The future of prices is dynamic

Stranded shopping cart - the future without fixed prices? Photo: Holger Porthmann/Creative CommonsPrice is a key factor in the success of online retailers. Particularly in the travel and events industry, customers have become accustomed to supply being based on demand. The president and CEO of the Association of the Swiss Mail Order Trade Patrick Kessler takes a relaxed view. Although he now only books his trips online, he doesn't think about how much his seat neighbor paid on the plane: "I only drive myself crazy with thoughts like that, so I turn them off." Walter Oberli, partner at the e-commerce consulting firm Carpathia, has a different opinion. He speaks of an uneasy feeling when his seat neighbor pays less for the same service. "From a retailer's point of view, dynamic pricing may be fascinating to optimize margins and much more. But as a consumer, I simply feel cheated." In his experience, he says, an online retailer must avoid any negative associations with its brand. This can quickly spread on social networks and have a negative impact on a brand's overall reputation.Indeed, price regulation on the Internet is a major challenge. With the help of market observations and the evaluation of data records, online retailers know when a customer buys which product at which price. How often he clicks on it or how much he orders. But how can an eTailer use this information? And how can he use his data intelligently for price adjustments? "The right price at the right moment - this is how sellers will be able to sustainably determine their pricing strategy in the future," explains Tal Weber, co-founder of Quicklizard, a software for the dynamic optimization of pricing strategies. This intelligent software provides a comprehensive analysis. It observes one hundred percent of the store assortment. In addition, it monitors and analyzes various online offers, collects data and calculates the best price adjustments depending on the request and objectives. The idea for this software comes from mobile telephony, where the multitude of offers, providers and roaming charges made it difficult for customers to make the best choice. Quicklizard offers the possibility to perceive the market and its dynamics in real time. The retailer is thus empowered to react dynamically.The customer at the centerFor the 250 members of the Mail Order Association in Switzerland, dynamic pricing does not (yet) play a role. According to Patrick Kessler, Switzerland is far removed from mechanisms of price dynamics such as those found on Amazon or eBay. The scope for price action in Switzerland lies in the availability of a good. Only when few products are available does the price tend to rise. But members of the retail trade currently have no shortage of goods, which is why other stimuli must be created to increase sales. "There is no sense in adjusting the price every two minutes to customers," he says. The loyalty of quality-conscious Swiss customers could rather be increased via other benefits, such as additional services.Online retailers use the software very differently. Some see it as a data provider of prices in real time, others as part of the distribution planning system. In all cases, the advantage of dynamic pricing lies in monitoring the competition.On the other hand, there is a great danger of a wrong strategy if a retailer does not know his own costs exactly and does not adjust them precisely enough.Transparency is the keyIn addition to positive brand communication, Walter Oberli advises setting the price strategy the same for all customers or controlling it via customer-specific promotions. "If, for example, you offer lower prices for everyone at the weekend, this strategy is fairer than if one user pays a higher price than the other. "The trend is to make prices dependent on even more factors. Since 2012, the Flims-Laax ski resort has already been calculating its eTicket prices according to the weather, snow conditions or the capacity utilization of the ski area. Transparent communication supports customer acceptance and is crucial to the success of this pricing policy.However, is a retailer allowed to offer a different price in the retail store than in the web store? The omnichannel buying experience works by keeping the price the same online as in the store. "But is that really the right way to go?" asks Tal Weber. After all, he says, the overall costs of selling in-store, such as rent, electricity, or employees, are much higher than running an online store and maintaining a warehouse. Consequently, the price has to differ, he said. In addition, many more items can be presented online than in a brick-and-mortar store.The increasingly rapid dynamics around the factors affecting eBusiness require tools to manage. Dynamic pricing is now profitably applied in different segments. In the future, Quicklizard consultants see potential in the price management of marketplaces.UFirst Group. UFirst Group is the main distributor of Quicklizard in the DACH region.