Time-based pricing, or dynamic pricing is all about setting up the "best price" in order to generate the best profit margins based on the availability, demand and the lifetime of the product. This pricing strategy originates from the tourism sector (airlines and hotels), but with internet and advent of dedicated digital tools took it to a whole new level, especially for the online retailers.
Every day, millions of products sold on the web and their respective prices are regularly being updated. A good example will be the Amazon website. A study conducted Profitero in 2015, indicates that prices on Amazon are being changed close to 2.5 million times a day.
Time-based pricing is also practiced on a smaller scale by online retailers operating through their own website or on marketplaces.
What are the benefits of time-based pricing
Well, can we seriously list down all the benefits of time-based pricing when it has already been so widely adopted by e-commerce practitioners? It is a strategy built around the selling price of products, which is also a key aspect of the buying process decision of most consumers. It is generally more compelling to have a better price than its competitors for the same product. This is also where the pricing software can help: adjust your prices based on what is being proposed by competitors, respond immediately to increase or decrease in price (create alerts) and easy integration to ecommerce website or marketplaces.
Getting started with a time-based pricing strategy
The implementation solid time-based pricing strategy goes through several phases:
Availability of the product
Availability of product and inventory management... you need to keep track of your inventory. You are running out of stock for a particular product having a high demand? Then it may be a criterion for an increase in price for latecomers. By cons if your products are close to their expiry date, then selling them at a discount will certainly help to clear your stock.
Knowing the market
Marketing mix (4P) or SWOT analysis can help you to have a better understanding of the overall market and the current price ranges of your competitors. You can also compare your prices with other websites. This can be done manually or using a price comparison website.
Make your forecast based on your past experiences
Analyze the performance of your pricing strategies for the previous seasons, how they impacted on your revenues and what was the profit margin. This will be the basis for your forecasts.
Evaluate the performances of your pricing strategy
Have sales increased or not? What were the consequences of this new price? Make sure to analyze this data and make the necessary adjustments to your price range.
PROS specializes in business management solutions (sales, pricing and revenue management).
PricingAssistant is an online price monitoring service dedicated to online retailers.
Workit gives you access to the latest web-crawling and product-matching technology.
Sellermania is a tool available to retailers operating on websites like Amazon or Cdiscount. It is a full software suite to manage your inventory, orders and invoices. There's also a feature dedicated to pricing.