Distributed Logistics for Digital Commerce Article 6: Dynamic Pricing Control
Pricing and price strategy are the foundations of a successful digital commerce business.
Most shoppers admit that they turn to ecommerce and marketplaces like Amazon and Walmart because they are attracted by the promise of low prices. They choose products based on pricing comparisons. They select sellers based on the availability of “free” shipping – which is nothing more than the seller’s decision on how to price their shipping.
But pricing rules ecommerce in a much more fundamental way.
That’s because most businesses are in business to drive a profit. The right pricing strategy creates a steady, predictable stream of profit. That frees up resources for advertising and promotion, for investments in staffing and infrastructure, and for focusing on growing the business without working 24/7.
The concept of yield management is central to understanding distributed logistics. The goal of a yield management approach is to get the most profit possible at any point in time from the inventory you have available.
That’s the point of dynamic pricing. It’s a tool for changing the price you offer based on changes to product costs and to market conditions in real time – but always with the goal of managing profitability on inventory available for that specific transaction in line with your overall pricing strategy.
There are three steps to implementing a dynamic pricing capability:
- Understanding product costs
- Understanding market conditions
- Understanding triggers that might call for a price adjustment
Done right, dynamic pricing unites sales and operations strategy in real-time. Done wrong, and you can quickly dig your brand into a hole and create major issues with your sales channels.