Dynamic pricing and web data are two major factors that influence online businesses. Dynamic pricing is the rate that varies by day, time, weather, season and a number of other elements. The price can also be adjusted depending on the customer’s past history with the company.
Dynamic pricing strategy is a highly debated topic, and every company has its strategy. There are many reasons to adopt one type of pricing over the other, but not surprisingly, this boils down to customers’ willingness to pay and the company’s capability to absorb fixed costs.
In general, economics considers how demand for a product or service changes when a certain amount increases the price. In the case of pricing, this means that the price will change (increase) in such a way as to maximize consumer utility.
When consumers are asked to pay a higher price on something, they feel less satisfied with their choice and opt for a cheaper alternative. This is called the demand curve.
Whereas both companies and consumers can benefit from increased prices, these benefits should be viewed within the context of how many customers each can afford to lose at that particular price point.
Use web data to make sure your prices reflect the popularity of your website
According to Pew Research, people will leave a website because of a bad experience. If you have web data, you can make sure that your prices reflect the site’s popularity and prevent people from walking away from your product.
Using the data to gauge what other companies are charging for similar services/products, you can charge lower prices than competitors to win more customers.
There is a lot of debate on the best way to track customer data on a website, but you can get consumers to pay more for your product while keeping them longer by using web data. By monitoring where customers come from and where they leave your site, you can use this information to determine when to charge less and when to charge more.
Here are three simple ways you can use web data to fuel your dynamic pricing strategy:
1. You can use web data to keep prices lower than competitors
You can track the popularity of your site and adjust your pricing accordingly. If you find that your company’s pricing is exorbitantly high compared to competitors, you need to determine whether or not this is due to your demand or their lower quality/cost of service. In either case, it would be better to use web data to inform you of exactly how much customers are willing to pay for certain products/services.
You can then charge less than competitors without sacrificing quality and/or lowering the customer’s lifetime value.
In our world of many-to-many comparisons, different products need to be priced differently, and the prices should reflect the value of these products. By using web data, you can compare your prices to competitors and adjust according to demand in a way that generates more income for your company without losing customers.
2. You can also use web data to determine when to raise prices
You might decide that you need to boost your prices to maintain your margins on certain products/services. Using web data can help you determine whether or not it’s time to adjust your prices for certain customers at a particular point in time. If competitors are raising their prices, then it might be a good idea for you to do the same.
If customers are leaving your site because the prices are too high, you should lower them to keep them. You can also use this information to understand your customers better. You can use the information on customer behavior to make better decisions on whether or not to pursue each customer. This will help you make sure that you’re only focusing your attention on those who are most likely to pay more for your products and services.
3. You can use web data to adjust pricing based on external factors
You might view some factors as uncontrollable, but using web data can inform you of how much customers really care about certain factors. For example, if you are selling a product that is only 50% unique compared to your competitors, but you adjust the price higher at 50% more than competitors.
You will be able to see if customers are willing to pay more for that product. This will help you determine whether or not customers are willing to pay more for that product and if so, you can take advantage of that opportunity.
For example, if your product is similar to one of your competitors’ products, but they charge 10% more, you can charge 20% more than your competitor to encourage the customer to buy from you. This can also help you determine how much more customers are willing to pay for a product that is only 50% better.
Companies like Hotels.com, Orbitz, Priceline and Expedia use dynamic pricing based on external factors such as seasonality, events, and even customer demand. You might want to consider incorporating these factors into your dynamic pricing strategy to make your company’s products and services more relatable to your customers.
Using web data for your dynamic pricing strategy, you can make sure that each customer receives the best product at the best price possible. You can use this data to help create a relationship between your customers and your company.
By using web data for your dynamic pricing strategy, you can also be sure that customers are not leaving because of overcharging. This is a valuable resource for companies that wish to keep customers longer and improve the overall quality of their products/services.