![]() Prices of big-ticket items that tend to be heavily researched by consumers-such as TVs or sofas-should remain relatively stable, since frequent price changes may frustrate the diligent consumer who has been doing research for months. (Customers who have been buying white crew socks from your stores for years shouldn’t get sticker shock when they come back to buy another pair.) Carefully consider the length of the purchase cycle as well as consumer expectations for each product set. In apparel, for example, prices of on-trend fashion items can change from week to week, but prices of basics (such as plain T-shirts or underwear) should generally stay more stable. Certain items are better candidates for frequent price changes than others. Algorithmically offering the option to wait until the weekend for specific items and then passing the savings on to the customer turned out to be an effective way to drive additional conversions.Ģ. ![]() The retailer found that a longer wait didn’t significantly affect conversion rates and gave the company the flexibility to optimize deliveries for capacity and cost. That means making thoughtful choices not just about ticket prices but also about promotions, bundles, personalized offers, and shipping times and fees.Ī furniture retailer, for instance, tested lower delivery fees and longer delivery times on the hypothesis that customers don’t necessarily want their new furniture delivered right away they’d rather get their new dining table on a Saturday, for example, than in the middle of the week. Your dynamic-pricing strategy must therefore reinforce your chosen value proposition. Instead, they base their purchase decisions on the total out-the-door price, which includes taxes, shipping costs, service charges, and any additional fees tacked on to the total price. ![]() Shoppers don’t just look at the ticket price of an item they want to buy. Focus on the out-the-door price, not the item price. Retailers that have benefited from dynamic pricing have generally abided by the following rules: focus on the “out the door” price, consider consumer expectations, test and refine your strategy, and plan your journey.ġ. There’s no one-size-fits-all approach, but close attention to the following dos and don’ts can dramatically boost a retailer’s chances of success. Even traditional retailers can reap tremendous benefits from merchant-informed, data-driven algorithms that recommend price changes for selected products at some level of frequency.ĭynamic pricing isn’t just for travel companies or e-commerce giants, and it doesn’t necessarily require ultrasophisticated software that changes every product’s price multiple times a day.ĭrawing on our experience working with retailers of varying sizes across the range of subsectors, we’ve identified critical yet often overlooked imperatives and pitfalls that should be top of mind for leadership teams deploying a dynamic-pricing strategy. But dynamic pricing isn’t just for travel companies or e-commerce giants, and it doesn’t necessarily require ultrasophisticated software that changes every product’s price multiple times a day. In e-commerce, Amazon has long been a leader in dynamic pricing the company reprices millions of items as frequently as every few minutes. It’s a staple of the travel industry: dynamic pricing is the norm for airline tickets, hotel rooms, and ride-sharing services. Simply put, dynamic pricing is the (fully or partially) automated adjustment of prices. Dynamic pricing, in particular, is poised to become one of the core capabilities that sets winners apart in the retail landscape of the future. And because the shift to e-commerce is expected to continue even in the postpandemic era, pricing will become an increasingly important competitive tool for retailers. With just a few clicks, a shopper can find out which retailer sells a particular item at the lowest price. Over the past year, as homebound consumers placed online orders for everything from groceries and soap to yoga mats and laptops, many people were reminded of how easy it is to comparison shop on the internet.
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