Over the years, E-commerce has experienced lots of growth. It is expected to be close to a five trillion-dollar industry by the year 2021.
With this growth, it is unexpectedly harder for new e-commerce businesses to grow as fast as the established businesses and for better results, new e-commerce businesses need advanced tools and strategies. These will ensure that that they price their products competitively and can convert traffic on their sites into buying customers.
What is a conversion in e-commerce?
In e-commerce, conversion refers to persuading visitors to your website to complete a particular call to action. This can be registering for a newsletter, buying your products or even just creating a wish list of the products they would like to buy from your online shop.
Dynamic Pricing to promote these types of conversions
Dynamic pricing is a pricing strategy used by e-commerce businesses to ensure that their products are priced within the range of their competitors at all times. With an accurate and proper Dynamic Pricing tool, you’ll find a perfect pricing strategy that suits your business and helps you increase conversions.
How do dynamic pricing tools increase conversions?
Favorable pricing
With dynamic pricing tools, products in your online shop will always be affordably priced. This will ensure that customers will find your shop cheaper or equal to the market’s average price for all products (thus, competitive enough for the market you’re in). As a result, this will lead to more visitors on your website converting to customers.
Number of products on your e-commerce store
With a dynamic pricing tool, you can quickly scale your e-commerce website to accommodate a large number of products. As more and more customers appreciate your friendly prices, they will request for more related products that you will then add to your e-commerce store.
With more products, more visitors to your website will find a variety of products to buy. Thus, there will be higher conversion rates on your store and this will then translate to higher sales and higher profits.
What are the benefits of using a dynamic pricing tool?
Automatic repricing
By using a monitoring tool on your e-commerce site, you ensure that your products will always be at the right price.
This tool monitors your competitor’s online shops and sets the prices of your products at the price range you specify whether cheaper or more expensive by a small margin. Most online buyers carry out the price comparison on different sites before they buy, so being able to monitor your competitor’s every move is crucial.
The site with cheaper prices gets more customers, therefore more traffic on your eCommerce site.
Protects your profit margins
A monitoring tool calculates your costs and ensures that the price it sets is lower or equal to your competitors and also nets you an acceptable profit.
Stock Control
Dynamic pricing allows e-commerce shops to hold just enough stock at any given time.
They enable you as the business owner to identify when you have overstocked. You can then organize profitable offers for the overstocked products to help keep your stock at acceptable and profitable levels.
Make better business decisions
When you have a monitoring tool, you can quickly identify when market trends and consumer preferences change.
With this information, your e-commerce business can have the advantage of being the first-mover in meeting the new and ever-changing customer needs.
Consequently, conversion rates on your online shop will multiply as well as your profits. This will set you up as an attractive investment avenue which will help you raise capital to grow and scale your business.
Enhance negotiation power
As a retailer using dynamic pricing tools, you are able to negotiate better prices for the products that you stock from distributors or manufacturers.
As large supermarkets have done for ages, the data that you gather will enable you to advise manufacturers and distributors on the best price for their products. You can provide them with sales data of their products and justify why they need to offer their products to you at the price you feel is the best for your customers and business.
More conversions
If you can attract visitors to your e-commerce business, you want everyone who visits your website to turn into a customer.
With dynamic pricing, this is easily done. In the online business world, price comparisons are done all the time and quickly. No one wants to buy a more expensive product when they can just open another tab and visit another online store.
With the best prices for a particular product, they will end up coming back to buy from your website. The next time they need something, they will remember that your website offered the best value at the price for all the products on sale.
You can focus on the different products you have for sale
Depending on the niche that your e-commerce business serves, dynamic pricing will enable you to look at all your products individually and from different angles.
You can quickly identify those products that are integral for your website and how to set their prices. You can quickly and easily gather data on seasons and the type of customers who buy different products.
Enhanced advertising ROI
The data you collect from dynamic pricing tools enables you to market your business to your exact target market for the type of products that you stock. This results in better ROI on advertising and improved profits.
Marketing and advertising are one of the largest business costs, especially for online business. With better targeting, comes qualified customers which result in improved sales and a positive return on the cost of marketing and advertising.
Gathers real-time market information
With this tool, e-commerce businesses can get all the price information of their competitors in real-time.
How to choose a dynamic pricing tool
Its capability
The best dynamic pricing tool is versatile in what it can do to help increase conversions on your e-commerce site.
First, it should be able to quickly identify competitor prices and automatically change the price of your products to reflect the demand and supply in the market and to ensure that your business makes a good profit.
Without this, your dynamic pricing tool will see you go out of business quickly. Set appropriate levels of pricing and any automatic price reductions to ensure that in spite of being the price leader in your market, you are making substantial profits.
Gathers substantial market data
Without data on pricing and buying trends from the market, it will be difficult for your pricing tool to be effective.
It should quickly gather data on similar product prices from other websites. Where there are discrepancies, it should help lower or increase to match and beat those of competitors.
Applicable to a range of industries
The dynamic pricing tool that you choose should offer its services to a wide range of industries that operate online shops.
Saves time
Before there was a tool like this, monitoring your competitor’s selling price on similar products was a tedious and time-consuming task. It would require lots of time that could be used in improving other aspects of the business to monitor and change your prices to reflect a lower or equal price to your competitors.
Disadvantages of Dynamic Pricing
Can be used exploitatively
As a dynamic pricing tool is able to follow trends and see spikes in demand and supply, it can lead to a higher price when demand is high. This can be seen as an exploitative business practice especially if it happens with essential products.
Can disorient your customers
Customers may end up feeling like they were conned out of their money when they realize that the product they just bought has just gone down in price. This could lead to negative reviews of your business which could have a great impact on future sales.
When using this strategy, it is important to let your customers know that the prices of products may vary from day to day or within hours.
Increases competition
With price out of the way, you and your competitors now need to prove to your customers that you are the better retailer. This will then increase competition in aspects of the business that are not related to prices. For example delivery time, or even quality of products.
The state of online shopping
Online shopping enables quick comparisons. Even with a dynamic pricing tool, there will always be a website selling similar products at a lower price than your shop.
Seek to sell your products at acceptable to prices for a sustainable business.
Conclusion
In conclusion, for everyone running an e-commerce business, a dynamic pricing tool is a must-have. It helps keep the price of your products below that of your competitors and enhance the conversion rates on your e-commerce store.
It also helps build your e-commerce business based on other aspects that are not dependent on the price of goods as offered in the market by your business or your competitors.
