How Can Dynamic Pricing Help Solve Major Pricing Dilemmas?

Trial and error is important, yet in order for retailers to gain valuable insights, they need to conduct an immaculate process with zero deviation for a designated time frame


A cosmetics retailer that sells a wide variety of products is constantly torn between two pricing strategies. The first strategy involves selling products at affordable prices (“everyday low price”) that provide reasonable profit margins. The second strategy involves selling products at higher prices, while applying promotional pricing throughout the majority of the product catalog. These strategies vastly differ from one another, and the retailer finds it difficult to make a decision. Which strategy will attract more clients? Which will provide higher profit margins?

Solving Pricing Dilemmas

For many businesses, pricing generates strategic dilemmas. Naturally, businesses wish to solve these dilemmas as quickly as possible. Yet in many cases, they feel they need to experience some “trial and error”. First try strategy #1, and then stop and switch to strategy #2.

Trial and error is important, yet in order for retailers to gain valuable insights, they need to conduct an immaculate process with zero deviation for a designated time frame. Sounds difficult, right? Not if dynamic pricing is involved.

Sticking to Strategy

Retailers rely on dynamic pricing to optimize prices for specific target audiences, in accordance with a wide variety of dynamic parameters (competitors, seasons, days, hours, market trends, etc.). Yet price optimization can be effectively implemented only after a general pricing strategy is determined.

Smart dynamic pricing always begins with strategy. Dynamic pricing platforms help retailers establish pricing boundaries for product categories. Once these boundaries are set, retailers can benefit from a very dynamic pricing optimization process, which helps them sell more and generates meaningful insights. These boundaries are important, because they create pricing recommendations without strategy deviation.

Choosing What Works Best

Let’s go back to our cosmetics retailer. Using dynamic pricing, the retailer first establishes the “everyday low prices” strategy for a designated time period. After recording the results, the retailer switches to the heavy promotion strategy. Each strategy is supplemented by ongoing price recommendations, in real time, based on consumer behavior, market trends and more.

After implementing both strategies, the retailer should have ample information regarding the one that best suits the business. The retailer can make an informed, fact-based decision, knowing that the “trial and error” phase was fully adaptive to a wide range of variables, while never deviating from strategy guidelines.

Comparing Apples to Apples

Most importantly, the dynamic pricing platform creates a clean comparison. Optimal real-time pricing for both strategy scenarios creates a revenue comparison that is free of unwanted variables. Metaphorically speaking, the retailer is comparing “apples to apples” instead of “apples to oranges”. Thus, the retailer can proceed to solve an important pricing dilemma – and move forward.


You might also like:

Pricing Optimization
Anat Oransky Lev, VP Marketing

Planning Your Pricing Strategy for the Holiday Season

The holiday season is a great time to boost your sales, but it also presents a unique challenge: how do you price your products differently when the demand for them is so high?

Price too high, and you miss sales and revenue. Price too low and your margins erode.

Read More »
Pricing Optimization
Pini Mandel, Co-Founder & CEO

Vertical: Dynamic pricing for DIY Retailers

DIY Retailers face fierce competition for sales and intense pressure to improve margins. While traditionally DIY retailers sell paints and tools, today they also compete in other categories selling anything from household goods to various types of electrical appliances.

Read More »
Pricing Optimization
Pini Mandel, Co-Founder & CEO

Vertical: Practices and Trends in Dynamic Pricing for Grocery Stores

Grocery stores today are under intense price pressure as a result of supply chain challenges, competition and rising costs. Knowing how to increase share of wallet among current customers and attract new customers has become critical to the survival of struggling grocery stores. A critical component of this process is instilling a favorable price-value image in the minds of consumers.

Read More »
Skip to content