In our series of The Ultimate Online Pricing Guides, we have already shown you how to
_ create a focus article list in just 60 minutes,
_ segment your focus articles intelligently into four groups,
_ tap into the secret of effective pricing rules, and
_ how to define your pricing floors.
You are thus only one step away from successfully using the potential of dynamic pricing. In this final part of our tutorial, we will show you how to best possibly rollout your active price management.
Increase the frequency of your pricings.
As with manual pricing, allow yourself 30 minutes every day for price management. Set your prices daily for your most significant items and for long tail items set weekly anew. You will see that your time was well spent, since no other controlling factor in your company affects your profits as enormously as the optimisation of price-setting.
1. Strategic top products: daily price adaptation
Top products have a higher significance for your company in sales and are therefore to be particularly focussed upon. To increase efficiency, we thus recommend a daily price adaptation of top items within the moderately competitive sectors. Within those highly contested sectors, on the other hand, such as electronics and computers, for example, we recommend a daily price adaptation of all articles – regardless of their segmentation.
2. Strategic middle-ground: weekly price adaptation
Although these items have a somewhat lower volatility and sales significance than the top products, a good market position for these articles is imperative. You should therefore never neglect these items and adapt their prices weekly.
3. Strategic sleepers: daily price adaptation
The reason for lowered sales volumes amongst the so-called sleepers could possibly lie with uncompetitive pricing. This can also subsequently impact negatively upon the overall pricing image of your company. Consider your market position precisely, therefore, and set your prices for sleeper items on a daily basis.
4. Strategic potential articles: from monthly to 14-day price adaptation
The volatility of potential articles is very low, but their share in total sales varies sharply. It is thus worth examining how your company is positioned in pricing terms. You should then decide on this basis whether a leading price-position in the market is worthwhile. The potential to this end can be found within these articles.
When implementing active price management, a closely-meshed pricing control based on key statistics becomes absolutely essential. This serves towards success monitoring, as a security function and also elevates the pricing knowledge of your company.
Statements about the success of price reductions or increases will then form the basis for future pricing decisions. Successes or failings based on the impacts of pricing measures are to be defined in the volumes and gross profits at an individual article level. Unprofitable price reductions should therefore be expressly avoided, whilst profit-building price increases should be further maintained.
When employing daily price adaptations, to be observed, above all, are the total growth in gross profits and the level of average price increase or decrease, as well as the top-selling articles per day.
A further indicator of improvement in your pricing image is the average value per shopping cart per day. If this value increases, then your pricing image also improves.
After only two weeks of using active price management, our client, at minimised manual effort, was able to increase his turnover by over 13.5%, gross profit by 10% and shopping cart value by 2.4%.
To support an active and market-orientated price management, as well as to achieve consistent market transparency, a great number of leading retailers use technologies such as blackbee. blackbee allows you a detailed observation of your competitors, displays new trends and facilitates for you a well-grounded pricing and product line management. Only those who recognise which prices become established, which trends are developing and how the optimal product line should look can achieve higher margins, increased sales and remain competitive longer term.