What Online Retailers Can Achieve from Using a Price Optimization Software
With an ever-increasing number of shoppers turning to the internet to make their purchases, the overall sophistication of the online shopper has increased as well.
96% percent of Americans with internet made an online purchase in 2017 (as did over half of the internet users in the world) according to bigcommerce.com, and over 80% of online shoppers research their product before buying.
These trends show no sign of slowing down and have been increasing in occurrence every year. Related studies have shown that price and shipping cost are the most relevant factors for a shopper deciding to buy, followed closely by the speed of delivery. Every other consideration trails far behind.
This means that more and more your Ecommerce business will be forced to compete on a price by price level with nearly every product you carry. For some this is a good thing, for others, it will spell the end. If your business can’t compete with the fact that almost half of all online buyers begin their search on Amazon, you stand little chance of surviving in the long run.
Whether or not your business will be among those that can cut through the noise and establish itself as a go-to brand eventually comes down to having a detailed pricing strategy that both attracts customers and ensures your bottom line. This is much easier said than done.
Major online retailers like Home Depot, Walmart, and Hotels.com have been shown to “tailor prices to specific shoppers based on their digital habits and demographics, such as their ZIP code.“ Amazon adjusts thousands of item prices daily depending on market demands.
How is it possible for a relatively small company to compete with this level of sophistication? That is actually the easy part.
While recent technological advances have allowed the big shops to increase their pricing sophistication drastically, those same advancements in technology have also allowed smaller stores to incorporate many of the same pricing tactics for a fraction of what it used to cost, as explained in this article. What once took an army of researchers and specialists can now be accomplished with a few key pieces of software.
What Price Optimization Software Can Do For You
The primary goal of any pricing strategy is to sustain margins and profitability, to maintain competitive positioning, and to push critical value items. To that end, modern software can give you better insight into common pricing practices in your market and provides recommendations that both improve customer satisfaction and increase revenue.
According to a study titled “Customer satisfaction and business performance: a firm-level analysis” by Paul Williams and Earl Naumann : “Increases in customer satisfaction lead to increases in cash flow and a reduction in risk associated with those cash flows. Others have also found a positive relationship between customer satisfaction and overall revenues. “
Catalogs which were already partially managed and then adopted such software has seen 15-45% in gross profit gain. More importantly for long-term benefits, they have also been shown to increase customer satisfaction. Maintaining your position as an outlet with low competitive prices, while still keeping (or growing profits) is a feat that may seem at first to be counterintuitive. Price optimization tool for retailers, like Upstream Commerce, takes into account a myriad of factors to determine demand and can pinpoint opportunities for both raising and lowering prices – the eventual outcome often accomplishes the Herculean task of both lower perceived costs and higher profits.
This added profit can also allow you to improve your offerings in service and delivery, eventually establishing your shop as a premier option in your industry. Pricing is king, but always make sure you are using your advantage to build up your brand image.
Remember, not all software is created equal. Make sure you do as much research shopping around as your customers will.