As a Shopify merchant, you probably know there are lots of other Shopify stores—more than 2,5 million Shopify stores to be exact—that can attract your customers with similar offerings.
At this point, you might already be thinking of solutions to optimize your store, whether it’s your customer service, checkout processes, product listings, or SEO, and you know the optimization never ends for an online merchant.
And these optimizations are somewhat expected from your customers’ end. There is also one thing that will most certainly affect your customers’ purchasing decisions: the price of your products.
Since pricing is one of the paramounts in ecommerce, you need to make sure you are pricing your products most appealingly to your target customer segment, and dynamic pricing is the most profitable pricing strategy for your store.
It might seem complicated at first, but no worries, we plan to guide you through your dynamic pricing journey with clear definitions and action plans.
Let’s start with what dynamic pricing means and how to use it to boost your Shopify store’s revenue.
What is Dynamic Pricing?
Dynamic pricing is a strategy that allows online retailers to instantly adjust their prices to the optimal levels, according to their competitor prices, demand changes, seasonality, or stock availability, utilizing retrieved market data.
By using dynamic pricing, ecommerce businesses can respond to the dynamic market conditions with the best possible price point for each product and increase their profits and competitive advantage.
As an online retailer, you should know by now that not only do prices and demand change rapidly, but consumers also compare prices from multiple sellers to find out the best deal before purchasing.
In contrast to traditional pricing, where prices stay the same for long periods, with dynamic pricing being a very flexible approach, merchants can rely on analyzed data to adapt easily to market changes.
So, we believe you don’t want to leave money on the table with impractical manual pricing, so let’s move with what you can do more with dynamic pricing as a Shopify merchant.
How Dynamic Pricing Works on Shopify
Let’s say you are a Shopify merchant who sells music equipment. If you have been selling unique products that are differentiated in terms of branding and quality from your competitors, then that’s good for you since you don’t have to deal with all the hassle.
But in this example, we will assume that you are selling highly competitive products with naturally lower profit margins, where dynamic pricing is very applicable.
First, you need to install a dynamic pricing tool from the Shopify app store, like Prisync, which will automatically sync your Shopify products into your store and define your main competitors to turn their shortcomings to your advantage.
Dynamic pricing tools help you retrieve your competitors’ product prices, stock status, and pricing position, allowing you to have competitor analysis, too.
Competitor analysis lets you know your market position to determine if your current position matches your business goals.
Best Practices for Dynamic Pricing on Shopify
To align with your business goals, you can utilize different pricing adjustments by creating product categories that will help you target different customers with diverse buying abilities.
Once you have information about your competitors based on your products, and make sure you add your main rivals to your analysis as well, you are free to use several predefined rules with each product or product category.
Use Dynamic Pricing Rules for Competitiveness
Let’s exemplify. For some of your audio store products, you would like to be a certain percentage lower if you want to beat your competitors in terms of price and lure customers to your store.
Let’s say for a specific brand, you might choose to set the price a percentage higher to justify additional benefits, such as complimentary accessories or free shipping. Moreover, you might want to end your prices with decimals like 99 or 95 to leverage psychological pricing tactics and make your prices more appealing.
You can do all these pre-adjustments and control your market position with dynamic pricing rules, where you can apply rules with endless variations to achieve the best pricing for each item.
Smart Price Suggestions and Price Change Alerts
You can also get smart price suggestions and price change notifications if your competitors decide to change their prices.
After you have determined the cost of your product and the competitive profit margin you want to achieve, this feature will help you boost your revenue by automatically repricing your products without going below your predefined limit and warning you not to underprice your products.
Manage Your Inventory During Busy Times
Another practical scenario to understand the benefit of dynamic pricing is that it helps merchants to control their prices according to their inventory levels, which becomes really helpful in seasonal demand peaks.
Let’s go on with the same audio store example, and assume that you also sell party speakers in your store. When the demand is high in the summer, you and your competitors risk going out of stock if the pricing strategy is not right.
With a dynamic pricing tool, you can access stock information for your products and your competitors’ products.
The tool will send you an alert if your competitors are out of stock, which allows you to raise your prices strategically.
Move your Inventory with Convenient Promotions
On the other hand, when the busy seasons end, you can move your inventory and reduce your costs by offering discounts on overstocked items.
This strategy will help boost your ecommerce business’s revenue by selling your products at the right price, and also help you create convenient promotions at the right time.
Review to Optimize Your Strategy
Dynamic pricing requires constantly monitoring competitors’ prices and the pricing adjustments you have made to measure if they are producing the expected results.
You can analyze the change in your sales volume, profits, and customer behavior to determine if your pricing strategy is proper or needs fine-tuning to remain competitive.
Can Dynamic Pricing Work for All Shopify Stores?
As we mentioned earlier, you don’t have to use automation for all your products since dynamic pricing is ideal for products with lower profit margins where the competition is high and inventory changes frequently.
The good part is that you can choose to automate certain brands, product categories, and your best-selling or most price-sensitive products, making dynamic pricing adaptable for almost any Shopify business.
It’s important here to develop your strategy step by step, starting with identifying your top competitors and most competitive categories, tracking your competitors’ prices, analyzing your competitors’ strategy to react accordingly, and experimenting with different pricing rules that align with your business goals.
Since you rely on pricing engines to implement your strategy successfully, keep in mind that the effectiveness of your pricing adjustments depends on the quality of the data you receive, so choosing a proper tool is also essential.
For example, Secom is a Shopify store that sells supplements and cosmetics from different brands and manufacturers.
Secom used Prisync to stand out among its 13 major competitors, experienced 20% growth over the last year, and grew its market share on its Shopify store.
The best part of the dynamic pricing automation for Secom is knowing real-time price changes almost anytime and building a price strategy based on this information.
Conclusion
A proper pricing strategy can make a difference in your business’s revenue among thousands of other Shopify stores, and dynamic pricing is a highly effective tool to stand out from the crowd, whether you are new to online selling or a seasoned merchant.
All in all, even though it might seem complicated at first, implementing dynamic pricing in the retail industry can be very beneficial in setting your prices automatically to boost your revenue and profit margins whenever market prices, demand, or stock availability change.
So, that’s how we guided you through your dynamic pricing journey to help you take those first steps on your Shopify store. Determine the right price at the right time with a dynamic pricing tool and boost your revenue.
