Dynamic pricing and repricing strategies: the advantages

Regardless of their size or industry, businesses are increasingly adopting dynamic pricing. This approach involves adjusting the price of a commodity or service in real-time based on factors such as demand, competition, and inventory levels. Dynamic pricing ensures businesses maximize profitability while offering customers reasonable and competitive prices.
What might you gain from dynamic pricing, and how can you start using it? Read more below.

What is dynamic pricing?

Dynamic pricing is an adaptable method of determining your online shop’s listed prices. It uses AI and ML (artificial intelligence and machine learning) to consider competitor costs, among many other things. An algorithm adjusts your prices as required, meaning you are always competitive through immediate flexibility without needing live input.
In today’s fast-paced business environment, dynamic pricing has become indispensable. With e-commerce on the rise, customers have access to different products and services offered by numerous vendors. In short, there is more competition today than ever before, making it difficult for companies to differentiate themselves and attract consumers.
The most challenging aspect of dynamic pricing is keeping up to date with all the competitor, supplier, and customer data you need to monitor. Pair an efficiently developed database with a web-scraping service for the best results. Web-scraping uses AI and ML to track live pricing data from all sorts of sources, flooding your database with valuable insights. As a result, you’ll stay relevant to the latest trends and have enough time to adjust pricing strategies accordingly.

Advantages of dynamic pricing

One key advantage of dynamic pricing is that it allows businesses to adjust an item’s price based on market factors such as changes in demand. This way, organizations avoid lost sales due to higher-than-average prices or missed opportunities thanks to lower prices. The exact setup depends on the individual approach. Still, prices generally go up during peak times and drop when the ‘off-season’ comes around.
An example of where this pricing strategy is often is the airline industry. Here, providers adjust prices based on the time of day, day of the week, and seasonality. They’ll almost always charge higher prices during peak travel times. The result is the highest possible profits while still offering competitive prices.
Most industries are similar. For example, online retailers charge more based on the proximity to a public holiday such as Christmas. Gas stations monitor each other’s prices to compete for the most accessible rate. Insurance companies pledge to provide the best annual prices possible, and so on.
Dynamic pricing has another great benefit for businesses: it allows them to react swiftly to changes in the market. For instance, if a rival company lowers its prices, you can immediately modify your listings to keep up and stay competitive. This helps companies to avoid losing market share and remain relevant in today’s demanding business environment.

Repricing strategies

Consider various repricing strategies when implementing dynamic pricing. Companies often use one of two standard repricing methods to adjust their pricing strategies and stay competitive.

• Rules-based repricing: Rules-based repricing involves setting rules based on factors such as competitors’ prices, minimum and maximum prices, and profit margins. This approach is far simpler (and therefore cheaper) and most suitable for smaller organizations with a lower budget.
• Algorithmic repricing: Algorithmic repricing is a more advanced approach that utilizes machine learning algorithms to adjust prices according to market demand and competition. Algorithmic repricing requires more advanced technology and expertise than rules-based repricing.

Getting started with dynamic pricing and repricing strategies

Are you keen to get started with dynamic pricing? Wonderful. We truly believe it’s the only way a business can remain competitive in today’s landscape.
In summary (and in brief), here are a few steps your company might consider taking:

• Establish your brand’s current pricing and market positions.
• Produce clear, SMART goals and targets for where you want to see these positions in a set period.
• Use your goals to develop a dynamic pricing strategy.
• Implement best practices and codes of use.
• Establish the beginnings of your database.
• Choose a price comparison tool.
• Begin filling out your database and watching your prices adjust accordingly.
• Monitor, adjust, and alter as necessary.