Janni Ellegaard Langholz

5  examples  of  how  dynamic  pricing   can  boost  your  online  sales     Dynamic  pricing  is  commonly  known  from  the  travelling  and  hospitality  industry,  but   has  since  moved  into  retail  and  especially  online  shopping.  Today,  it  has  become  an   important  tool  for  ecommerce  websites  that  wish  to  keep  track  of  their  competition   and  increase  their  number  of  conversions.  Here  are  5  examples  of  how  dynamic   pricing  can  boost  sales  in  your  online  shop.       1.  Ensure  revenue  and  boost  your  ROI   2.  Beat  your  competitors   3.  Optimal  pricing  based  on  real  time  demand  and  supply   4.  Avoid  dumping  prices  too  low   5.  Increase  your  customer  return  rate     1.  Ensure  revenue  and  boost  your  ROI   Conversions  are  important  for  everything  online,  but  for  online  stores,  where  a  conversion  is  often  a  sale,  it  is  also   important   to   keep   an   eye   on   the   price   of   conversion.   If   your   online   store   has   a   high   number   of   conversions,   your   turnover  is  probably  also  high  –  but  your  revenue  might  not  be.     With   dynamic   pricing   you   create   a   set   of   rules,   making   it   possible   for   you   to   set   a   price   margin   that   will   keep   the   sale   price  from  being  set  too  low  compared  to  its  cost.  It  might  not  boost  conversions,  but  it  will  make  sure  that  you  are   always  driving  revenue  on  the  sales  that  you  do  convert.             2.  Beat  your  competitors   One  of  the  simplest  ways  that  a  dynamic  pricing  tool  will  help  you  boost  online  sales  is  by  giving  you  an  easy  way  to   keep  track  of  your  conversions  and  sales  –  and  your  competition.  While  you  would  previously  need  a  manager  at  your   physical   store   to   keep   track   of   supply   and   demand,   and   set   the   prices   accordingly,   a   dynamic   pricing   tool   will   automatically  let  you  know,  if  an  item  is  suddenly  not  performing  as  well  as  before,  or  if  your  competition  is  dropping   –  or  raising  –  prices.   By  not  having  to  wait  for  someone  in  your  company  to  notice  that  sales  are  dropping,  you  will  be  able  to  catch  and   correct  the  problem  earlier  and  gain  revenue  that  would  otherwise  be  lost.     3.  Optimal  pricing  based  on  real  time  demand  and  supply   Being   cheaper   than   the   competition   might   be   the   most   obvious   reason   to   use   dynamic   pricing,   but   it   can   also   be   relevant   for   the   opposite,   i.e.   for   raising   prices   when   the   market   is   right.   Using   a   tool   for   dynamic   pricing   lets   you   know   when   items   are   in   high   demand   or   sold   out,   making   customers   willing   to   pay   a   higher   price   for   a   specific   product.     If   you   e.g.   run   an   online   shop   selling   exercise   equipment,   you   might   use   dynamic   pricing   when   all   your   potential   customers   are   suddenly   forced   to   work   out   at   home   instead   of   at   their   usual   gym.   With   a   higher   demand   for   exercise   equipment  to  use  at  home,  you  could  raise  the  price  of  those  items,  as  customers  are  willing  to  pay  more  for  a  product   that  they  need  here  and  now.     A  price  increase  can  also  be  driven  by  exclusivity.  If  you  are  the  retailer  of  a  product  that  is  low  in  stock  or  sold  out,   and  at  the  same  time  very  hyped  and  in  demand,  it  might  also  be  relevant  to  sell  at  a  higher  price  for  a  period  of  time.   Not  only  will  you  increase  revenue,  the  product  will  also  seem  more  exclusive,  which  also  drives  sales.       4.  Avoid  dumping  prices  too  low   One  of  the  times,  when  you  are  most  interested  in  catching  shoppers’  interest,  is  when  your  online  store  has  a  sale   going   on.   By   using   dynamic   pricing,   you   can   ensure   that   your   sales   strategy   doesn’t   just   generate   conversions,   but   also  drives  revenue  for  your  online  business.     While  it  is  important  to  have  the  high  sales  numbers,  you  don’t  want  to  be  too  cheap  compared  to  your  competition,   as   you   will   only   loose   out   on   revenue.   A   dynamic   pricing   tool   will   help   you   watch   your   competition’s   sales   prices,   making  it  possible  to  adjust  your  own  prices  accordingly.  If  you  put  an  item  on  sale  for  $100,  while  every  other  online   store  has  it  on  sale  for    $150,  you  can  adjust  your  price  to  $125  –  keeping  your  position  as  the  cheapest  option,  but   decreasing  you  loss  on  the  sales  item.     5.  Increase  your  customer  return  rate   Last,  but  not  least,  dynamic  pricing  might  help  you  gain  trust  with  the  customers,  leading  to  them  returning  to  your   online  store  and  generating  more  sales.  A  large  portion  of  consumers  will  base  their  purchases  on  price,  but,  as  we   know  from  the  physical  stores,  their  decision  will  also  be  made  based  on  trust,  loyalty  and  brand  perception.  Dynamic   pricing  can  be  part  of  building  a  relationship  with  your  customer  and  strengthening  your  brand’s  image.   Having   prices   that   are   constantly   much   higher   than   the   competition   will   probably   scare   customers   of,   but   prices   that   fluctuate  too  much  can  create  confusion  or  –  worst-­‐case  scenario  -­‐  even  mistrust  to  your  brand.  A  dynamic  pricing   tool  will,  with  the  right  pricing  plan,  help  your  steer  clear  of  these  traps  and  help  you  gain  customers  that  trust  your   brand  and  are  subsequently  more  likely  to  return  to  your  online  store  for  their  next  purchase.     Conclusion   A  dynamic  pricing  tool  is  essential,  if  you  wish  to  keep  up  with  your  competition  and  make  sure  that  your  online  store   both  converts  and  drives  revenue.  This  article  gives  you  five  ways  that  dynamic  pricing  can  boost  your  online  sales,   but  there  are  many  more  –  some  more  relevant  than  others  depending  on  your  industry  and  type  of  online  shop.