How Often Should eCommerce Companies Make Pricing Decisions? | eCommerce Matters Ep. 001

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In the first episode of "eCommerce Matters" Philip Huthwaite, Founder & CEO of BlackCurve, and Dr Rob Horton, Product Director and in-house eCommerce Data Scientist, take a look at an age-old ecommerce question - "How often should I make pricing decisions?".

Philip and Rob share how frequent an ecommerce company should change prices, why price management is important to operational excellence and how stock levels impact prices.

The conversation also dives into changing consumer behaviour and why data sets are the dirty secret to making pricing work for ecommerce companies across a number of sectors.

Hosts: Philip Huthwaite (CEO & Founder of BlackCurve) and Rob Horton (Product Director at BlackCurve).

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Full Episode

Podcast Summary

Consider Sales Cycles and Demand Patterns

When deciding on the best day to change prices, it's crucial to consider your business's sales cycles and demand patterns. Many businesses experience fluctuations in demand throughout the week, with higher sales on weekends and lower sales during weekdays. Understanding these patterns helps you avoid charging different prices on different days, ensuring consistency for your customers. By analysing your sales data and identifying the peak and off-peak periods, you can determine the most suitable day for price changes.

Avoid Intraweek Price Changes

Making frequent price changes within a week can lead to confusion among customers and disrupt their purchasing decisions. It's generally advisable to avoid intraweek price changes, especially when there's a predictable demand pattern. Charging different prices on different days within the same week can create uncertainty and may discourage customers from making purchases. Instead, strive for consistency in your pricing strategy to maintain customer trust and satisfaction.

Choose a Convenient Timing

While there isn't a universally optimal day for price changes, it's important to choose a timing that aligns with your internal processes and minimises risks. Many businesses automate price changes during early morning hours on trading days, typically around two or three in the morning. This timing allows for sufficient processing time and provides an opportunity for a final check to ensure accuracy and alignment with other business operations.

Frequency of Price Changes

The frequency of price changes often has a more significant impact on overall performance than the specific day or time of the changes. Rapid and frequent price adjustments are crucial for achieving market efficiency and staying competitive. By closely monitoring market dynamics, customer behavior, and competitor actions, businesses can determine the optimal frequency of price changes. This may vary depending on the industry, product type, and target market. Strive to adapt your pricing strategy to match the pace of the market and customer expectations.

Utilise Automated Pricing Technology

Automation can provide substantial advantages when it comes to managing price changes, especially for businesses dealing with a large number of products. Implementing automated pricing technology allows for efficient and timely adjustments, ensuring you can keep up with frequent market changes. By leveraging algorithms, data analysis, and machine learning capabilities, automated systems can help businesses make informed pricing decisions, respond quickly to market shifts, and maintain a competitive edge.

Maintain Unpredictability

Maintaining an unpredictable pricing pattern can be advantageous in the marketplace. By varying the timing and frequency of price adjustments, businesses can prevent competitors from exploiting predictable pricing changes. An unpredictable approach keeps competitors guessing and reduces the risk of being outmaneuvered or price-matched. By keeping your pricing strategies confidential and using automated systems that adjust prices at different intervals, you can disrupt the market and maintain a competitive advantage.

Incorporate Additional Data Sets

To make more accurate and informed pricing decisions, businesses should consider incorporating additional data sets beyond competitor pricing. These may include historical sales data, inventory levels, website performance metrics, customer behavior analytics, and even external factors like weather data or economic indicators. Analysing these diverse data sets provides valuable insights into market trends, customer preferences, and pricing opportunities. By leveraging this information, businesses can optimise their pricing strategies and maximise revenue potential.

Pricing Decisions Beyond Competitor Overlap

Expanding pricing decisions beyond direct competitor overlap is essential for maximising efficiency and profitability. While competitor-based pricing is crucial for specific products, it's equally important to make data-driven pricing decisions for products without direct competitors. By leveraging historical sales data, demand forecasts, and other relevant factors, businesses can determine optimal prices for these unique products. This approach ensures that no product is overlooked and enables businesses to capture additional revenue opportunities across their entire product portfolio.

Pricing Maturity and Market Share Growth

Frequent price changes, informed by various data sets and automation, are generally associated with better performance in the e-commerce industry. This reflects pricing maturity and a focus on market growth. Businesses that adapt to rapid price changes and make informed pricing decisions across their entire product range are more likely to gain market share and maintain a competitive position. By continuously evaluating market conditions, analysing data, and refining pricing strategies, businesses can optimise their revenue potential and achieve sustainable growth in the dynamic e-commerce landscape.

Conclusion

In summary, effective pricing decisions for e-commerce businesses involve considering sales cycles, avoiding intraweek price changes, choosing a convenient timing, utilising automated pricing technology, maintaining unpredictability, incorporating additional data sets, expanding pricing decisions beyond competitor overlap, and striving for pricing maturity and market share growth. By implementing these strategies, businesses can optimise their pricing strategies, improve market efficiency, and achieve growth in the e-commerce sector.