Dynamic Pricing – Sniffie

What means cooling-off period in dynamic pricing?

Tomi Grönfors — Fri, 09 Jun 2023 10:44:59 +0000

The Eu’s new Omnibus Directive has created increased transparency for consumers when it comes to pricing and reviews. That is excellent news for online shopping. While it is good for consumers, it does bring additional burden to online shops to plan their pricing, especially before discount campaigns. One strategy that’s garnering attention is the use of a ‘cooling-off period’. This concept, typically used in reference to consumers’ rights to reconsider their purchases, is being redefined by the EU’s new Omnibus Directive. In this blog post, we will delve into this phenomenon, its implications for businesses, and how you can harness it effectively.

What is the Omnibus Directive?

The Omnibus Directive is a recently introduced EU legislation designed to further protect consumers in the marketplace. Among its stipulations is a rule that requires companies to display the lowest 30-day prior price during discount campaigns.

Rethinking the Cooling-Off Period

Conventionally, a cooling-off period is a defined length of time during which a consumer can reconsider a purchase decision and cancel the contract without any penalties. In the context of the Omnibus Directive, however, this term is acquiring a new meaning.

The cooling-off period now also pertains to a phase in which businesses halt their dynamic pricing. This is done to ensure the comparison prices displayed during discount campaigns appear attractive to consumers.

Try it yourself - compare your campaign scenarios!

See how changing pricing before, during and after the campaign will affect your demand and profitability.

Why Do You Need a Cooling-Off Period?

A carefully planned cooling-off period can be a potent tool in your marketing strategy. By demonstrating appealing lowest prices from the previous 30 days, you underline the value proposition of the discounts you’re offering. This can amplify the appeal of your sales campaigns and potentially drive up the conversion rates.

How Do You Implement a Cooling-Off Period?

Begin by setting your dynamic pricing to automatically revert to the Recommended Retail Price (RRP) or a planned campaign comparison price 31 days prior to the start of the campaign. Run your discount campaign as planned and then return to dynamic pricing once it concludes. Simple as that.

Pitfalls to Watch Out For

As with any strategic move, there are potential pitfalls you need to consider while adopting a cooling-off period. One significant downside is the potential loss of sales during the period. As you freeze your prices at a high point to make discounts seem more appealing during a campaign, you might see a drop in sales.

The key here is to assess the overall profitability. You should calculate the profit not just from the campaign but also consider the impact of potential losses during the cooling-off period. This can provide a holistic picture of whether implementing a cooling-off period is indeed a worthwhile move.

An alternative could be to select certain products that are not subject to dynamic pricing for your campaigns, reducing the risk while still providing a compelling offer to your customers.

In conclusion, the cooling-off period, presents an exciting new facet of strategic pricing. By understanding and carefully implementing it, businesses can enhance the effectiveness of their discount campaigns, potentially boosting sales and customer loyalty. However, due care must be taken to navigate potential pitfalls and ensure the strategy aligns with the company’s overall profitability goals. Good thing to remember that the period should also take into account you discount codes that might affect your Omnibus Price. Make sure to take those into account as well.

FAQ

Most frequent questions and answers

What are the benefits of a cooling-off period?

By implementing a cooling-off period, you can ensure your promotional offers truly represent value to your customers, which can enhance your brand’s credibility and customer trust. It also ensures compliance with the EU’s Omnibus Directive, avoiding potential legal complications.

How long should the cooling-off period be?

The cooling-off period should be at least 31 days prior to the start of your promotional campaign, as this is the period in which you must show the lowest price for the products you are offering at a discounted rate.

Does the cooling-off period apply to all types of sales?

The cooling-off period primarily applies to products to which you change prices frequently (dynamic pricing, price optimization, markdown etc.) and you are planning a promotional discount.

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How to forecast discount campaigns with forecast module

Tomi Grönfors — Thu, 01 Jun 2023 10:29:46 +0000

Discount campaigns can be a powerful tool in a marketeer’s arsenal, driving customer engagement and sales volumes while moving inventory. However, executing successful discount campaigns requires careful planning and precise forecasting to ensure the right balance between promotional offers, profitability, and supply chain effectiveness. In this post, we’re going to examine how you can use Sniffie’s forecasting module to plan effective discount campaigns.

What is Sniffie’s Forecasting Module?

Sniffie’s forecasting module uses advanced enforced learning AI to predict future sales by understanding the interaction between product demand, price, and product costs. It incorporates your sales history, seasonal patterns, and uses regression analysis to create a robust forecast, allowing you to compare different scenarios against the status quo.

How to Use Sniffie’s Forecasting Module

1. Select Your Product

Begin by choosing the product or products you wish to simulate and forecast. Use any filters to narrow down your selection. You can combine both static product filters and AI insights like Dynamic ABC Analysis.

2. Open the price simulator

After you have selected the products the blue top bar appears. Click on the forecasting icon on the top bar to open up the price simulator.

3. Adjust pricing, cost and stock

Adjust the price, the costs and modify the stock to see how changes impact your forecast. You have three distinct views to understand your forecast accuracy: Insights, Future Forecast, and Current Situation AI Insights.

Insights: This tab shows how price changes will affect your profitability and sales volumes.
Future Forecast: The future forecast gives a timeline of your profitability and sales volumes for a selected period, showing how they develop. The green line is the new scenario and blue line is the current scenario. The confidence interval is shown as the base colour around the line.
Current Situation AI Insights: This section demonstrates how price elasticity can affect your sales volumes, revenue, and profit. It fits all the product elasticities into one and shows you how much a percentual change up or down will impact volume, profit and revenue.

Planning a Discount Campaign Using Sniffie’s Price Simulator

Once you’ve selected your products, it’s time to start planning your discount campaign.

1. Establish Preliminary Discount

Begin by setting a preliminary discount rate. Note how this affects your profitability. You can adjust the discount % up or down and see how your profitability and volume changes.

2. Adjust Discount Levels

Play around with different discount levels to observe how changes impact profitability and sales volumes. Especially important is to monitor how the difference between current stock and infinite stock develops.

3. Assess Stock Levels

As mentioned above, if you notice a significant difference between the infinite and current stock levels, adjust first the timeframe to see how the sales volumes change. If the sales volume is projected to dip close to zero, it means your current stock might be insufficient for the campaign.

4. Modify Stock Levels

Use the stock modifier to increase your stock in response to the projected demand. Experiment with this feature to strike a balance between increased sales, inventory, and profitability.

5. Adjust Costs

Finally, consider additional costs associated with your campaign. You can add a percentage increase to account for extra costs or elements like kickback discounts. This will finalize your scenario planning and you are ready in minutes, instead of hours with Excel sheets.

Sniffie’s forecasting module offers an intuitive way to plan your discount campaigns, using AI to predict future demand and simulate different scenarios. By adjusting parameters like price, stock levels, and costs, you can find the perfect balance that optimizes both sales volumes and profitability. By integrating Sniffie’s forecasting module into your campaign planning, you can ensure you’re making data-driven decisions that will help your business thrive.

Conclusion

In conclusion, Sniffie’s forecasting module provides marketers with a powerful AI-driven tool to plan and execute effective discount campaigns. By leveraging advanced enforced learning AI and analyzing factors such as demand, price, and costs, this module offers precise predictions and scenario simulations. With the ability to adjust parameters like pricing, stock levels, and costs, businesses can optimize sales volumes and profitability. By incorporating Sniffie’s forecasting module into campaign planning, marketers can make data-driven decisions that drive success and help their business thrive.

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Dynamic ABC Analysis: Powering Your Product Portfolio Management

Tomi Grönfors — Thu, 01 Jun 2023 06:26:04 +0000

In the constantly evolving world of e-commerce, effectively managing your product portfolio can be a challenge. Let alone to understand what products bring in the value and how that changes over time. ABC analysis is a handy tool, yet it often takes a lot of resources or manual work. We at Sniffie are on a path to make pricing simple for e-commerce, and to help you with that we released a new feature: Dynamic ABC analysis.

Dynamic ABC analysis

At its core, the Dynamic ABC Analysis feature is a pioneering AI algorithm that recalculates your product portfolio into ABC groups based on three key parameters: revenue, profit, and volume. Designed to streamline filtering, pricing analytics and dashboards, and dynamic pricing workflows, this feature is a game-changer for businesses looking to boost their pricing efficiency and profitability.

A Deeper Dive into Dynamic ABC Analysis

Dynamic ABC Analysis takes the traditional ABC inventory categorization and adds a new layer of intelligence to it. Earlier on your ABC classifications were updated maybe quarterly and were mainly done manually in Excel. With the help of AI, we generated a Dynamic ABC Analysis that is reliable, quick and dynamic. For a quick refresher, ABC classification is a method of sorting inventory into three categories:

Class A represents about 20% of the products, which are the highest profit contributors.
Class B signifies the next 30% of products with moderate profitability.
Class C encompasses the remaining 50%, usually the least profitable products.

However, Dynamic ABC Analysis goes one step further by dividing each category into three subcategories. For instance, class A products are further divided into subcategories

A1 (the best 0%-6.7%),
A2 (the following 6.7%-13.4%), and
A3 (the rest of A1 representing 13.4%-20%),

providing a more granular view of your product portfolio’s profitability.

Why machine learning and AI are the future of product pricing?

AI is a buzzword like no other. We sat down, wrote all we know about it and let you be the judge. Here is a seriously indepth 50-page insights on how to use artificial intelligence in pricing. Hope you find it useful!

How to use Dynamic ABC Analysis in different pricing workflows

Let’s explore how this innovative new feature can supercharge your operations across three key areas:

1. Filtering

Using Sniffie’s global filters, you can streamline your product catalog by selecting specific ABC categories. This means you can focus solely on for example ‘A1’ products, if desired, allowing you to zero in on the products that matter most. Further refine your filtering by incorporating other parameters such as revenue, category, or AI insights, creating a tailored pricing or analytics workflow.

2. Analytics and dashboard

Sniffie’s pricing dashboards incorporate Dynamic ABC Analysis, enabling you to create widgets and compare crucial aspects like revenue, profit, or volume development across different ABC categories. This provides rich, comparative insights to guide your strategic decision-making.

3. Automate your pricing strategies

Harness Dynamic ABC Analysis to shape your pricing strategies. By creating filters that utilize this feature, you can trigger automatic pricing changes based on a product’s category. For instance, if an ‘A1’ product’s volume is lower than expected, workflows could automatically adjust the price to stimulate sales.

A Tool for Every Team

The versatility of Dynamic ABC Analysis extends its utility across various teams within an organization. Whether you’re part of the pricing, category management, or supply chain team, this feature can provide essential insights into how product performance and pricing influence your daily operations.

In conclusion, Sniffie’s Dynamic ABC Analysis feature offers a powerful, sophisticated way of optimizing your product portfolio management. By providing real-time, AI-driven classification based on revenue, profit, and volume, this tool not only simplifies operations but also empowers businesses to make data-driven decisions that drive profitability. Welcome to the future of e-commerce – it’s as dynamic as your business needs to be.

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3 key metrics to set targets for a discount campaign

Elina Kotamäki — Thu, 06 Apr 2023 08:33:35 +0000

Setting clear, well defined targets for your discount campaign is one of the most essential steps in your planning process. Launching a campaign with no clear target in sight will have you flying blind with no way to track your campaign progress or motivate your team. In other words, without clear set targets you will have no way to measure the success of a campaign.

This article is intended to give you a solid foundation to stand on when considering targets for your own discount campaigns. First, we will cover the importance of defining clear targets for the overall success of a campaign. Then, to start you on the right path, we will have a look at three different metrics by which you can set campaign targets and track your success as you go!

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The importance of setting discount campaign targets

Setting targets for a discount campaign is important for several reasons. First and foremost, by setting targets you can measure the success of your discount campaign. Having a defined, measurable target for success is how you will know whether the campaign was effective in achieving the desired results or not.

Targets also help you and your team to focus your efforts and resources towards achieving your specific goals. A clear focus is especially important when you have limited resources and need to prioritize your activities and create a sense of urgency around the campaign. Working towards a clear goal is always an effective way to encourage your team to work harder and achieve the desired outcome.

Think about your overall goal and how to get there. Break that journey into steps and then set specific targets for different team members, by which they can complete each step. This creates a sense of accountability for the campaign overall, and holds individuals responsible for achieving their own goals.

Finally, clearly defined targets give you a point by which you can benchmark a campaign’s overall performance against previous campaigns. You can also benchmark the performance of various different elements to a campaign such as marketing, pricing, or product performance. Measuring the performance of each different area separately allows you to identify areas in need of future improvement.

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Measuring success in relation to targets

To measure a campaign’s success in relation to its targets we can utilize key performance indicators (KPIs). Individually, KPIs can only tell you how the area they measure has performed. This information is good to know, but it does not allow you to understand the campaign as a whole. The more performance metrics you track, the richer your data set will be.

The richer your body of data, the better you can analyze campaign performance. Determining which KPIs will be most beneficial for your campaign success depends largely on the goals which you plan your campaign around. However, there are some commonly utilized KPIs which are beneficial in every campaign scenario, such as:

Cost equalization (break even point)
Return on investment
Participation rate

Metrics such as cost equalization, return on investment and participation rate can be used for campaign outcome analysis. But once you have compiled a complete data set after the conclusion of a discount camping, they also provide a good foundation to build your campaign targets from. Let’s take a look at these three specific KPIs.

Cost Equalization

Cost equalization is the point where the cost and profit are equal. This is commonly known as the break even point. It is a crucial metric which needs to be calculated for every discount campaign, regardless of other performance indicators. Failing to determine the break even point can leave a discount campaign directionless.

To ensure a well-planned and thorough campaign, it is essential to estimate the total cost of the campaign before taking any action. As such, cost equalization should be set as the primary, minimum target for all discount campaigns.

Why should this be the absolute minimum target? Because, failing to reach cost equalization means a loss of revenue and a decrease in overall profits. Neither of which are the goal of any campaign, nor are they good for your business goals overall.

Calculating cost equalization is easy! To do so just divide the total campaign cost by the per product margin. At the point where the quotient equals zero you have cost equalization.

Total cost ÷ per product margin = 0
Total campaign cost = sum total cost campaign
Per product margin = total cost of product subtracted from the price product is sold for

Cost Equalization means your minimum target is no profit, no loss.

Return on Investment

One of the most commonly used metrics in all areas of business is the return on investment. In the context of a discount campaign this metric provides a general statement on the success of the campaign overall. To calculate the return generated by a discount campaign you take the sum total of the money earned through the campaign, and subtract the total campaign cost from that number. That sum is then divided by the total cost of the campaign to give you the return percentage.

The formula looks like this: ((X – Y) ÷ Y)) x 100 = return %

X = gross campaign sales
Y = total campaign cost

To illustrate this with an example let’s imagine a business ran a discount campaign at a total cost of 2 000 €. The total earnings of the campaign at its conclusion were 5 000 €.

To calculate the return generated by our 2 000 € investment we would use the following formula: ((5 000 – 2 000) ÷ 2 000) x 100 = 150%.

The minimum target for this metric is equal to the sum total investment sunk into the implementation of a discount campaign. For the above example, the minimum target we want to hit is 2 000 €. As the campaign exceeded our target by 150% we can say that the campaign was profitable, and so it was successful.

Participation Rate

Participation rate refers to the number of customers who made a purchase after engaging with the marketing campaign, and it provides valuable insights into the effectiveness of your discounting strategy. By setting and monitoring participation rate targets, you can refine your marketing strategy and make necessary adjustments to future campaigns.

Since discount campaigns bring pricing and marketing together, we can borrow some formulas commonly used in marketing to help us define campaign targets. The formula for calculating participation rate is the same as the one used by marketing teams to calculate conversion rates.

The formula to calculate participation rate looks like this: (X ÷ Y) x 100 = Rp

X = number purchases generated by the campaign
Y= number of engagements with campaign marketing materials
RP = rate of participation

Keep this formula in mind when planning your marketing strategy. You can aim at a perfect target, such as a 100% rate of participation. But perfect targets are hard to achieve in an imperfect world. Therefore it is better to first have an understanding of your historical marketing data to determine the reach necessary. For a more in depth discussion on setting campaign targets, and detailed example calculation of participation rates make sure you check out Sniffie’s free Pricing Academy course on Discount Campaigns!

Conclusion

Establishing clear and well-defined targets for your discount campaign is a critical step in the planning process. Set clear targets and share them with your team to focus individual efforts and give your campaign a sense of direction! Once you launch your campaign your targets will help you monitor your progress and keep team members motivated.

When setting campaign targets it is important to understand how you will track your progress towards reaching those targets. Key performance indicators (KPIs) can be used to gauge a campaign’s success in relation to its targets. Make sure you choose KPIs which work together to give you a deeper understanding of the campaign overall. Learn more about discount campaign pricing by registering for Sniffie’s free Pricing Academy course on Discount Campaigns.

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The pros and cons of dynamic pricing for your Shopify Store

Elina Kotamäki — Wed, 05 Apr 2023 10:18:04 +0000

Dynamic pricing for your Shopify store can be a powerful tool when you are looking to optimize your revenue and profit. Essentially, dynamic pricing is a strategy that allows companies to adjust prices for their products or services in real-time based on various factors. Demand, competition, seasonality, and even weather conditions are all examples of these factors. The goal is to optimize prices to match current market conditions, thereby increasing revenue and profits.

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Advantages of Dynamic Pricing

One of the biggest advantages of the strategy is that it allows companies to stay competitive in a fast-paced market. By adjusting prices in real-time, companies can stay ahead of the competition and ensure that their prices are always optimized for maximum profitability. For instance, if a competitor lowers their prices, a company using dynamic pricing can quickly adjust their prices to match or beat the competition.

Another advantage of the strategy is that it can help companies avoid excess inventory. By adjusting prices to match demand, companies can reduce the likelihood of overstocking and avoid having to discount products to clear inventory. This can lead to significant cost savings as companies don’t have to mark down products to sell them, thereby preserving their profit margins.

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Disadvantages of Dynamic Pricing

However, there are also potential downsides to using dynamic pricing. For one, customers may view the practice as unfair or unethical, particularly if they feel that the price they paid for a product was significantly higher than what others paid. This can lead to negative reviews and damage to the company’s reputation.

Additionally, dynamic pricing can be complex and time-consuming to implement, requiring significant investment in technology and data analysis. This can be a significant barrier to entry for smaller companies with limited resources.

Considerations for Your Shopify Store

Overall, dynamic pricing can be a powerful tool for optimizing revenue and profits, particularly for e-commerce companies operating in fast-paced and competitive markets. However, it’s important to weigh the potential benefits against the potential downsides and carefully consider whether dynamic pricing is the right strategy for your Shopify store. Companies should also take steps to ensure transparency and fairness in their pricing policies to avoid negative customer reactions.

To achieve this, companies can implement strategies such as providing clear explanations for price changes, offering discounts or promotions to customers who may be affected by dynamic pricing, and regularly monitoring and adjusting pricing strategies to ensure they remain fair and effective.

If this post sparked your interest, read our guide on implementing dynamic pricing for your shopify store.

Conclusion

In conclusion, dynamic pricing is a strategy that can offer significant benefits to companies looking to optimize their revenue and profits. It allows companies to stay competitive in a fast-paced market, avoid excess inventory, and ensure that their prices are always optimized for maximum profitability.

However, companies must also be mindful of the potential downsides of dynamic pricing, including negative customer reactions and the complexity of implementation. Ultimately, the decision to use dynamic pricing should be based on a careful assessment of the potential benefits and drawbacks, taking into account the unique needs and circumstances of each company.

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What is a seasonal product, and how to optimize pricing and profitability for the upcoming season?

Tomi Grönfors — Sun, 29 Jan 2023 08:34:28 +0000

We all know Christmas sales can be manic for retail and Ecommerce. The same goes for bikini sales in hot, long summer. But how do you prepare for seasonal product pricing, and more importantly, how can you optimize seasonal product pricing for the season’s best outcome and how to fine-tune the outcome with markdown pricing campaigns?

Product seasonality and seasonality of demand are a natural phenomenon in the retail and Ecommerce industry. Product demand fluctuates at regular intervals throughout the year. As a Retail and Ecommerce business owner, understanding and anticipating these patterns and understanding the benefits of demand forecasting are crucial for your success. Managing inventory to plan pricing & marketing efforts, and being aware of product seasonality helps you make better business decisions and increase your EBIT. In this blog post, we’ll explore how product seasonality can affect retail and Ecommerce businesses and offer clear strategies for making the most of this natural cycle of demand.

First, we will examine what a seasonal product is, what short- and long-season products are, and how they differ. To get there, let’s look first at product seasonality.

What does product seasonality mean?

Product seasonality refers to the tendency of certain products to experience fluctuations in demand at certain times of the year. Demand changes because external factors such as weather, holidays, and cultural events. There are a few key external factors that can make a product seasonal and we will still divide those into two distinctive classes. Longer seasonal products and shorter seasonal products. Longer seasonal products sell mostly against weather and seasons.

Examples of short and long product seasonality

Let’s start with the long prominent product seasonal driver, the annual climate variation. One of the most common examples of product seasonality is the increased demand for warm-weather clothing during the summer and winter clothing during the colder months. Annual seasons like summer and winter, obviously affect consumer behavior.

For the short seasonal drivers, Christmas is a perfect example. There is an increase in demand for Christmas-related products during the holiday season. Again, this is because of the cultural tendency to celebrate Christmas by eating good food, giving gifts, and decorating homes during the holiday season.

Similarly, there is an increase in athletic clothing and equipment demand before and during significant cultural and sporting events such as the Olympics or the Football World Cup. Again, this is because people are more likely to engage in sports-related activities during these events and want to purchase appropriate clothing and equipment.

Some seasonal products also are between short and long, with more unclear seasons. Different trends often form them. When the season of a product is set by a trend, like a musical trend, the season and the demand might be harder to pinpoint exactly.

In managing inventory for short seasonal products like Christmas decorations, accurate demand forecasting and building, reliable relationships with multiple suppliers are key. It is also vital to create inventory buffers, floor space or themed category landing page planning and implement effective inventory management systems to handle unexpected spikes in demand.

For long seasonal products like winter clothing or garden furniture, it is more important to have a flexible logistics plan and build flexible relationships with logistics providers to ensure stock is easily replenished, as needed.

Consider demand forecasts and competitive pricing for long seasonal products and emphasize value creation in shorter seasons. Supporting your pricing position should always be done with insightful, data-driven marketing for both short- and long-seasonal products. Additionally, having a clear strategy for end-of-season clearance and markdown promotions is the key to success.

What to consider when planning on using seasonal products?

As an Ecommerce business, there are opportunities to increase revenue and profitability by selling seasonal products. From Halloween costumes to Christmas decorations, seasonal products can generate high-margin sales during peak demand periods. They also offer cross-selling opportunities when consumers want to create a memorable Christmas for their families. Here are the five main benefits of seasonal products.

1. Seasonal products can have very high-margin seasonal sales

One of the most significant benefits of seasonal products is that they can generate high-margin sales during peak demand periods. For example, a company that sells Halloween related products may see a significant increase in sales during October, which can result in high profits.

2. Seasonal products often have high cross-demand with related items

Another benefit of seasonal products is that they often have high cross-demand with related products. For example, a company that sells Christmas trees may also see increased sales of ornaments, lights, and other decorations.

3. You don’t know if the season is going to be good or not

While seasonal products can generate high profits, they also come with specific challenges. One of the biggest challenges is, that it can take time or be impossible to predict how a season will perform in advance. For example, a company that sells winter coats may experience high demand if there is a freezing winter, but if the winter is mild, demand is lower.

4. How to manage seasonal product planning

So, now we know what seasonality is and how it affects products of a short time interval over a more extended period. Therefore, managing seasonal product planning can also be challenging. Naturally, it is vital to have the right amount of inventory in stock, to meet demand. But, on the other hand, having too much inventory will cut your margins and can result in markdowns and wasted resources.

A good thumb rule for effective season planning is to use demand forecasts, clear-cut pricing and swift end-of-season clearance and markdows. To effectively plan for seasons, you will benefit from having a crips understanding of your in-store and online promotional space and ensuring you have the right products in the right place at the right time.

You will also notice, that handling on season sales spikes from the supply and pricing side plays a vital role. Sometimes on a daily or weekly basis. High-demand periods will strain your suppliers and logistics, that right pricing might elevate. To avoid having out-of-stock periods, consider building relationships with multiple suppliers, developing a flexible logistics plan, and building inventory buffers to manage unexpected spikes in demand. Sometimes the simplest tactic is to raise prices to lower the demand to meet you supply.

In summary, while there are certainly challenges associated with seasonal products, the benefits are clear. By understanding the market, anticipating demand, and effectively managing pricing, inventory and logistics, you can capitalize on the high-margin sales and cross-demand opportunities that seasonal products offer. Let’s look at some key aspects in a bit more detail.

How to manage your inventory for seasonal products?

The inventory management principle with seasonal products is to ensure enough stock on hand to meet the expected demand during the peak season while minimizing the excess inventory at the end of the season. Develop accurate demand forecasts, build reliable relationships with suppliers, create inventory buffers, implement clear and effective inventory management systems, and continuously monitor and adjust supply and pricing to match demand. Additionally, implementing effective logistics and pricing strategies and using data and customer insights to drive targeted marketing campaigns will help you optimize inventory management for seasonal products. Here are five main points you should look at:

Develop accurate demand forecasts for your seasonal products
Build reliable relationships with multiple suppliers
Create inventory buffers to manage unexpected spikes in demand
Implement effective inventory management systems
Monitor daily the development, replan and optimize your supply for the spiking demand

How to optimize logistics for seasonal products?

The principle for optimizing logistics for seasonal products is to develop a flexible logistics plan that can adapt to the unique demands of the season. This involves building strong relationships with reliable logistics providers, implementing effective tracking and monitoring systems for seasonal products, and planning to manage unexpected spikes in demand. Additionally, it’s essential to clearly understand the lead times and delivery schedules for seasonal products to ensure that inventory arrives promptly and that you have enough stock to meet customer demand. Few tips for the logistics of a seasonal product planning.

1. Develop a flexible logistics plan

The plan should consider the unique logistics needs of your seasonal products, including shipping schedules, transportation methods, and potential delays or disruptions.

2. Build reliable relationships with strong logistics providers

By working with multiple logistics providers, you can ensure that your seasonal products are delivered on time and help you manage unexpected spikes in demand.

3. Implement effective tracking and monitoring

Monitoring will help you track the whereabouts of your products as they are in transit and ensure they arrive at their destination on time and in good condition.

4. Anticipate the end of the season and plan for clearance and markdown

A plan for end-of-season clearance and markdown pricing campaigns of seasonal products will help you clear out your inventory and avoid waste/loss.

Planning ahead, communicating effectively with logistics providers, and implementing effective tracking and monitoring systems is vital. Doing so ensures that your products are delivered on time and in good condition, which is essential for meeting customer demand and maintaining positive customer relationships.

Developing marketing campaigns for seasonal products

For marketing campaigns for seasonal products, it is important to utilize data and customer insights to develop targeted campaigns, build a strong social media presence, create and implement effective direct marketing campaigns, utilize influencers and partnerships, and create a supportive strategy for end-of-season clearance and markdown promotions.

1. Utilize data and customer insights to develop targeted marketing campaigns

Ensure your campaigns reach the right audience and generate maximum engagement and sales.

2. Tap into contemporary topics to boost interest.

There is nothing more appealing than communicating things that people want to hear. So reach a wider audience and generate more buzz around your seasonal products.

3. Make direct marketing count

Create and implement effective direct marketing campaigns from your Customer Data Platform (CDP) with email, SMS, and SOME. Reach your most valuable customers and drive sales during the peak season.

4. Use influencers to support your brand

Utilize influencers and partnerships to drive interest and sales. Partnering with influencers or other companies can help you reach new audiences and generate more interest in your seasonal products.

5. Prepare the communication for markdown campaigns

Create a supportive strategy for end-of-season clearance communication and markdown promotions. Move any remaining inventory and make room for new products while generating additional sales with optimized margins.

Additionally, monitoring your campaigns and adjusting as needed is vital. Use metrics such as conversion rates, click-through rates, and sales data to understand the effectiveness of your campaigns and make adjustments accordingly. It’s also important to consider the timing of your movements and align them with the peak season and critical shopping dates, such as holidays, to maximize their impact.

Another key aspect to consider is creating a sense of urgency and scarcity. When promoting seasonal products, emphasize that they are only available for a limited time and create a sense of urgency among your customers to purchase before the season ends.

Finally, consider leveraging data and analytics to identify trends and patterns in consumer behavior related to your seasonal products. Then, make data-driven decisions about pricing, inventory, and marketing strategies for future seasons, which can help you maximize your revenue and profitability for seasonal products.

How to do seasonal product pricing?

Pricing seasonal products can be challenging, as demand and supply fluctuate significantly throughout the year. However, here are a few strategies that you can adopt and use to price your seasonal products:

High-low pricing

This strategy involves setting a higher price during peak demand periods and a lower price during off-peak periods. You capitalize on high demand and move inventory during slower times.

Flexible pricing

This strategy involves adjusting prices based on changes in demand and supply. For example, if you anticipate high demand for a product, you may increase the price to take advantage of the market conditions. Conversely, if demand is low, they may lower the price to stimulate sales.

Bundle pricing

This strategy involves offering a bundle of products at a discounted price. You can use this to move excess inventory during off-peak periods.

Early-bird pricing

This strategy involves offering a lower price for customers who purchase the product before the peak demand period once you can anticipate demand and plan accordingly.

Dynamic pricing

Dynamic pricing uses technology to adjust prices based on real-time data, such as changes in demand, supply, and competition. As a result, you can stay competitive and respond quickly to changes in the market.

It’s important to note that you can use different pricing strategies at different product life cycle stages. Therefore, the most appropriate pricing strategy will depend on the specific product and market conditions. Additionally, It’s essential to comply with your region’s laws and regulations and ensure that the pricing strategy doesn’t mislead the customers.

How to optimize individual pricing for seasonal products?

When pricing seasonal products, it’s essential to consider the demand for them and how to use profit optimization for those. One effective strategy is to set prices based on demand forecasts, considering your overall seasonal experience and data from previous seasons. This way, you will help your product pricing to be competitive while maximizing your profits.

In cases where you are selling seasonal products like home and specialty goods or clothing, it can be beneficial to use demand forecasts based on previous seasons and competitive pricing data. This will help you to price your products in a way that is both profitable and attractive to customers.

Another critical aspect of optimizing pricing for seasonal products is using timely promotions and discounts to drive sales during the on-season period. For example, a discount campaign can include buy-one-get-one-free offers or discounts for bulk purchases. Planning these promotions will help you to make the most of the seasonal sales opportunities.

When the season ends and sales slow down, it is vital to have a clear and decisive pricing strategy for end-of-season clearance and markdown pricing of seasonal products. Ensure you move inventory and make room for new items while avoiding losses due to overstocking.

Finally, it is essential to monitor demand and adjust pricing as needed for seasonal products. This will help you to stay competitive and make the most of the seasonal sales opportunities. Additionally, consider the cross-elasticity of similar products to avoid loss in some sales while other sales soar. Here are still a few tips to bear in mind for optimizing pricing for seasonal products.

Understand the season demand

Set prices based on demand forecasts based on the whole seasonal experience you offer and previous seasons’ demand: By analyzing historical data on sales and demand for your seasonal products, you can make more informed decisions on how to price your products in the current season.

Pre-plan promotions

Plan clearly on how to offer promotions and discounts to drive sales for seasonal products during the on-season period: By planning and executing effective promotional campaigns during the peak season for your products, you can drive increased sales and maximize your revenue potential.

Have a clear plan for markdown pricing

Develop a clear and decisive pricing strategy for end-of-season clearance and markdown pricing of seasonal products: As the season ends, you will want to clear out your inventory. To do this, you should develop a clear pricing strategy for markdowns and clearance sales. This will help you to sell off your remaining inventory and minimize losses.

Monitor the demand

Monitor the demand and adjust pricing as needed for seasonal products: It is important to keep a close eye on demand for your products throughout the season. If demand is lower than expected, you may need to adjust your prices to boost sales. On the other hand, if demand is higher than expected, you can increase prices to maximize your revenue potential.

See what products affect each other

Control the cross-elasticity of similar items when pricing to avoid loss in some sales. By understanding this relationship, you can avoid pricing your products so that it drives customers to purchase similar products from your substitute products or even from your competitors.

Luckily there are pricing software that will easily help you to optimize your product pricing for the season and let you focus on your business.

FAQ

How can businesses effectively anticipate and prepare for the seasonality of product demand in the retail and Ecommerce industry, especially for short-term seasonal products like Christmas decorations?
- By conducting thorough market research and analysis to understand historical trends and consumer behavior during specific seasons. By leveraging data analytics and demand forecasting tools, businesses can predict demand fluctuations and adjust their inventory levels accordingly. Additionally, establishing strong relationships with multiple suppliers and implementing flexible logistics plans can ensure that stock is readily available to meet demand spikes during peak seasons.
What are the specific challenges associated with pricing seasonal products, and how do businesses mitigate these challenges while maximizing revenue and profitability during peak demand periods?
- The specific challenges associated with pricing seasonal products include the unpredictability of demand, potential overstocking or understocking of inventory, and the need to remain competitive in a dynamic market environment. To mitigate these challenges, businesses adopt pricing strategies such as high-low pricing, flexible pricing, bundle pricing, early-bird pricing, and dynamic pricing. These strategies allow businesses to adjust prices based on changes in demand, supply, and competition, ensuring optimal revenue and profitability during peak and off-peak periods.
How do businesses optimize individual pricing for seasonal products based on demand forecasts, competitive pricing data, and timely promotional strategies, and how do they ensure effective end-of-season clearance and markdown pricing to minimize losses?
- Businesses optimize individual pricing for seasonal products by analyzing demand forecasts, competitive pricing data, and consumer trends to set competitive prices that maximize profits while maintaining attractiveness to customers. Timely promotional strategies, such as discounts, bundle offers, and early-bird pricing, are used to drive sales during peak seasons. Additionally, businesses develop clear end-of-season clearance and markdown pricing strategies to liquidate excess inventory and minimize losses. By monitoring demand and adjusting pricing as needed, businesses ensure effective pricing strategies that align with seasonal fluctuations in demand and market conditions.

The post What is a seasonal product, and how to optimize pricing and profitability for the upcoming season? appeared first on Sniffie.

Dynamic pricing: How to prepare your E-commerce business for it?

Tomi Grönfors — Mon, 12 Sep 2022 08:50:47 +0000

This blog post will explain how to prepare for dynamic pricing in Ecommerce. In this article, we handle especially dynamic pricing in Ecommerce based on similar competitive products. First, we go through the main insights we have learned when helping different retailers and eCommerce companies set up dynamic pricing for their pricing strategy. Then we raise vital points you should focus on in your dynamic pricing implementation process.

Select products that benefit from dynamic pricing

Firstly, you should be aware of a concept called price elasticity. If your products are highly price sensitive, your consumers will most likely choose the lowest price on the market. This is especially the case if the price is relatively high. Let’s take an example. You are buying a refurbished Apple iPhone 13 5G 512GB. One outlet is selling it with 719€ and another with 829€. Even with the reliability, cost of shipping, branding etc. inluded, you most likely will buy the 719€ iPhone. Because the value for you isthe saving you make.

So, for you as a merchant it is important to first find those products from you catalogue that need to be kept in best possible price. The easiest way for you to understand which products to choose, you can analyze the competitor prices against your product sales volumes. If your volumes drop when a competitor is cheaper, you know your product is price sensitive. You can try first to match prices to see if your volumes pick up. Often your Key Value Items reflect this way. So map out the products that bring in the high volumes to put those into dynamic pricing.

You can leave other products into manual repricing, profit optimization, and run discounts with those. That way, you can optimize the profitability without competition dictating your prices for all your products.

Set a clear corridor for dynamic price changes

Let’s presume your price is 100 and your profit margin is 50. What should you do when your competitor sells at the same price and drops the price to 60? That is something you need to know in advance.

Creating a clear corridor (price floor and price ceiling) for the highest and lowest possible price point is essential when you do dynamic pricing. That way, you ensure you never set too high prices (your volumes drop dramatically) or too low prices (you won’t make any margins).

Start by setting a margin target for each product. Margin target is the minimum margin % you accept for the dynamic pricing to set your price to. When you analyze the company’s profitability, a high gross margin might be misleading. The only thing that matters is the classic formula for retail: volume X margin.

Analyze first what the share of each of your product sales is from the total sales. The bigger the share, the bigger the importance.
Then analyze how much you need to have minimum margin for the product to keep the volumes high.
Then set clear margin targets for each product, so you do not give excessive discounts or lower the price too low.

For example if you have a Cost of Goods Sold 80€ and 20% margin target the lowest price is 100€ for your product. If you sell at 120, the corridor could have a price ceiling of 150 and a price floor of 75, and your dynamic pricing rules will never set lower prices than that.

Example on operating margin impact

Gross margin is the margin you will get from a single product. But let’s assume you sell only 100 products the entire year. You also have other costs like salaries, office, phones etc. If you were to sell the whole lot with your target price of 141€ your total annual turnover would be 14100€. For simplicity we can also estimate that all your costs would be 5000€ a year. So, your operating margin would be 2050€ ie. roughly 15%. See the breakdown below:

Turnover	14100	100 %
Costs	7050
Gross margin	7050	50 %
Other costs	5000
Operating margin	2050	15 %

This means that when you sell all your 100 tires, you make a 15% operating margin. But that means only if. In case you won’t, it’s a whole other ball game. Gross margin tells you what you are getting from a single sale. Operating margin is always relative to how well you perform sales, as it does have fixed costs included in the calculation. Those will always stay the same. Selling only 71 tires out of 100 tires and somehow noticing that the other 29 went bad or got lost, you are down to 0% on operating margin. One more and you are at a loss. Even with the 50% margin you are getting for each product.

Gross margin is a poor value to indicate your business performance. It only will tell you how much the margin is in one product. Listening to people who say they have a 200% margin is not just mad. It means you are following blind people in a dark forest. Your margin can, at highest, be only 99,99% or less. More importantly, no matter how high your gross margin is, your fixed costs should be the thing that dictates your pricing actions.

Need a Dynamic Pricing for Ecommerce?

Create rules for the automation level

Automation makes life easy. But it might be a two-sided sword. Set clear pricing safeguards where your dynamic pricing can and cannot adjust prices. These boundaries should include following things:

Keep below the market maximum
Keep above market minimum
Keep above your purchase price
Keep above your margin target
Do you need to confirm price changes manually
Follow the Competitor Price Index
Take into consideration the Days of Supply
Follow product quality classes
Take into consideration inventory
How many times a day can the price be changed

By setting these boundaries, you ensure your automation is not working against you if the market goes too wild.

Make sure KVI products are either manually accepted or have tight automation policies to avoid loss

Using a dynamic pricing strategy, you must keep an eye on your Key Value Items. Mistakes in those products mean loss. Therefore we suggest that at least early on, you accept price suggestions manually and see how your demand forecast is developing.

Use gathered competitor campaign and availability details in your automation process to avoid loss and lost opportunities

Firstly, you Key Value Items should have even tighter automation policies. For example, you probably do not want to match competitors’ campaign prices. Secondly, those products might get further sales even when you raise prices if you are the only one selling those on the market.

A good policy, therefore, is that you should have early manual acceptance of those product prices and monitor competitor campaigns and availability. Your dynamic pricing software should be capable of collecting competitor campaigning and availability and turning it into action.

Create alternative actions in your automation when competitor actions offer opportunities

Dynamic pricing strategies are pretty straightforward. If something happens, then you react in a certain way. To capture the opportunities on the market, you can plan alternative actions. Create a set of alternative actions if and when your competitor gives you a case to do so. Having a low or no inventory is a no-brainer. Removing KVI’s that you two have in common will change the dynamics. So create ready-made alternative actions on how to act when something happens.

Set products that are in automation to set in right price level before major campaigning

Consumer rights have been in political discussion lately. And rightly so. Unfair commercial activities have been seen widely in campaigns like Black Friday. Raising a price to show a high comparison price is morally wrong if you do it a day before the campaign. But pricing is still your fundamental right as a retailer or eCommerce. Especially after the EU’s Omnibus Directive, you must plan your dynamic pricing. Dynamic pricing changes your prices every day. Noticing that your comparison price is too low before the campaign might be a big disappointment. So ensure you return your prices to a level you can still use in campaigns. Especially important if you are working in the EU. If you raise the prices for a campaign, you should do that 31 days before the campaign. Make sure you calculate the cost of these actions, as having a higher price might mean you lose the campaign profits in the 30 days prior. The best practice might then be to have different products in the campaign.

Create clear communication and action guidelines on communication if customer service received feedback on changed pricing

Some customers might react to your changing prices. That is only natural. The best policy is to write down clear guidelines for communication. Focusing on the fact that you try to offer the best possible price for the consumers is wise. Everyone understands that it is, in the end, for their benefit. But unclear, vague and unorganized communication is bad for business. Communicate your policy to the team and ensure the customer service has the tools to share that with your customers.

Make sure you only have one pricing master to avoid pricing mistakes

Dynamic pricing is suitable for businesses and consumers. But if you have several systems or people changing prices, you end up setting prices you didn’t intend to. So make sure you have one pricing master where all your price changes go to your eCommerce platform.

Hopefully these tips and the links we provided will help you to setup your dynamic pricing strategies and implement dynamic pricing to your organisation.

Get help from our resources

We have created free tools for eCommerce professionals that you download from our Resource Library. Get the tools to understand how to improve your pricing.

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How to use competitor pricing to improve your profitability

Tomi Grönfors — Wed, 07 Sep 2022 11:47:42 +0000

ECommerce is a highly competitive business area. Therefore, a key aspect is to understand your competitive environment. Consequently, we wrote you a 15-step guide to get started and understand your competition better.

1. Check the market competition situation

Let’s face it. To understand your competitor’s pricing, you need real-life pricing data (or price monitoring data, as often called). It gives you a true insight when you collect competitor pricing manually or use web scraping techniques. The most profitable way is to do it for some time to understand how much your competitors change pricing. Maybe even have it on permanently.

Once you have the pricing data, match the similar products against your own to compare pricing. Again, if you have periodical data from your price changes, it will help you to figure out how much your competitors follow your pricing.

So, check the market competition situation first by collecting competitor pricing information.

2. Monitor the toughest competition daily

Most likely, 20 percent of your products bring 80 percent of your revenue. We call those products Key Value Items. From a profitability perspective, you must monitor your Key Value Items against your competitors because price changes in these products will immediately impact your profits.

It is crucial to be alerted if market pricing is going up or down and requires you to make pricing changes. There are a lot of good web scraping and price monitoring services that you can use for daily monitoring.

3. Understand which price changes you should not react to for competitor pricing

If you use dynamic pricing, make sure you also cover competitor campaigning. Changing pricing based on price means you are also reacting to their pricing campaigns. Set your automation so that it does not respond to competitor campaigns.

The easy way is to monitor the competitor campaigns for not reacting to price changes unnecessarily.

4. Find opportunities for price increases

When your competitor is out of stock, the demand will shift to other vendors. So collect the availability data to know when your competitors are low or out of stock. That helps you to make better pricing if needed. Then make price changes based on that. Monitoring the competitor availability is the wisest action to ensure you do not unnecessarily react to their price changes.

5. Utilise the competitor availability and campaign in your digital marketing to create opportunities

When you know your competitor has a campaign or is out of stock, you should know how to react. First, create clear guidelines on how to act in such situations. For example, create ad groups to Google Ads highlighting that you have stock and can deliver immediately. Then, automate those guidelines in your process or educate your team on how to make price and ad change manually.

Utilizing competitor availability and campaign in your digital marketing will create opportunities that improve your profitability on a larger scale.

6. Find the price leaders in the industry

When you have collected the price monitoring data, check which of your competitor is the price leader and set the price level in your industry. That will help you to understand how much room you have to price your products. Trying to match their pricing manically might not be wise.

The most straightforward way is to use your internal sales data to map first the price elasticity of your demand and then see how much those competitors affect your pricing. You can download a free tool for calculating price elasticity from our resource library.

Use Our Free Price Elasticity Calculator

Use this simple calculator to calculate your product’s price elasticity and understand how price changes affect your product’s demand.

7. Find the first movers in the industry

With the same price monitoring data, check which of your competitors make the first price changes. That helps you to understand who are the ones that ignite pricing processes. Essential if they are aggressive in pricing. Understanding how the price changes start will help you set strategies to react to their pricing. Create guidelines that ensure you won’t match their prices, especially with pricing that is too low or unprofitable.

8. Find competitors who are following your pricing

Check which of your competitors always follow your pricing. That helps you to understand who are the ones that move after you and how fast they do it. You can also look for specific products they follow. This approach creates a competitive advantage when you will not just lower pricing because of your competitor’s automation. Otherwise, you might find yourself in a dropping market.

9. Use a pricing calendar to understand your competitor’s pricing

A pricing calendar is an effective tool for understanding how your competitors price their products. When they do and how much. That will help you see what pricing changes are ignited by them and by you. Use your pricing data to create a simple calendar where your and your competitor’s price changes are. Find schedules, patterns, and strategies they hide in their pricing changes.

Creating a pricing calendar to understand how competitors react to your pricing will be one of the most important insights you can give your team.

Learn how to use Dynamic Pricing

Dynamic pricing is a hot topic when it comes to pricing but it’s often used as a buzzword in strategic plans rather than being implemented into the pricing strategy of a company. In this webinar recording, two pricing experts take a hard look at how time really should be taken into consideration when pricing and how to use this to improve your revenue.

10. Make sure to mark the competitors that use the price match policy

Price matching is a standard policy used by eCommerce companies, as well as retail companies. In many cases, it is a policy that might even lower the competition, as Harward Business Review explains in this article. You should know which competitors do that and how it affects your business.

So, go to your competitor’s websites and check their terms. Mark those competitors that use a price match policy. If you suspect that they match your lowered pricing, that might be a reason to modify or keep track of your pricing policies.

11. Understand your competitor’s product category diamond

You might use quality classes when you sell products that satisfy the same need. Quality classes help you to price products always in the same relation. For example, let’s say you have three similar televisions in the same group. One costs 99€, the second 259€, the third 399€. If you change their pricing individually, it might easily add product cannibalization. When you always move those in the same amount, let us say 10%, the value added between the models remains the same.

As explained above, it is also helpful to understand how your competitors have structured their quality classes or category diamonds if you use quality classes. Firstly, understanding how they create pricing increments will also help you to develop appropriate price increments for your products. Secondly, it helps you to keep relevant spaces between different product prices or, thirdly, even structure new ones.

12. Using a competitor price index to establish overall goals

The competitor price index is an essential Key Performance indicator. Use products you and your competitor have in common. First, calculate a sum of all product prices you two have in common. Your index value is always 100, and competitors are monitored against that. For example, if the competitor is 99, they are one percent cheaper on the index.

You can create the CPI index to compare every competitor’s sum to your basket sum (only the exact products included). Then, divide their basket (same products that you and they have) with your basket sum and convert this to an index.

An index value that is less than 100 means that the competing basket is cheaper than your basket. Values above 100 mean the competing basket is more expensive than your basket.

The Competitor Price Index will help you establish company, category, and brand pricing guidelines. Then, you can monitor your overall pricing performance instead of focusing on individual products. Some products might be cheaper or more expensive than your competitor’s, but you see your general price level as a critical index.

As simple as it is, a competitor price index will give you an overall KPI for your pricing on a competitor, category, and brand level.

Profitable Pricing in eCommerce Ebook

Setting prices is simple, but knowing the right price point requires a bit of knowledge. This book and the tool to go with it will give you all the information and secrets you need to know.

This is what you will get:

Handbook of profitable pricing in eCommerce
Strategic Pricing Gateway -calculator
Concrete tips and instructions for profitable pricing

13. Check the product match level against competitors

Knowing how many vendors sell the same products as you do is essential. Match, at least, your Key Value Items to your main competitors. This way, you know your pricing competition against the competition. The less competition, the more you have pricing leverage on those products.

14. Check how your ABC listing fits against the competition

Knowing how many vendors sell the same products is essential—knowing how similar products match your inventory ABC-listing can help you create alternative pricing options.

For example, if you have many A-list products matched but not B- and C-list, you might want to use dynamic pricing in A list (to keep your volumes up) and price and profit optimization in B and C (find the most profitable price point based on your demand).

15. Check how much your competitors sell private label products

As the last tip, private label products are perfect for diverse price image. Gather details on how much your competitors use private labels to understand how much your branded products might be affected by, for example, lower price point competition. Using such products as Substitute matches for price monitoring is wise. But most importantly, your private label products should yield better profitability as there is less competition.

Interested to develop your pricing more?

Use our free tools to improve your pricing already today. Download from a variety of free professional tools to get started.

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Price Intelligence for Ecommerce: Why does it matter?

Jonas Timonen — Tue, 23 Aug 2022 09:47:00 +0000

In the booming e-commerce era, price intelligence has become crucial for businesses to succeed. So why does it matter for your e-business, and how can you implement it successfully? Let’s take a look.

What is price intelligence?

Why is price intelligence important for e-commerce?

What are the benefits of price intelligence for e-commerce?

How can businesses implement price intelligence effectively for long-term growth?

What is price intelligence?

Price intelligence is a process for tracking, monitoring, and analyzing competitor pricing and market trends to make well-informed pricing decisions.

Why is price intelligence important for e-commerce?

According to Shopify’s Future of Commerce Report 2022, price is a crucial factor influencing 74% of consumers. On average, a potential customer will visit at least three different websites before making their purchase. This explains why e-commerce giants like Amazon change prices around 10-12 times daily. That is why many companies, especially e-retailers, rely on price intelligence for their pricing decisions to stay competitive in the marketplace.

What are the benefits of price intelligence for e-commerce?

Setting up a price intelligence system has many benefits. Let us introduce a few of those below.

Boost sales

With an active price intelligence system, you can track your competitor’s price changes and create better pricing strategies to attract customers. By making them more appealing, your offers will rank at the top on the “Comparison shopping engines,” which are websites that consumers use to find multiple retailers offering the product they are searching for. Google Shopping, Pricegrabber, and Shopping.com are examples of such websites. A good ranking on these websites will significantly increase your visibility, boost your organic website traffic and attract many new customers. Thus, it is a great way to boost sales.

Optimize profit

Gone are the days when companies had a plan for all products at a simplified and fixed margin target. No matter how extensive your product portfolio is or how often your competitors revise their pricing, a powerful price intelligence software is a game changer. It enables you to monitor competitive prices across all relevant SKUs in real-time and vary your offers to obtain the maximum margins.

Target many different customer segments

A price intelligence tool tells you the maximum price customers are willing to pay for your products and the median point where most competitors price it. By combining price intelligence knowledge with a dynamic pricing strategy, you can target many customer segments with different optimal price points.

Get rid of old stock at a low cost

Every product has a trend and an expiration date. Once the trend slows down, customers are not interested in buying the products. Price intelligence tools help you identify these trends early on, allowing you to apply attractive discounts to maximize sales before it is too late. This way, you can get rid of the old stock at a low cost rather than throw away the entire product stock.

How can businesses implement price intelligence effectively for long-term growth?

What should be asked is, “How can businesses implement price intelligence effectively to gain long-term growth instead of entering a price war.” Following our three-step guide will help you achieve that goal effortlessly.

Step 1: Choose a good price intelligence tool

Keeping track of competitors’ pricing can be time-consuming and inaccurate with the traditional price intelligence methods, such as manually filling information on excel sheets. These shortcomings can be fixed using modern price intelligence solutions that utilize AI-based technology. With the Sniffie tool, you can update real-time competitor product pricing data with a 99,9% accuracy. This information can be used to offer attractive deals to customers. By leaving the tedious task of price intelligence to the software, you gain more time to focus on your business growth.

Step 2: Develop a dynamic pricing strategy

In the e-commerce world, the pricing of competitive products changes in the blink of an eye. Many pricing strategies are at your disposal, such as cost-plus pricing, value-based pricing, economy pricing, etc. However, choosing dynamic pricing strategies enables you to react accurately to demand and generate better profits automatically through different product pricing workflows. As a result, staying competitive and profitable 24/7 will no longer be just a wish.

Step 3: Monitor the results and make adjustments

No pricing strategy works forever. The market conditions and consumption trends keep changing every day. Therefore, after setting up an automated dynamic pricing system for your store, you should keep an eye on monitoring and evaluating the sales. If you do not see the desired results in the long term, you should check the report and suggestions from the price monitoring company to revise your pricing strategies accordingly.

Conclusion

In short, price intelligence is indispensable for businesses to survive in the fierce e-commerce environment. However, doing price intelligence alone can’t bring success to your business. Combining price intelligence data with proper pricing strategies helps grow your business in the long run. Sniffie’s AI-powered price optimization tool helps e-commerce and retail companies increase their profit margins by 5% during the first 90 days of use and on average 10% more than the traditional methods of calculating price elasticity. Want to see how it works? Book a demo with us here.

Book a 20 minute demo

In just 20 minutes, we'll tell you which products to optimise and show you how to use your free trial, if you wish.

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A free guide on dynamic pricing for Shopify Stores

Jonas Timonen — Thu, 28 Jul 2022 06:45:00 +0000

The dynamic pricing trend has taken the e-commerce industry by storm. Not too long ago dynamic pricing was only accessible to notable big retailers like Amazon. However, many affordable dynamic pricing tools are now available for most online retailers. If you own a Shopify store, you already know how fast the online marketplace is changing. Therefore, your pricing strategies should change along with the prevailing market conditions to keep your sales at their highest. However, few people know how to use an efficient dynamic pricing strategy for their Shopify store. This article will help you explore dynamic pricing, why it is crucial for your business, and how to implement it successfully on your Shopify store.

Dynamic pricing explained

You may have heard of dynamic pricing as surge pricing, demand pricing, real-time pricing, or algorithmic pricing. It is the pricing strategy where product prices are flexible and continuously updated based on real-time market conditions such as competitors’ pricing, market demand, or supply changes. For example, if stock for a certain product drops on Amazon, you’ll likely see a surge in the price within minutes. You can check more examples of dynamic pricing from our earlier blog post here.

Why is dynamic pricing important for Shopify stores?

There are some key reasons why many business owners choose dynamic pricing for their online stores, including Shopify. With dynamic pricing, you have a great method to increase sales and react immediately to the ever-changing market. You can take advantage of high-demand periods to raise prices, capture sales opportunities and maximize profit. When it comes to low demand periods, you can lower prices to trigger sales and increase revenue. Moreover, when you handle an e-commerce store with hundreds of SKUs, adjusting prices for different products based on various dynamic parameters becomes difficult. Dynamic pricing systems offer an effortless way to manage different price rules for a complex range of products based on varied market conditions.

What are the benefits of dynamic pricing for Shopify stores?

Dynamic pricing offers a lot of benefits for Shopify stores such as:

Better optimized inventory turnover
Optimal balancing of peaks and lows of prices or stocks
Avoiding unnecessary discounts with optimal price points
More efficient deliveries.
Faster responses to demand fluctuations
Capturing the best possible sales impacts revenue positively

Our dynamic pricing tool has been able to increase store margin on average by 10% when compared to manual pricing. This technique improves the customers’ perception of your competitive prices, resulting in higher customer satisfaction and more sales in Shopify.

Read our e-book "AI in pricing" to learn more about dynamic price optimization

How to successfully implement a dynamic pricing strategy for Shopify stores?

Implementing a dynamic pricing strategy is an excellent opportunity to improve your profit, but there may be a lot of twists and turns in your business if you don’t know how to start. Here is an easy six-step implementation process with its do’s and don’ts during the implementation, and our solution for dynamic pricing.

The six-step process to implementing a dynamic pricing strategy for a Shopify store

Step 1: Understand your target customers:

The first step is to ask yourself a set of very fundamental questions: Who are your target customers? What are their characteristics and expectations? When do they have the most demand for your product?

There might be different groups of customers seeking different product values and prices. For instance, some customers may be price-sensitive, but others may require high-quality products rather than low prices. Understanding the target customer will help you design your business with the right product and price offerings.

Step 2: Define a commercial objective.

After understanding your target customers, it’s time for you to define the commercial objective you want to achieve. The objective can be increased market share, discounter, a high-value proposition, etc. Having a clear objective helps you navigate any changes during your pricing management journey and makes sure you are focused towards the right goals.

Step 3: Establish a pricing strategy.

After you know what you want to achieve, you can determine how to achieve it by setting a suitable pricing strategy to attract and retain customers. If the objective is to maximize visibility while capturing profits, you can apply the “high-runner” strategy like Amazon. In this strategy, you attract customers to visit your store by pricing a small selection of your most popular products cheaper than the competition, but price some less-popular products higher to gain more margin. It is hard to give general advice because the pricing strategy is a choice based on your needs. If you are interested, you can find more guidance on our “pricing strategies” blog.

Step 4: Choose your pricing method(s)

Once you’ve established a pricing strategy, you must choose how you are going to implement it. There are many different pricing methods, in this post we’ll go through four common ways:

⦁ Competition based-pricing: you adjust product prices based on the competition.

⦁ Cost-plus pricing: you set prices based on a desired margin and product cost.

⦁ Value-based pricing or elasticity-based pricing: you consider customers’ willingness to pay for the perceived value of your products. Products with low price elasticity are better candidates for price changes as they are less sensitive to price adjustments.

⦁ Time-based pricing: you change prices at a specific time or season where the demand changes significantly or when the product has an expiration date.

These pricing methods are not mutually exclusive, and you can combine them to fit your needs. For example, you can combine price penetration strategy with competitor-based pricing and cost-plus pricing to ensure that you offer a competitive price while maintaining a certain profit level.

Step 5: Set pricing rule(s)

Now it is time to set the rule(s) that tell your dynamic pricing software what to track and change. You first define the specific product, then set up a particular rule. For example, you select the headphone items with a stock of over 10 pieces. Then you assign rule X, which is to follow the lowest price of competitors A and B.

Step 6: Implement, test, monitor, and evaluate.

Before going live, you should go through a robust test phase to see if pricing settings are ok or not. Then if the rule(s) are working correctly, you set an automated dynamic pricing system for your Shopify store. After going live, monitoring and evaluating the sales over time is crucial. If you do not see the desired results, consider re-evaluating your strategy or objective.

Do(s) and don’t(s) in implementing dynamic pricing for Shopify stores

To help you with practical tips, let’s wrap up some do(s) and don’t(s) in implementing dynamic pricing:

⦁ Be transparent to your customers:

You should inform your customers that you’re applying dynamic pricing to your store. It will help you gain advocacy from your customer and enhances your brand image.

⦁ Focus on the out-the-door price, not the item price:

Consumers decide to buy products based on total out-the-door price, including taxes, shipping costs, service charges, and any additional fees. Therefore, your dynamic pricing should consider not just the item price but also promotions, bundles, shipping times, and other fees to make the out-the-door price competitive.

⦁ Capture competitor stock out:

Track your competitors’ inventory and raise your price when their SKUs are out of stock. It will help you maximize your product margins.

⦁ Offer Discounts to Regular Customers & Bulk Buyers:

For regular customers who buy your products in bulk, offering special discounts may encourage them to buy more at your store. However, don’t offer discounts for a first-time bulk buyer as they may not turn into a regular customer.

⦁ Automate your Dynamic Pricing for Maximum Returns:

In dynamic pricing, you must continuously update market changes to optimize your prices.Though it is hard to implement this manually, it is much easier with an automated AI-powered dynamic pricing software. Our dynamic pricing tool allows you to make changes within minutes to keep up with the fast-paced marketplace. It enables your product prices to stay competitive and profitable 24/7.

⦁ Don’t introduce prices that alienate customers:

Ensure that pricing rules align with your brand value proposition and customer perception. If you sell high-value products, don’t offer a hefty discount that can make customers doubt your product value. Customers may accept that airfares constantly change even during the day, but they expect the soap price to stay stable.

⦁ Don’t change prices too frequently without justifiable reasons:

Don’t change prices if you don’t have justifiable reasons to your customers, such as product seasonality, cost change, market demand change, supply change, etc. Also, before making price moves, you should identify if that item is the key-value item (KVI) or non-KVI because customers often compare the prices of KVI to non-KVI.

Our solution for dynamic pricing in Shopify stores

Sniffie’s dynamic pricing module is highly accurate and responsive; thus, it will help you improve your speed, accuracy, and profitability of pricing. Our tool offers great features to support your Shopify stores:

React immediately to changing market conditions
Select to react only on your chosen rules
Get notified immediately
Escape the race to the bottom and secure your margin
Minimize price cannibalization
Safeguard yourself against unfavourable market conditions

Dynamic strategies modified with AI

Every price change is studied by artificial intelligence and you can easily plan how to improve your strategies.

Any rules you want

Create rules that you need with our easy to understand pricing actions.

Forecast your demand

Use our demand forecast tool to understand how much room you have for adding.

Any data you need

You can combine any data points you like, to create strategies you need.

Only for Shopify stores

Keep your pricing compliant with EU’s Omnibus Directive.

The Omnibus Pricing App tracks the running 30-day lowest price point and automatically considers discount codes to make sure your sale price is always shown with the right 30-day lowest price.

+ 14 day free trial!

The post A free guide on dynamic pricing for Shopify Stores appeared first on Sniffie.

Dynamic Pricing – Sniffie

What means cooling-off period in dynamic pricing?

What is the Omnibus Directive?

Rethinking the Cooling-Off Period

Try it yourself - compare your campaign scenarios!

Why Do You Need a Cooling-Off Period?

How Do You Implement a Cooling-Off Period?

Pitfalls to Watch Out For

FAQ

Most frequent questions and answers​

How to forecast discount campaigns with forecast module

What is Sniffie’s Forecasting Module?

How to Use Sniffie’s Forecasting Module

1. Select Your Product

2. Open the price simulator

3. Adjust pricing, cost and stock

Planning a Discount Campaign Using Sniffie’s Price Simulator

1. Establish Preliminary Discount

2. Adjust Discount Levels

3. Assess Stock Levels

4. Modify Stock Levels

5. Adjust Costs

Conclusion

Dynamic ABC Analysis: Powering Your Product Portfolio Management

Dynamic ABC analysis

A Deeper Dive into Dynamic ABC Analysis

Why machine learning and AI are the future of product pricing?

How to use Dynamic ABC Analysis in different pricing workflows

1. Filtering

2. Analytics and dashboard

3. Automate your pricing strategies

A Tool for Every Team

3 key metrics to set targets for a discount campaign

Table of Contents

Try it yourself - compare your campaign scenarios!

The importance of setting discount campaign targets

Want to try out Sniffie?

Measuring success in relation to targets

Cost Equalization

Return on Investment

Participation Rate

Conclusion

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The pros and cons of dynamic pricing for your Shopify Store

Try it yourself: 14-days free trial for Shopify stores!

Advantages of Dynamic Pricing

Want to try out Sniffie?

Disadvantages of Dynamic Pricing

Considerations for Your Shopify Store

Conclusion

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What is a seasonal product, and how to optimize pricing and profitability for the upcoming season?

What does product seasonality mean?

Examples of short and long product seasonality

What to consider when planning on using seasonal products?

1. Seasonal products can have very high-margin seasonal sales

2. Seasonal products often have high cross-demand with related items

3. You don’t know if the season is going to be good or not

4. How to manage seasonal product planning

How to manage your inventory for seasonal products?

How to optimize logistics for seasonal products?

1. Develop a flexible logistics plan

2. Build reliable relationships with strong logistics providers

3. Implement effective tracking and monitoring

4. Anticipate the end of the season and plan for clearance and markdown

Developing marketing campaigns for seasonal products

1. Utilize data and customer insights to develop targeted marketing campaigns

2. Tap into contemporary topics to boost interest.

3. Make direct marketing count

4. Use influencers to support your brand

5. Prepare the communication for markdown campaigns

How to do seasonal product pricing?

High-low pricing

Flexible pricing

Bundle pricing

Early-bird pricing

Dynamic pricing

How to optimize individual pricing for seasonal products?

Understand the season demand

Pre-plan promotions

Most frequent questions and answers