Dynamic pricingDynamic reacting is the term used to describe the phenomenon when a retailer reacts to competitor pricing changes using continuous competitor price monitoring. Dynamic pricing, in a general sense, refers to the practice of keeping product prices flexible in accordance with the changing market conditions.
While computing dynamic prices for the commodities sold, retailers can keep the following parameters in mind:
- Competitor monitoring
- Supply and demand
- Conversion rates
- Sales objectives
- Other internal and external market factors
The retailer can react by either setting premium prices or by adopting aggressive price cuts to compete against the competitors. The main aim of dynamic pricing is to increase profits and raise revenue levels. This is done by capitalising on the competitor’s market stand and the prevailing conditions. Competitor availability is a key factor in dynamic reacting in pricing too. Consider an example. The absence of the competitor’s product lines in certain market segments can be seen as an opportunity to aggressively market one’s own products. This fills that gap whilst fetching great prices for the retailers.
In the modern era, where e-commerce is the prevalent framework, online retailers are particularly known to adjust their prices in response to competitor pricing.
Dynamic reacting in pricing is a known phenomenon in most industries. However, it is particularly common in the electricity, entertainment, hospitality, public transport, and travel arenas. Of course, every specific industry type has its strategies of repricing their products and services, which is based on their specific needs, the market demands, and their past experience.
Price intelligence is the key technology that drives dynamic reacting in prices. For the retailer to react to the competitors, he must first monitor their market stand and behavior. Competitive price intelligence allows them to undertake this very task. This technology uses modern tools such as data mining techniques and artificial intelligence to observe competitor behavior.
Retailers can also benefit from competitive price tracking and monitoring software. These provide valuable insights into the competitive landscape in real-time. Such software can also help evaluate the strength of the pricing strategies in place.Strategy cardStrategic importance (retail)Strategic importance (ecommerce)Ease of usePractical implementation
1. Dynamic reacting in pricing is a great way to develop the right pricing strategy for your products and services.
2. Retailers can boost sales by knowing their competitors and their prices well.
3. By knowing the pricing of your competitors, you can set the prices of your own products accordingly so you get more margins and better sales.
4. Often, retailers might be operating in isolation, without regards to the prevalent market trends. This could lead to narrower margins when selling similar quality goods at lower prices. Knowing the prices of the competition can help them still offer cheaper products than the competitors while also getting greater profits.
5. Old stock can be a nuisance and could lead you to sell your products even below the original cost price. Price intelligence helps retailers study the prices of their competitors and deliberate upon the stock updates rather than holding them for too long.
6. Competitor monitoring also enables retailers to catch a glimpse of what the competitors offer when it comes to the product range and diversity. With a watch on competitor catalogs, retailers can attract consumers by offering something different and truly unique.
7. Another often neglected aspect of dynamic reacting is when retailers use competitor monitoring to obtain information about the functioning and strategies of their competitors. Using this information, they can make it easier and painless for consumers to make the switch to their own brands.
1. The best way to dynamically react to pricing is to quickly respond to the competitor’s price changes and adjust your own strategies accordingly in time.
2. It is best to rely on computer software and modern data mining tools over human resources when it comes to competitor monitoring since, in today’s world, gathering information manually is a herculean task with new products being launched every single day.
3. The time spent in data collection is better spent in analysing the information gathered by AI-based tools and in quickly moulding pricing strategies to one’s benefit.
4. Modern price intelligence software tools can also automate data analysis after collecting it, so retailers can benefit from automation of repetitive tasks.
5. When using competitor monitoring techniques, it’s important to consider the various sources from where information is being obtained. Retailers must consider the competitors’ social media, blog posts, website announcements, email alerts, and the like for a complete picture of the contenders.
1. Dynamic pricing might seem a complex topic at first, but, contrary to popular belief, it is actually simple to use and once properly configured is the best marketing strategy.
2. Price intelligence can also help retailers to enter into better deals with their suppliers with a knowledge of how their competitors function in the market.
3. The key idea and the most important thing to remember is to decrease the response time as much as possible. A faster response to the changing competitive scenario is likely to fetch greater returns by increasing sales rather than a delayed response to the conditions changing by the minute.
4. To stand apart from the competitors in the modern times, it is imperative for retailers to use modern technology to their best advantage over their competitors and make their indelible mark.
5. E-commerce is one segment where the impact of pricing reactance is extremely important since prices change frequently. Lightning deals are struck every minute to attract and allure customers. It’s essential for online retailers to have a sound knowledge of their competitors’ market strategies so they can explore workarounds and profit.
ConclusionDynamic reacting in pricing heavily relies upon competitor price monitoring, which can offer early warning signs into the ever-changing market conditions.
New product arrivals, upcoming price slashes, as well as the entry of new players in the market out of nowhere can all be traced to help retailers reap maximal profits by adjusting their own product prices.
The basic premise of dynamic pricing is to find out everything about all your competitors at the right time.