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04 September 2015

Is the price becoming the only differentiation criterion in e-commerce?

Customers who shop on the internet easily have the possibility to compare prices. And they make use of this possibility. Things like the “customer experience” are not irrelevant, but for a nicely designed shop-page to come into action, the customer has to find its way to the shop-page first. Usually the price is the guidepost.

I think, at this point it is unnecessary to cite statistics about how many consumers compare prices on the internet. You already know them anyway. Fact is: the internet compresses the space in which consumers and vendors act. In this small space, vendors on the one hand have to position themselves in the best way possible, if they want to be perceived by consumers. Consumers, on the other hand, find themselves in an overwhelming situation of a seemingly endless world of offers. They will thus try to select the most relevant offers by concentrating on certain features of those offers: this usually is the price. Only when a vendor is able to persuade the searching consumer of his offer or shop, other factors like the design of my page, payment and delivery conditions, goodies etc., come into action.

How can I offer an optimal price?

The advantage you have as an online vendor compared to a stationary retailer is that you can potentially know a lot about your customer without even talking to him or her. Simultaneously you can know a lot about your competition. All the data are available on the internet, they just have to be gathered. The challenge is to interpret those data and to convert them into practical strategies. This process is meant when people talk about “automatic pricing”. [In Germany this runs under the term “repricing”]

In this “automatic pricing”-process, a program continuously looks at the prices of your competitors and adjusts your own price according to different strategies. These newly calculated prices are automatically implemented in your shop- or ERP-system. Though, it is not about offering the cheapest price, but to offer optimally calculated prices due to various strategies and thus increasing your sales numbers and margins.

This “smart pricing” (understood as the next step of automatic pricing) leads to a different connotation of the question raised above. The price not only serves as a criterion of differentiation for the consumer, but also enables the market to differentiate between well and badly positioned vendors. In the future, only vendors with well calculated prices and a smart pricing strategy will be able to prove themselves at the open and transparent online-market.

For further information on “automatic pricing” and “smart pricing” please visit our website and/or contact us directly:

http://patagona.de/pricemonitor/shop-preise-optimieren/funktionsuebersicht/

(Guest Blog Post written by: Tim Scharmann, Head of Marketing and Sales of Patagona GmbH)

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