/ Pricing smarter on the Net

Knowledge Base Article
Article Type: Blog
Author: Bibi M

Pricing smarter on the Net


Many start-ups have offered low prices on the net in the rush to capture first mover advantage. Many established companies, by contrast, have transferred their offline prices onto the net, hoping to establish online presence without being ready to deal with the complexities multichannel pricing brings.

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You can use the net to optimise pricing in 3 ways:

1. Set and announce prices with greater precision

Test prices easily and collect customer responses instantly. This allows you to set most profitable prices and tap into previously hidden customer demand. Transparency and efficiency go both ways – easy for customers to compare prices on the internet and easy for companies to track customers behaviour and adjust the prices accordingly.

2. Adjust prices 

Adjust prices in response to fluctuations in market conditions, customer demand and competitors behaviour.

3. Segment your market 

You can do this by using the purchase histories and analytics to set segment specific prices and offer promotions immediately.

Behaviour of consumers shows that most online customers shop around very little, returning to the same sites time and time again.

Behaviour of corporate buyers says that they buy online primarily to lower cost of ownership – mainly transaction and search costs and track inventories and make better purchasing information.

How does a company develop and execute an online pricing strategy that fully exploits the opportunities created by improved pricing decision, adaptability and segmentation?

▼ Here are 3 steps you can follow to do that

1. Identify the price freedom that is aligned with your strategy and brand.

For example, a retailer might be seen as untrustworthy if they offer widely different prices to different consumers. Whereas a bank can offer substantially different prices to different customer segments because it is perfectly justified to charge lower interest to more profitable, more loyal and more wealthy customers.

2. Build appropriate technological capabilities.

There are a number of inexpensive tools you could use to optimize online pricing, such as competitors price tracking and online customers surveys. Ideally you should use techniques for monitoring and responding to the behavior of the customers, markets and competitors. You can :

  • test pricing precision, adaptability and segmentation online
  • test alternative pricing and pricing structures to find out at what level to set prices and which other variables to change and how often.
  • develop early indicators of customer price perception – regular surveys of customer perception can give you early signals of potential problems or opportunities. You  can also track the sales conversion by monitoring how many people visit a site with how many view and configure a product check the price or make a purchase. If the ratio rises above a set threshold, it may be time for a price increase.

Alternatively, if it falls if may be time for a targeted short-term promotion.

  • identify supply and demand imbalances that could trigger profitable price changes.

3. Make somebody accountable.

To fully exploit the opportunities that e-pricing creates – this group or individual should sit higher in the organisation and has the authority to experiment constantly, to change prices, and to adapt quickly to shifting circumstances. Also, the individual should be analytical, flexible and fast and be comfortable to use analytical tools and technology. They will become expert at feeding information they gather back to the your company’s off-line  channels so those too can become more responsive.


By taking full advantage of the unique possibilities of the Net to set prices with precision, adapt to change quickly and segment customers accurately you can get your pricing right. It is one of the ultimate drivers of e-commerce success.

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Post originally published via ICAEW Business Advice Service – click here

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