonal trends, inventory levels, and competitor prices.

Technology advances have made it easier to implement dynamic pricing. Automated tools, machine learning, and AI analytics capabilities allow retailers to adjust prices more efficiently.

Consumers can now compare prices in minutes thanks to online platforms for pricing comparison. With this level of price transparency, retailers need to adapt their pricing strategies to stay competitive.

These factors have made dynamic pricing popular in retail. While it requires some investment, the benefits for businesses are undoubtedly significant.

When is it worth implementing dynamic pricing?

When you want to quickly and automatically change prices on a site with numerous SCUs, taking into account certain external and internal factors:

  1. competitors’ prices, sales, and promotions;
  2. prices for similar products;
  3. expected conversion, logistics, and marketing costs;
  4. out-of-stock products (to increase the margin for products that are in demand, and only you have);
  5. availability of your product in stock;
  6. exchange rate fluctuations;
  7. margin corridor;
  8. product expiration dates, etc.

What are popular dynamic pricing strategies in 2024?

It’s important to note that the strategies below can be used in combination, depending on the specific goals of your business.

Popular Dynamic Pricing Strategies in 2024

  • Demand-based dynamic pricing strategy — setting a higher price during periods of high demand and a lower price during periods of low demand.
  • Time-based dynamic pricing strategy — changing prices according to the time of day, day of the week, or season. For example, raising prices during peak hours or periods of high demand.
  • Competitor-based dynamic pricing strategy (or competitive pricing) — is a strategy that uses competitors’ prices as a basis for setting your own.
  • Dynamic discounts and flash sales — using temporary discounts or special offers to stimulate sales for a short period.
  • Personalized dynamic pricing strategy — applying customized prices to individual customers based on their purchasing history, behavior, and other personal factors.
  • AI-powered dynamic pricing strategy — using AI to analyze large amounts of data and determine optimal prices in real time.
  • Bundle pricing is a strategy where companies bundle several products together and offer them at a reduced price compared to buying each item separately.
  • Event-based dynamic pricing strategy — tailoring prices based on certain events, promotions, or holidays.

How to implement dynamic pricing optimization?

Dynamic pricing optimization using data collected from BI (business intelligence) systems is becoming increasingly popular. These platforms pull data from various sources, like SAP and internal company systems, and use it to inform pricing decisions.

With this data, retail and e-commerce specialists can easily adjust prices and gain better insights into demand and consumer behavior. This helps them develop more informed strategies to boost customer satisfaction and business profitability.

What role does the PIM system play in dynamic pricing?

A PIM system centralizes all your product data, making sure it’s accurate and consistent across every sales channel, which is essential for an effective dynamic pricing strategy. By integrating with BI systems, it lets you analyze real-time data, helping you set up prices based on current market trends and inventory levels.

How To Make The Most Of PIM Implementation
12 min read
Alina Virstiuk
Product Information Management

PIM Implementation: Full Guide [2024]

Learn about the guidelines for PIM implementation and software features that will help you address challenges the process can face.

eCommerce PIM PIM software product content product information management

Managing product information becomes much easier, reducing errors and ensuring your pricing adjustments are always based on the latest data. Moreover, a PIM system helps you handle complex pricing rules and strategies, allowing for more precise and responsive dynamic pricing. It also boosts teamwork between different departments, ensuring marketing, sales, and finance are all on the same page, enhancing your overall pricing strategy.

Final Thought

Dynamic pricing retail plays an important role in modern e-commerce, allowing retailers to promptly adapt their prices to market needs and competitors’ actions. This ultimately maximizes financial results.

Using modern tools for price monitoring and dynamic pricing, you can optimize product repricing – automate pricing strategies to increase profits, even with a small staff of category managers.

Sofia Kondrat - Talented Content Manager At Gepard PIM
Written by Sofia Kondrat
Content Manager at Gepard
Sofiia Kondrat is an experienced content writer and content manager, passionate about creating high-quality, engaging content that resonates with readers. With a keen eye for detail and a deep understanding of industry trends, Sofiia is dedicated to producing informative, well-researched content that helps businesses stay ahead of the curve. When she's not writing, you can find her doing music & singing, exploring the great outdoors, or planning her next travel adventure.

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