Foolproof Steps To Create And Implement A Dynamic Pricing Strategy
Dynamic pricing often confuses price discrimination because of the price change flexibility it offers. This isn’t the case when implemented correctly using an AI-powered retail pricing software solution. Dynamic pricing is about intelligently changing product prices based on factors such as season, demand, events, and geographical location. Dynamic pricing offers retailers the ability to maximize their profits and thereby their revenue when done correctly. Changing the product price isn’t a random process and so proper software must be carefully chosen as a first step to ensure smart pricing-related decisions made.
The following are the steps to successfully create and implement a dynamic pricing strategy.
Step 1: Be Clear About Your Objectives
You cannot proceed to create a strategy that magically works if you don’t define your business goals first. What do you wish to achieve with the dynamic pricing strategy? Do you want to be a business that is known for providing consistent low-priced items? Do you want to be someone who is known for their high quality and high priced items? If you want to be a business that offers similar prices to local and international customers? When you pinpoint your objectives and goals, then you can begin forming your dynamic pricing strategy because you have a foundation to work with.
Step 2: Know What Affects Prices
Your customers can compare products in minutes. But what affects how much your customers are willing to pay? You should be aware of what affects your product prices. Does a new product launch from your competitor affect the price expectation of your customers? How sensitive is the demand to price fluctuations? Is your product a seasonal one? All these factors affect prices and how you should set them to maximize profits. You want to consider these when you are developing the dynamic pricing strategy.
Step 3: Get Competition Information
Studying your competition isn’t futile because it gives you the scope to catch opportunities missed by your competitors. You need a dynamic pricing software solution that has embedded AI so you can get the competition-related information you need. What is your competition selling and how are their price changes? Are low-priced items of your competitor selling faster? Keeping an eye on your competitor prices can help you develop a robust strategy that works and ensures you are not losing out on profits in an attempt to leave your competitor behind.
Step 4: Accept That Real-Time Price Change Is Inevitable
You cannot wait for days to change your prices and it is a harsh reality you need to accept. Amazon takes just two minutes to refresh prices and there is no reason you shouldn’t do the same. You need to be on top of the game at every second and this is only possible with a retail pricing software solution. When you have a solution that constantly monitors competition, market changes, elasticity, compares similar products, and helps you change prices that don’t hurt your brand reputation, then you can safely and confidently change pricing to your benefit while keeping your customers satisfied.
Step 5: Test And Monitor Your Strategy
Some advanced retail pricing software solutions allow you to test what-if cases so you can find out what can happen if a particular scenario plays out. Building a dynamic pricing strategy and then hoping it would always work is not smart. Testing and monitoring ensure you have built the right dynamic pricing strategy. This enables you to make changes if you are not happy with the results or if you want better profits to boost your revenue. With the help of a retail pricing software solution where processes are automated, most of the price forecasting will likely be done for you so you can make intelligent decisions.
A dynamic pricing strategy can only be as successful as you allow it to be. For some businesses, it has become a game-changer while for others it has become a disaster solely because of how it implements. Using an AI retail pricing software solution such as Inoptimizer and In competitor by Intelligence Node, you can ensure you are pricing your products at the sweet spot so you are happy and so are your customers. Don’t stick with static pricing but change pricing so benefit everyone involves.
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