Many are just becoming aware of the huge technological advantages the big box stores have had for nearly a decade or more. As technology advances, and becomes more cost-effective, more businesses can compete. This becomes a double-edged sword for many companies.
Price optimization software, like Upstream Commerce, or dynamic pricing methodologies, have become the name of the game for retailers, and although more small stores are now able to compete with these price setting advantages, going without may soon become a death sentence.
We are going to cover what price optimization is, and what to look for in a good piece of software that claims to do such. You will soon see that your future as a retailer may depend on what route you choose to take.
The Art of Dynamic Pricing
Dynamic pricing isn’t necessarily new, but the technology and software allowing small business to do it for low costs definitely is. Before it was only airlines and big box stores that could openly get away with differentiating prices based on locality and demand, now it’s an utmost necessity.
Price optimization software not only peers into your industry’s current buying practices but compares it to seasonal averages and many other factors. The algorithms powering it have been decades in the making.
What is Dynamic Pricing
A quick summary, Dynamic pricing looks at the long-term trends, the immediate factors, competitors’ actions, as well as likely scenarios – all to give you the most competitive price for every one of your products. This helps you keep prices high for products are in demand, and competitive when demand decreases. Check this article that explains the most valuable pricing methods for retailers.
When you understand pricing optimization software is the only choice for legitimate competition, the next question becomes what to look for.
Dynamic pricing software takes the big picture into account. Industry trends, and seasonal trends going back years, as well as recent fluctuations, are all factored in. It may seem obvious, but even a slight bit of oversight can send the numbers spinning way off into nonsense. You have to make sure your software has been verified by those who understand the markets they serve, as well as having gotten results. Any legitimate piece of dynamic pricing software can usually guarantee 10-45% increases in gross profit. That’s how effective the real ones actually are, also for controlling your supply chain.
The Key Elements of an Effective Price Optimization Software
- Taking into account your main competitors and their listed prices. Though this should go without saying, ensuring you are competitive with your main competition is your main concern.
- Instant, or near instant repricing. If you can’t stay up to date, then you are already falling behind. Daily pricing changes is what you’re looking for.
- Predictive results. Staying up to date is good, but beating competitor prices when possible is infinitely better. The best software is predictive and will be able to give you optimum prices well in advance.
- Manual overrides and input. Computers aren’t always perfect. You want a system that lets you put in custom parameters for unique situations.
- Actionable Insights. Prices matter, but understanding who’s buying and why, can go even farther. Find software that gives you an insight into your customer and allows you to expand your offerings.
- Implementation guides. The best software will let you know how to take action, either via the software or their supporting teams. Find a program that helps you make the best of any situation.
There is no one size fits all solution, but you should ensure you invest in a product that takes your needs into account. Dynamic pricing is the future, and you need to board that train, just ensure it’s the bullet train and not a Greaseball (Starlight Express reference, sorry.)
Again, this isn’t a choice to take lightly; it can have far-reaching implications for the rest of your business practices.