Challenges such as trying to quickly adapt to new technologies, and reprice against behemoths like Amazon, has revolved around the idea that you have to be the fastest and most aggressive when it comes to succeeding in ecommerce.
But maybe retailers should take their foot off the gas, at least when it comes to their pricing strategy.
In the beloved tale of the tortoise and the hare, we’re taught a valuable lesson: that slow and steady wins the race.
When you’re too busy being flashy and hopping around from spot to spot, it can do your store more harm and good.
When it comes to your pricing strategy, more specifically price optimization, retailers need to channel their inner tortoise and hare. Yes, it’s important to move fast, but randomly changing your prices to keep up with competitors can be detrimental.
But it’s easy to understand where the pressure to move fast comes from. In ecommerce today, 85% of shoppers believe that price impacts where they will actually make purchases, so you know they’re looking for the right deal at all times.
Not to mention that 56% of shoppers actually go online in search of better prices.
This can give some retailers a panic attack. Knowing that shoppers are really looking for the best price possible can create a sense of alarm, and lead to some poor decisions when it comes to pricing strategy.
In the past, static pricing was the norm. But now that retailers like Amazon are changing their prices hundreds of times a day, some retailers are hopping from price to price without any calculations involved.
Static pricing is bad, but how about random price changes? They can actually be worse. Not only because they often deplete margins, but because they leave the retailer with little to no time to analyze the effect it has on their demand and sales levels.
Giving yourself time with each price change to measure the results is the best way to build confidence in your pricing decisions moving forward.
It sounds strange to take your time with price optimization, especially as retailers are constantly undercutting their competitors.
But the fact of the matter is that chasing those retailers is like going down a rabbit hole.
There may be no coming back from drastic price cuts, as consumers might only be hooked on your product due to its ridiculously low price, and when you move it up to earn back margin you could lose sales.
As retailers become more equipped with tools to measure competitive intelligence, it’s time they monitor things a little differently.
Make price changes a little more calculated and increase the interval between each change.
Doing this can help you measure your products’ elasticities and help you understand where you have pricing power, or where you need to be more competitive to win over the shopper.
It’s important to keep up with market changes. But at the same time, it’s just as important to test your prices and act on a winning strategy.
If you find a price that wins a lot of sales for your products, take note of your competitors’ prices at the time. If it’s higher, you know you can command a price premium.
The future of price optimization is now. In order to get ahead, retailers have to combine the best of the tortoise and the hare to price smarter, not necessarily harder.
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