Are eCommerce prices getting too dynamic?

This holiday season I was looking for a specific toy as a gift. I did a price comparison and found it had the lowest price at the Toys R’ Us site. When I went back to make the purchase just 2 hours later, the price has jumped up by 50%. Now I had to do my comparison all over again. That was frustrating to say the least.

This is the latest example of Dynamic Pricing. It’s been around for a while but mostly in scarcity driven industries like airlines and hospitality / entertainment. Here the rules of the game are clear, inventory is limited, it has an expiration date, securing a sale in advance has benefits and discounters can help you sell last minute excess inventory.

Now back to our dynamic pricing for $50 toys, other than a few highly desirable toys before Christmas, this is not a scarcity market. Special sale, timed sales, loyalty coupons and all these dynamic promotions are confusing enough but serve a purpose. Not being able to do a simple price comparison and place an order is annoying and will impact the buying decision. If there is always the possibility of a lower price just around the corner, then let’s wait.

Target had recently announced that it will begin price matching for all products, even against amazon but details on implementation are a bit fuzzy.

As dynamic pricing gets more widely used and noticed by consumers, how will they react?

Here are a few suggestions for retailers considering or implementing dynamic pricing strategies:

  • If the products you sell are of a limited quantity, knowing how many are there (at this price) is very helpful. What Orbitz does for example (only 3 tickets left at this price!) gives the consumer valuable information and an incentive to act fast.
  • If a price is reduced for a period of time, let the consumer know for how long it will stay at this price. Again, enables decision making.
  • Shop with confidence. While guarantees against future discounts are problematic, consider offering this to members of your loyalty club. The same way a great sales associate will tell you a sale is starting next week and he will hold the items for you so you can pick them up at the lower price, rewarding the best customers with price assurance and advance knowledge of sales will go a long way.
  • If you are putting an item below the competition, make it known. Consumers may doubt it but if they check and found it is true it will build trust.
  • Try not to put items that are dynamically priced into an email. Since you have no control over when the consumer will read the email, they may be viewing pricing that are no longer correct.
  • Feed the aggregators and comparison sites as soon as changes are made.

The key theme here is that dynamic pricing can be great if the buyers are given enough confidence and information to make decisions. Otherwise it may just make the the consumer even more hesitant to click the “Buy” button.

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