Dynamic pricing is when a retailer frequently changes their prices to have the lowest and most competitive price—at any given moment. And while many retailers—big or small—follow dynamic pricing it’s most likely not the wisest way to “play the game” unless your company is a retail giant swimming in money.

Also, talk about possibly upsetting customers. Let’s say there’s this shirt you’ve been eyeing that you’re dying to buy online on your go-to retailer’s website. The price is constantly changing so you decide to wait a few days and see if it settles. Meanwhile, you find another retailer who has a stable price for this shirt so now you feel weary. Who can you trust? And how can you really make a purchase decision if the price of this shirt is constantly changing?

Dynamic pricing affects retailers and consumers in some way and perhaps it’s better to leave the “price wars” to retail giants, as they can probably “afford” to do so.

Effects of Dynamic Pricing on Retail Businesses

Dynamic Pricing is usually used to take advantage of any space that is available i.e. sports/concert tickets, hotels and flights.

Some consumer products can undergo numerous price changes in just the course of a day. And how exactly do these players engage in dynamic price changing games? Competitive intelligence tools. Even if the retailer’s goal is to maintain a lower price, it becomes an exhaustive effort for the customer.

So, what are some advantages and disadvantages of dynamic pricing?


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Advantages of Dynamic Pricing

Advantages for the retailer include having the lowest price and the chance to have their product chosen.

Dynamic pricing also allows retailers to see if other companies have sold out of a particular item and if so, they can now raise the price without any fears. Additionally, if the retailer sees it’s selling a product for a lot lower than competitors, it can immediately raise the price to be in line with market price.

Disadvantages of Dynamic Pricing

While there are advantage there are also disadvantages of this pricing strategy. Firstly, retailers and consumers can run into trouble keeping up with pricing changes that are in fact inaccurate. As in, outdated results.

Upstream Commerce dynamic pricing optimization tools help companies avoid this problem by providing them with highly sophisticated pricing analytics that prevent these mishaps and allow the retailer to maximize profits.

Retailers can only support low prices for so long until something has to give and then it’s back to the constant increasing and decreasing products which leave consumers enraged and confused. Not a great idea when you’re trying to build or maintain your client base.

Managing Pricing Intelligence

Usually, merchandising departments are responsible for controlling assortments, decide which products to purchase and attempt to maximize margins. Marketing is then responsible for setting dynamic prices because they understand the sales and brand management portion of the company.

However, 10% of retailers are saying that this ideal combination of both departments is being used. What better way to bypass this “mess” of a situation and go straight to dynamic pricing tools. This saves a lot of time and effort as competitive pricing algorithms can quickly pick up what’s going on with hundreds and even thousands of products.

The Good News? Pricing Intelligence Tools

Sophisticated pricing intelligence tools like Upstream Commerce sharply increase the amount of information a retailer can use to maximize profits while not harming their business.

Today, many retailers are not using pricing tools that can help them better manage pricing as opposed to departments such as marketing and merchandising dealing with it. Pricing is an essential part of your company’s sales efforts as well as brand image and reputation. Using a dynamic pricing tool is a smart way to organize and figure out complicated data with the simple click of a button.


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Pricing intelligence solutions allow you to see the bigger picture and make you aware of what competitors’ are up to. It’s now more than ever that these intelligence tools are needed. Retailers are craving that immediate data/information that will provide them with insight on their target market, what competitors are up to , and essentially help them understand what is needed next.