Unraveling the Secrets of eCommerce Pricing Intelligence
Most of your customers decide whether to buy your product based on the price alone. While they may not conduct too much research, they’re likely to check at least three competitors to check their prices, and if you fall back, they’ll go someplace else.
The thing is that you have so many competitors, and you never know where to look. Even if you have better prices today, what happens if they change them overnight and you’re no longer competitive in the morning when the customer checks? Sure, it may seem like this would merely result in the loss of a few customers, but this is never the case (nor would it be dismissable even if it were).
More and more enterprises are using eCommerce pricing intelligence to get a real-time price analysis and make all of these updates as they happen. This tool tracks all these costs, helps you update your pricing strategies, and even monitors/analyzes user behavior regarding these prices and price changes. With all of this in mind and without further ado, here’s what unraveling the secrets of eCommerce pricing intelligence will look like.
Factors affecting eCommerce pricing
There’s a reason so many specialists struggle with coming up with the price for their eCommerce products. First, you need to consider the costs. If you’re buying them from someone else, you need to consider the cost of acquisition. If you’re manufacturing them yourself, you have to consider the cost of production.
Regardless of which of the two is involved, you must also consider your operational costs. Warehousing, shipping, and fulfillment all come with expenses of their own, and this is something that you just can’t afford to dismiss.
Then, there’s the issue of competitor pricing. No matter how much it costs to acquire/manufacture the product, if all your competitors sell products for less, you can’t afford to charge the full price. Otherwise, you won’t be able to stay in business for too long.
Demand fluctuates over time, so you will have to adjust the price to the current supply. Some events affect supply change disruption, and adjusting to these changes (which are often quite sudden) is a huge challenge.
One of the hardest things to understand is consumer behavior, especially in terms of things like price sensitivity and perceived value. While this may sound a bit trivial to you, how much your audience thinks something is worth is quite an important thing. Also, while the price may be optimal at the moment, your audience may be so sensitive to price change that even the slightest change may offset them.
The fact that you have to keep all of these things in mind when changing the price is discouraging, and you need help more than ever.
The importance of dynamic pricing
Dynamic pricing is one of the easiest ways for you to maximize your revenue. Increasing the price during high demand and lowering it during low demand can be the way to extract every single dollar of value. You can even adjust prices downward to stimulate sales, which means you can actively prevent demand from ever dropping significantly.
By being the first to adjust the prices, you’ll always stay one step ahead of your competitors. This is something we’ve already discussed, but your ability to adjust to change is the key factor in the resilience of your business.
Price will affect the sales of your products, which means that dynamic pricing adjustments also have the potential to optimize your inventory management. In fact, inventory management and pricing strategy should always go hand in hand. There’s no point in sticking to the price that no one wants to buy the product at. If you identify such an item, you’ll do something about it more easily.
Also, we’ve already talked about the unpredictability of user behavior. Your customers don’t have analytical minds and don’t choose their yearnings based on data. This is why you need to observe how highly they value some of your products and adjust your strategy based on that. If they’re willing to pay more just based on their sentiment, it’s wasteful not to take advantage of it.
According to specialists behind a renowned Webflow agency for enterprises, people expect your site to have the latest information. They may assume that you haven’t updated your social media profiles, but when it comes to your site, they expect the updates to be in real-time. What if you could use a tool to update your site so that the prices are always up to date?
Consumer behavior and pricing psychology
Every time a new iPhone is released, the world is reminded that price has nothing to do with features. People are willing to spend more for prestige, luxury, brand, and many other, similar things. People struggling with their bills often have no problem paying $14 for a latte or $28 for cookies. In other words, people are not approaching their money-spending habits from a data-based standpoint.
The first thing you need to consider is what they base their price-quality perception on. Find out what their reference point is. A product that’s the flagship of the industry. From that point on, it won’t be that hard to figure out if the product in question is of a higher or lower quality of the product if it has more or fewer features.
Then, there’s the issue of bundle pricing. Often, items in a bundle will be significantly cheaper than if they just bought them separately. At least, this is the perception. Sometimes, the combined price is not even lower than if they bought them separately, but the perception is still there.
Then, there’s the issue of social proof. People hope that others have done their research, so if others think that this is what the product is worth, it might be worth that much. You should never downplay the significance of social proof.
There are all sorts of cognitive biases in place, which are very hard to research. Even if people have false presumptions about the product, finding out what these presumptions are and basing your strategy on this can make a world of difference.
Lastly, there are some psychological thresholds, which are why so many brands tend to round up their prices to $99.99 instead of just saying that it costs $100.
Challenges in eCommerce pricing intelligence
Naturally, it’s not all sunshine and roses in this field, either. There are so many challenges in this field, and while they’re getting fixed and improved upon with every new version, you still need to consider them.
The first major challenge is data accuracy and quality. If your data is corrupt, false, or not comprehensive enough, all the computing power in the world won’t be able to help you. This is why regularly auditing your data and having strict criteria can make all the difference in the world.
While you do want dynamic pricing to be a thing, you can’t make it too dynamic for practical (subjective reasons). You can’t afford to change prices every hour since this will not leave a good impression on your audience. Your customers do research, and there’s no easier way to drive them away than to change the price in the middle of their research. You need some consistency.
The second challenge involves the technical aspect of setting up and managing a platform, especially for those who are not familiar with the digital landscape. For instance, learning how to create a website from scratch can be a daunting task, but it’s essential for presenting accurate data and maintaining customer trust.
Another thing is the legality and ethics behind data scraping. While not strictly illegal, this strategy is often frowned upon and might get you and your IP banned from most competitor sites. Sure, this problem can be easily overcome with proxy services, but it’s still not as simple as you would want it to be.
Then, there are the cybersecurity concerns since you now have access to more data, which means an even bigger disaster if there’s ever a breach. You need to focus on encrypting all this data and keeping it safe and away from any malicious parties. Restricting access even to your team might be a sensible move.
From a technical standpoint, all pricing intelligence software must be integrated with your existing digital arsenal. This means you might want to check for potential integrations before deciding which platform to go with.
The price of your products affects everything from your bottom line to your overall image. Even with the same product, a different price can classify your business as a budget or a luxury brand, completely changing everything about your image.
Changing prices can start a new chapter of your enterprise, or it could drive away even some of your most loyal customers. With so many moving parts, it’s nearly impossible to keep up with price fluctuations on a daily basis.
Fortunately, with the help of eCommerce pricing intelligence, this task might just become a bit easier to manage. You can get a thorough analysis on-demand and all the help you need to keep your customers up to date.