- eCommerce

Introduction to Dynamic Pricing

Dynamic Pricing-Innovative and Intelligent Pricing Strategy to Follow by eCommerce Marketers

Dynamic pricing plays the role of an edge to outpace a large number of competitors, which prevail in the entire online retail market. We all know that the online retail industry is of flexible type and competition is increasing in a rapid way.

In this situation, if you continue following a rigid marketing strategy, you may never expect to occupy a big prospective or customer base. Instead, you need something to outperform the intense competition and move ahead in your path.

Here comes the role of dynamic pricing, according to which any online retail sales its product offers by calculating both variable and fixed costs and thereby, finding a suitable markup based on the perception of potential customers. In this way, dynamic pricing strategy results in gaining maximum possible revenue.

Overview of Dynamic Pricing

Dynamic pricing implies a technique focusing on the setting of any product/product’s price in accordance with its supply and demand but in a relatively small span of time. In addition, a retailer has to consider a few other factors, like customers’ perception, competitor pricing and value of a specific brand.

The psychology behind Dynamic Pricing

Introduction to Dynamic Pricing

A majority of online retailers perceives dynamic pricing an entirely new concept and thinks that it has arrived only after the booming of eCommerce industry. However, offline retailers have remained involved in dynamic pricing for a long time. At present, dynamic pricing is prominent on varying online platforms because of the fact that the online market is relatively more agile and allows easy access to the available information.

Online portals access the cookie data, device details, and location of a phone or PC user. They weigh varying factors to check the extent, up to which you may shell out for their offered services. For instance, whenever you check different websites for a hotel room or flight booking, the website checks the cookies to view whether you want to book the respective services or simply browsing their sites.

Once online airline companies or booking sites become sure that you will book their offered services, they create a price in accordance to the number of seats left, the specific location, from where you book and the type of device you use. Each of these steps helps in determining the ability to shell out.

Techniques related to dynamic pricing are according to demand fluctuations and behavior of people. However, it is somewhat different from personalized pricing, as dynamic pricing collects the innumerable number of data and determines an appropriate price to help any vendor to earn the highest possible profits and/or revenues.

Psychology is simple i.e. if your device’s browser history highlights any expensive purchase or you place order from any expensive device or locality, you will end up with relatively higher chances to make more payment.

The technology behind Dynamic Pricing

Dynamic pricing today includes/adopts innovative technologies to obtain dynamic price ranges. Whenever e-commerce websites target prospective customers and realize that a person requires a specific product but until now does not become a customer, they opt to remarket their products.

For this, eCommerce marketers apply decent price reductions to convert a window shopper into a permanent shopper. Especially, they analyze cookie data of the respective individual and use other related tools, like Facebook Pixel and Google Adwords to generate a discounted price to entice the same individual. Dynamic pricing is perfect in this case to determine whether a person would purchase any product after changes made in its price.

For instance, Dealdash, eBay and other auction-based eCommerce stores use dynamic pricing to make the most from their customers. They have used and continue using special algorithms to increase the product price with each of the placed bids and sell the same to customers with a unique one.

Benefits of Dynamic Pricing

Dynamic pricing gives the following key benefits to an online retailer or eCommerce marketer.

  • Provides higher control over the already existing pricing strategy
  • Gives forecasts on upcoming trends in the customers’ demands
  • Helps in huge revenue and income growth
  • Gives a strong platform to conduct customer analysis to perform personalized pricing, while market analysis to achieve price competition
  • Facilitates for highly précised and SKU pricing levels
  • Assures fast response to fluctuations in the demand
  • As changes in price consider different factors, including the perception about the price of a product among customers, it leads to a long-term increase in profit and sales.

Why eCommerce Marketers should opt for Dynamic Pricing

Why eCommerce Marketers should opt for Dynamic Pricing

eCommerce industry is an infinite market with infinite time horizon, infinite buyers’ population, and infinite seller inventories. Even eCommerce companies often experience relatively low operational costs and startup costs based on technological advancements.

Helps Marketers to Boost Profit Margins and Market Share

Considering each of these facts, we should say that eCommerce marketers should definitely go with dynamic pricing to make sure about both short-term and long-term success. Particularly, dynamic pricing is helping to boost profit margins, to create a unique brand identity and to achieve a competitive edge.

For instance, if we have a look at the scenario of the airline industry, we have found that passengers (customers) have reacted in a good manner to dynamic pricing models during the last few years. Reason for this is that airline groups have adopted the strategy of low prices or affordable travel packages in most of the situations to entice worldwide travelers and thereby, achieve a huge profit margin as well as market share.

Lets Retailers to Deal with Changing Market Conditions

Another research report related to dynamic pricing highlighted that a majority of online retailers adopted dynamic pricing to deal with consistently changing market conditions, competitive intelligence, and consumer behavior.

For example, Amazon.com, the leading eCommerce platform used dynamic pricing for a long time and in different guises as possible. Furthermore, with the wide accessibility of modern technology, many retailers have adopted the strategy of dynamic pricing to compete with dominant market players and to encourage various price-sensitive American shoppers.

Other than leading eCommerce platforms i.e. Amazon and Wal-Mart, about 23percent of other eCommerce platforms cited to achieve huge gains via dynamic pricing strategy for many years.

Another report about Amazon and Wal-Mart on dynamic pricing has revealed that Amazon online changed and updated its price at about every 10 minutes and thereby, succeeded to increase its revenue by about 27.2percent. Wal-Mart on the other side adopted dynamic pricing and changed prices of its product offers for 50,000times in one month. Based on this price model, Wal-Mart sales increased by about 30percent in the year 2013.

Considering the aforementioned facts, we should say that dynamic pricing or any other related pricing intelligence tool is now acting as a mainstream among online retailers, a large number of third-parties have started delivering affordable solutions.

How Dynamic Pricing helps to beat Competitors

How Dynamic Pricing helps to beat Competitors

Dynamic pricing has proved to be a competitive edge for eCommerce marketers based on its following facilities and benefits.

Gives Scope to Set Optimal Price on Real-time Basis

As an innovative pricing strategy, dynamic pricing enables marketers to set flexible products’ prices by considering varying costs, required profit margins, competitors’ prices, and the market demand. In this way, you may set optimal price as per the real-time customers/market demand and present competition status by considering your existing business goals.

Provides Valuable Insights on Latest Industry Trends

Dynamic pricing provides retailers with valuable and additional insights into the latest industry trends. In this way, eCommerce retailers may apply varying price limits and analyze elasticity in products’ prices before they decide the price of an optimal product. Particularly, paid advertisements or paid ads are excellent yet effective ways to test and optimize prices of varying product offers.

For instance, Google Shopping displays instant data in various ways, in which online shoppers respond to the new price. After you change your products’ prices, you may analyze different aspects, which include margins, CTRs, impressions, conversion rates. Moreover, with continuous tests, you will definitely identify the optimal price.

Offers Abundant Benefits to eCommerce Marketers

Excluding the facilities mentioned here, dynamic pricing gives tons of other benefits to eCommerce marketers to outperform the competitors. These include improvement in profit margins and revenues, improved conversion, increase in market control, personalized prices as per specific season, demographic and demand, along with a presence in various price comparison engines. In this way, prices you set always stay competitive and fully optimized in the intensely competitive eCommerce market.


You will come across hundreds and thousands of competitors prevailing over the internet and each of them adjusts their prices consistently. In this way, you have to take actions and monitor your competitors’ pricing according to the pricing competition prevailing in the respective market. In case you deny the competitors, you may price either too low or too high and the lack of adequate information forces you detaching from the industry.

In this scenario, you will suffer low conversion rates causing harm to your sales as well as your overall business growth. To conclude, we should say that if you own, market or manage an eCommerce store, you should adopt dynamic pricing strategy seriously by considering appropriate technology to make the most from your eCommerce business online.

Author Bio:

Varun Patel is the founder and CEO of Coreway Solution, a leading eCommerce and mobile app Development Company offers highly tailored and business-centric solution. He is a technopreneur with over decades of experience in solving complex challenges by using Information technology solution. His charming and result-oriented approach & quick problem-solving skills make him stand out from the rest.  He holds the interest in writing based on his own experience about upcoming business enhancing technologies and business plans.

Introduction to Dynamic Pricing

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