How a pricing engine can help you increase eCommerce sales

Best practices in price monitoring 12.5.2022. Reading Time: 5 minutes

If the challenging 2020 has taught us anything, it is that the eCommerce environment has changed for good and that retailers need to give their best to adapt to the digitally-driven economy. That shift means entering a new phase of adopting AI-powered automation. Moreover, IBM Institute states that more the 40% of the organizations are already using some of the automated solutions. One of the most used solutions is the pricing engine

pricing engine

If you’re still not familiar with price engines, it means that you’re a part of that 60% who are not using their business potential to the fullest. 

Let’s see how we can change that.

What is a pricing engine?

A price engine is a software solution meant to help eCommerce professionals with keeping track of accurate prices from any website. The most important benefit of this SaaS solution is following the price changes in real-time

Thus, the pricing engine allows you to adjust your pricing decisions and harmonize your prices across different channels. 

That being said, what are the main attributes to look for in a pricing engine solution? 

Besides the accuracy, a good pricing engine also has to be highly scalable and flexible. That means that it needs to be able to include pricing rules, discounts, promotions, returns, and any other factor that can influence the final product price. 

What should you look for in a pricing engine software?

The shopping experience nowadays is highly dynamic. Retailers are trying to make it as personalized as possible, thus the price changes reflect market trends and fluctuations. According to McKinsey, retailers usually change product prices around 3 times a day, while some of them do it even 12 times! Needless to say, that would be impossible without a complex tech solution.  

What should you look for in a pricing engine software?

But, not every pricing engine design is suitable for every business. The right design will depend on your goals, limitations, and business size. However, some of the universal models are the following: 

  • Elasticity – calculating the way in which the price changes can affect the demand
  • Competition-based model – price changes are based on market trends and competitor actions. Usually, you can decide on a couple of the most important competitors and keep track of their actions. Depending on what you want to achieve, the price engine can help you set your prices above, below, or exactly as the competitors’. 
  • KVI (Key-value item) module – helps define which product is the key-value item, and how it affects the overall price perception
  • Omnichannel module – allows you to adjunct your prices across all your channels both off and online. 

Can customers benefit from price engines as well? 

Yes, because price engines represent a win-win approach. 

It brings benefits to everyone – retailers get to increase their profits, while customers get a more personalized shopping experience. 

Maybe you weren’t aware, but according to SalesForce, only 12% of the marketers are satisfied with the offered level of personalization. That’s where a pricing engine can step in. 

Pricing software can help you in the following ways:

Price – as we’ve said, prices can be very dynamic and depend on lots of factors such as market conditions, sales channels, store location, etc. Finding the price that suits both the customer and the company can be a tricky task, but that’s why pricing engines are there for.

Special offers and promotions – are also unstable components. Different promotions can be valid through different times of the year, while special offers can be used as a way of gifts and benefits for long-term customers. Knowing when to use them and how to respond to similar competitors’ actions is one of the things that price engines can help you with. 

Everything mentioned so far speaks in favor of pricing engines. Then why only 40% of eCommerce professionals are using it? 

Common price engine misconceptions

Even though price intelligence brings many benefits, some retailers and brands are still hesitant with using it. 

Why is that the case? 

There are some common misconceptions about pricing engines that can put people off. 

Common price engine misconceptions

Pricing engines just lower the prices 

Many retailers believe that the main purpose of a price engine is to lower the prices to attract more customers. However, some retailers don’t face fierce competition, therefore, they don’t need to drop their prices to look more competitive. Well, a great thing about pricing engines is that they do so much more than lowering the prices. 

A well-developed pricing tool will recognize when there is no need for a decrease. If, for example, you’re the only seller, or have limited competition, this tool will advise you on how to capitalize on that position. Maybe there is room for increasing the prices without endangering your market position? 

Pricing engines lead to price wars

Wrong. Many retailers fear that automated pricing solutions will just blindly follow what’s happening on the market. Retailers think that if their competitor is constantly lowering the prices, price engines will take that as a hint to respond in the same way, which will lead to a price war. 

That’s far from the truth. In fact, pricing tools can prevent such occurrences. 

One of the very important price engine aspects is setting minimum and maximum prices. Price fluctuations are inevitable, but if they’re too big, they can jeopardize your brand image. That’s why price engines have developed a feature called MAP minimum advertised price, which will inform you when a MAP policy has been violated. 

Price changes will be too frequent

Also not true. 

Pricing engines will help you to understand what’s going on in the market and get competitive insights. The gathered pricing data will indicate when and how often you should perform price changes. 

In cases where the market is highly competitive, prices tend to fluctuate a lot. However, there are also cases where monitoring the prices once a day will do the trick. To avoid making these decisions solely based on your assumptions, price engines will provide you the accurate and timely data. There will be no guessing because the numbers don’t lie. 

Dynamic pricing is a complete necessity of today’s eCommerce world, so there’s no need to worry if you select the right price monitoring tool. 

What the future holds for pricing engines?

Retailers that are still focusing on traditional approaches are struggling to keep pace with the competition. A study done by Capgemini showed that more than a quarter of 250 global retailers are integrating AI in their businesses. Moreover, they expect that price engines based on AI will save around $340 billion annually! 

Long gone are the days when you could only be a spectator of market shifts. Today’s eCommerce world requires you to take a proactive approach. Make sure you’re not left behind! 

What are your thoughts on pricing engines? Is your business already using some of them? 

We would like to hear more about it in the comments.


Ana Popovic
Ana Popovic is a Digital Marketing Specialist at Price2Spy. She's a sociologist who found her place in the eCommerce world. As such, her love for writing has led her to discover the beauty of content marketing and given her the opportunity to inform people about eCommerce and pricing topics.