Dynamic Pricing Myths: What is the truth?

Dynamic Pricing Myths: What is the truth?

10/18/2021 - Dynamic pricing

Dynamic pricing is a price optimisation technique increasingly used by different types of online businesses, e-commerce sites and businesses in the service sector. It allows them to tailor their prices at any given moment, according to supply and demand. However, there are also myths surrounding this new pricing trend which mean that it does not always enjoy a good reputation. What is the truth behind the myths which revolve around dynamic pricing?


Myth 1: Dynamic pricing is discriminatory pricing

Far from it. Dynamic pricing is a type of pricing strategy in which discriminatory pricing also fits. However, they are not exclusively reliant on each other.

Specifically, a discriminatory pricing strategy only provides the possibility to offer different prices to users based on more stable characteristics, such as online behaviour, geographical origin or demographic profile. Meanwhile, dynamic pricing provides the ability to change prices at any given moment in time, according to the needs of the business, market behaviour or sales forecasts.

In this case, the myth has arisen due to confusion between the two concepts. However, they are not at odds with one another, nor do they negatively affect one another. We could say that dynamic pricing is a much more refined and scientific development. Dynamic pricing allows your business to offer your potential buyers almost personalised prices.

Myth 2: Dynamic pricing could damage my business

This is one of the most frequent fears regarding the application of dynamic pricing. How will my business profits react if I implement it? The truth is that businesses must safeguard one key element to overcome this myth: profit margins.

A pricing tool such as Reactev allows you to specify the precise upper and lower limits that each product’s prices must not exceed. This helps you to ensure a minimum profit with each sale. Additionally, these can be changeable depending on the moment at which the adjustment is made. Therefore, any business or e-commerce site can implement dynamic pricing techniques with complete confidence. 

Thanks to the automated and scientific nature of dynamic pricing, your business is in complete control of your strategy. You can define the rules governing price optimisation and chart the indicators’ path to execute the changes.

Myth 1: Dynamic pricing is discriminatory pricing

Myth 3: Dynamic pricing confuses users 

Some business managers believe that the changes brought about by dynamic pricing can mislead users. They think it may cause doubts about whether or not users should buy the product, either waiting until the price is lower or mistrusting the online store itself.

How can I overcome this potential pitfall? The key is always to inform consumers that product or service prices are subject to changes. Contrary to this myth, digital users already deal with price changes on different sales platforms with ease. More and more people are even using their own tools to keep on top of new offers or lower prices for the products they want to buy.

The e-commerce sites that use dynamic pricing drive their range closer to their potential customers by recognising opportunities that arise from seasonality and demand forecast. At these times, users easily identify when the best time is to do their shopping at the best price and with total security in your store.

Myth 4: Dynamic pricing makes me lose control of my pricing strategy

The last and maybe greatest myth surrounding dynamic pricing. The variation in catalogue prices causes many marketers and pricing strategists to believe that this strategy makes them lose control over the terms that apply.

However, the reality is quite the opposite. Dynamic pricing strategies allow the business to flag the roadmap for price fluctuations for each product, as individually as needed, and always with the option of making groups that react to the same patterns.

Thanks to sales data collected from each change, it is possible to analyse and conclude the most advantageous prices for the business by the translation into profit volume, with the guarantee of doing so using verified data. In fact, with a dynamic pricing strategy based on price intelligence, with well-defined change indicators, it is possible to speed up the price processes that your business needs, adapting at any moment and immediately to market circumstances. This maximises sales opportunities and their yield.

In short, dynamic pricing techniques have multiple advantages in digital sales businesses, allowing them, above all, to maximise net sales and revenues. Have you tried a tool like Reactev yet, to put it into practice?

Category: Dynamic pricing

Tags: ecommerce, pricing

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Maria Jose Guerrero
Content Manager

The first dynamic pricing solution designed by and for retailers