Dynamic Pricing is the latest buzzword in e-commerce circles. You set or change your price as often as you like responding to consumer demand, market competition, your current market share, overstocks and any other business led reason you may have. To degree all retailers do it and the current ways they use are generally accepted by customers:
- Short shelf items in supermarkets being marked down at the end of the day
- End of season sales to clear out the previous season range to make way for the new season
Consumers are use to these and even modify behaviour to accommodate them – all seen the queues outside Next on the day the sale starts.
Dynamic pricing takes this to whole new level and for online only businesses could mean a price change several times a day as events unfold. Its a great technical solution to increasing margin and potentially sales but it just seems to have overlooked one tiny problem area. Consumers are not yet happy with the idea.
If you’ve ever worked in a store you will be familiar with the consumer who comes back when the sale starts to try and get a discount an on item they bought full price last week. Consumers are never happy to see prices change downwards after they have bought. Dynamic pricing exacerbates this bad feeling towards the brand who constantly shifts pricing.
So I would contend that overtime brands who manipulate pricing without any thought for the consumer reaction – shoppers are emotional beings after all – may well see a gross margin rise but will see gross sales fall as consumers become wise to the price manipulation tactics.
Consumers are, to some degree, happy with price manipulation in sectors with limited supply – travel tickets or event tickets for example – but in sectors where they feel there should be “unlimited” availability demand pricing and its pals feel like taking the consumer for a ride. No one will be happy if your brand manipulates Christmas lead up pricing on the “must have” children’s toy.
Dynamic pricing is a technical solution that may cause you a moral backlash. Guarantee this will be featured on BBC Watchdog in the run up the Christmas.