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Implementing Dynamic Pricing to Maximize your Ecom Profits

Dynamic pricing is becoming a common practice among eCommerce websites across the world. This pricing method has always been popular among travel websites, hotels, and airlines. It gives them the chance to price their tickets and services based a variety of different factors. Hence why your airline ticket will cost more or less depending on the time of year you buy it. Hotels will also use dynamic pricing to adjust their prices according to events happening in their city at that time. It is all about taking advantage of the demand for a product or service so the overall profits of a business will increase. Dynamic pricing is not a new concept in the business world, but it is becoming more important with the growth of eCommerce in the last few years. If you have yet to implement this pricing method into your strategy then it is something you should start to consider.

What is Dynamic Pricing

Dynamic pricing, also known as Real-Time pricing, is a method of pricing products that gives retailers the flexibility to change prices to fit the current market. This means they can decrease the price of their products or services when business is slow or increase prices when business is booming. Dynamic pricing is a strategy used by street vendors to mega retailers like Amazon, which changes its prices every ten minutes.

Dynamic pricing is an important concept to understand if you want to really succeed in the eCommerce industry. The key is to keep your pricing flexible so you are prepared for any situation by monitoring the demand for a product. Monitoring can be done through the use of price bots, software that uses algorithms to monitor products and several other factors to adjust prices accordingly. Pricing bots base price fluctuation on the location of customers, time of the year, the day of the week, the hour and how your competitors are pricing similar products. This allows you to stay on top of the market and increase your sales revenue.


What are the Benefits of Dynamic Pricing?

Even though many customers won’t like it, there are many advantages for your business if you start using dynamic pricing. The first is that lowering prices can really help increase your sales if your business is in a slump. Since price bots can determine your competitors’ prices they can lower yours so customers will come to your shop for lower prices. But, dynamic pricing isn’t just about cutting prices so you have the least expensive prices. Price bots can also use market data to give your prices a boost to maximize your revenue.

If you are planning to have bots do the work for your then you will never have to worry about doing your own research. Price bots are programmed to analyze all the data you need to adjust prices and do it for you. Overall, when you start using dynamic pricing for your business you will see an increase in your overall profits.

Lastly, since dynamic pricing considers so many factors before setting a price, you will save money. Since a computer program will do most of the work for you, your company is going to save money by not hiring administrative assistants to do the job for you. An example of this is Wal-Mart. The Superstore chain changes its prices roughly 50,000 times a month to keep their customers. By using dynamic pricing, they ultimately raised their prices by 30 percent.

How to Implement Dynamic Pricing into your Current Website

Now that you know what dynamic pricing is and how it can benefit your business, it’s time to implement it. Going from a static pricing method to dynamic pricing can be a little tricky, but it will be worth it.

Before you can establish your own prices, you need to look at how your competitors are pricing their products. This is going to give you a better idea of what you need to do to stay at the top of the market. You will also have to find data as to how well their products are selling and compare it to your own sales.

Once you have gathered all the data you can, it is time to test it against your old numbers. You can test the data with the standard A/B testing method. If you are unfamiliar with the concept, it is very simple. Half of your customers will see the control prices and the other half will see the new method you are testing. Once the testing duration (one to two months) is complete compare the results from both groups. When analyzing the results you are going to have to compare the bottom line, sales revenue, and conversion rates to determine the best prices for your products and services. Testing is going to help you find the right price to bring in the customers and increase your profits.

While dynamic pricing does involve a lot of factors to set prices for each customer, you should never price discriminate. You shouldn’t set higher prices for customers who come to your site on Apple products or purposefully set lower prices for those on PCs. This type of price discrimination can be illegal and get you into a lot of trouble down the line. Let the market determine the price and not the economic status of each customer.

Last Word

Even though it is not a new concept, Dynamic pricing is the future of eCommerce. Understanding the basic concepts and how to use it for your website will boost your profits. With so many top retailers using the system and seeing great success with it, there’s no reason to avoid dynamic pricing. It is the only pricing method that has proven to increase overall sales for hundreds of companies all over the world including Amazon and Wal-Mart. All you have to do is find the right computer program to help determine the best prices for your products and you will be on your way to the top of the market.

Lastly, let me know your thoughts and what other tips for dynamic pricing that has helped you. Leave a comment below and I look forward to hearing from you.

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About Sean Donahoe

Sean is one of the most recognized industry leaders in business and marketing. As a popular speaker, author, consultant he has helped over 50,000 students world wide find success in their businesses and has consulted with Fortune 500 companies and businesses of every size grow and thrive...


  1. Hello Sean, so cutting to the chase, what is the best online software to buy and setup that will get quick results, both for a newb and an experienced operator to assist with this dynamic pricing that isn’t going to cost an arm and a leg – you send a lot [and I mean many emails] to various peeps about many new options out there. so what is the best value for money!

  2. Great article, Sean! I’m absolutely going to try implementing dynamic pricing, but I’m not sure how… Any recommendations?

  3. This sounds like a frustrating experience for the visitor that they keep seing the price fluctuate which is why the dime sale model seems much more effective bcz at least they know if they dont act now another will act causing the price to rise or simply different price points based on the level of product access.

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