In other words: the best way to achieve financial success on Black Friday is by optimizing your pricing strategy. In this blog post, we dive into how dynamic price optimization can help you and your business.
It is about to be that time of year again. The day (or days) when consumers worldwide are hit by a very special shopping fever - with the glowing visa card as the most frequent symptom - is moving closer. There are just two months until Black Friday (November 26), and most e-Commercers are already planning - part of it is getting the pricing under control.
The increase in e-Commerce has created increased price transparency and more frequent price changes
Historically, Black Friday has been a day where especially the physical retailers saw their products being pulled off the shelves. In recent years, and especially in the wake of Covid-19, e-Commercers have been able to reap the benefits of the consumption party.
The increase in e-Commerce means that price transparency in the market has increased, resulting in more frequent price changes. The combination of these two factors has made dynamic price optimization a necessity in today's market.
An effective pricing strategy is crucial to your success, especially during Black Friday, where price plays a more significant role. In the hunt for a good deal, your customers are most likely to come across 100 to 1000 products and prices before landing on your webshop, and even if you have the best product on the market, a bad pricing strategy will give you huge problems. If you price the product too high, you risk losing customers. If you price it too low, your profit may fall. Dynamic price optimization helps you optimize your pricing strategy, win customers and make a profit.
What is dynamic price optimization?
Briefly explained, dynamic price optimization is an ongoing, automatic price optimization of your pricing strategy. The pricing strategy and product prices are controlled by software and are continuously changed based on, e.g., the following factors:
- Supply and demand
- Market trends
- Competition and industry standards
- Consumer expectations
Dynamic price optimization is a further development of dynamic pricing. We especially know dynamic pricing from the travel industry. You have probably been browsing Momondo or Hotels.com and experienced how prices constantly change. In the e-Commerce universe, i.a., Amazon is the leader in dynamic price optimization. Amazon adjusts its prices minute by minute. Their algorithm filters through large amounts of data - including market trends, consumer habits, competitor prices, etc. - with the result that they can sell more products with the highest possible profits.
However, you do not have to be a travel company or the size of Amazon to come along. It does not necessarily require expensive and hugely complex software that changes your product prices several times a day to get value from dynamic optimization. The most important thing is that you help identify and develop the pricing strategy that provides the most significant value for your particular company. This is to avoid becoming one of many who blindly match competitor prices without understanding when it provides value and when another price would have given better results for you.
Why is dynamic price optimization valuable?
When you invest in dynamic price optimization software, you make sure to always be competitive in terms of price - when it is advantageous for you and no matter what sudden changes may occur in the market. At the same time, you eliminate much of the manual work of preparing competitor analyzes and/or measuring the price elasticity of your products.
A product can either be elastic, where a price change leads to a significant change in demand. Or non-elastic, where a small price change does not change demand significantly. If a product has a high price elasticity, it will be more sensitive to price changes than a product with low price elasticity.
Dynamic price optimization is valuable. In addition to always having the best price for you, you also release time to focus on other important tasks - e.g., getting your Black Friday strategy under control, making better campaigns, and making better purchases.
Why is dynamic price optimization valuable in the context of Black Friday?
Many e-Commercers waste time manually tracking and changing prices in connection with Black Friday. Their employees spend all day following the market and comparing prices and products. With dynamic price optimization, you automate this process and release time to handle, e.g., customer inquiries -there will probably be several inquiries on such a busy sales day.
With an accurate insight into the price elasticity - based on sales data, for example, from last Black Friday - it is also made clear which products have a high price elasticity.
What should you be aware of?
There is no doubt that we are big advocates of dynamic price optimization. We see great potential in implementing the service in your e-Commerce business - in connection with Black Friday and in general. However, to get the most value out of it, there are some potential pitfalls you should be aware of.
1. The software takes care of everything
If you think your dynamic pricing software takes care of everything, you can be pretty sure it will end badly. While it may sound appealing to leave the dynamic pricing algorithm alone to determine the price - without the involvement of your employees - it will not work in practice. You must have some staff and or a good advisor who can keep up with the algorithm and ensure it is always under control.
2. No restrictions on the frequency of price changes
If your prices change so often that it becomes apparent to your customers, they will start to wonder about waiting to buy your product until the price is down again. It could also be that they even lose confidence in your brand. Intelligent price optimization also means changing as little as possible when it means the most.
3. Competitors are always undermined
If you always set a lower price than your competitor, it can mean that they do the same thing, and it starts a race to the bottom. Eventually, you run the risk of the value of your product plummeting and you losing profits. Intelligent price optimization is not just about matching or bidding below the competition.
4. The software is only used online
If you run an omnichannel business, your prices must be consistent across all channels. In your physical store, it will be relevant to implement electronic shelf labels. With electronic shelf labels, it is easy to quickly update and change prices without going to all the shelves and doing it manually. This way, you make sure that your prices are always updated and identical. Even without electronic shelf labels, your physical stores can benefit greatly from intelligent price optimization tailored to what is practically possible in the physical store.
Fiftytwo and GX ADVISOR
To help our customers achieve dynamic pricing success, Fiftytwo partnered with GX ADVISOR. GX provides a best-in-class software platform for dynamic pricing, but most importantly, they possess the competencies to help our customers succeed with the solution.
They help some of the Nordic region's most talented e-Commerce companies sell or earn more through effective pricing strategies. This allows the individual company to reach its goals - increased revenue, maximizing profit, optimizing inventory turnover rate, or much more.
With GX ADVISOR, we offer our 52eSELLER customers a non-committal dialogue about your best options with intelligent price optimization. As part of that dialogue, you can get an overview of your pricing potential and which pricing strategies are most obvious to consider for you.