This is the first post from the series of articles about price management at online store (and not only). In this series I’ll try to describe in detail how the modern process of price management looks like.
The automatic price management process consists of some elements:
- Monitoring of competition
- The analysis of price elasticity of products on the basis of historical data
- Price testing – the choice of optimal price strategies
- The automatic management of an offer
I’ll describe each of these elements in detail in seperate posts. Below I present a short characteristic of these stages.
Collecting information about prices and availability of products from competitors’ websites, price comparison websites and auction sites. The most often it is done every day.
It is why we should monitor product prices at competitive stores, price comparison websites and auction sites :
- Quick information about price changes at your competitors’ stores
- Monitoring of product availability in the market
- The possibility of putting pressure on producers/distributors
- Information about popularity of products
The analysis of price elasticity of products on the basis of historical data
Some conclusions concerning the influence of price on sales can be drawn by analysing historical data concerning sales. The conclusions can be very helpful if we use some data concerning competitors’ prices. We should remember that price elasticity can depend on many factors, for example: time of the year.
Price testing – the choice of optimal price strategies
Carrying out an analysis of price elasticity can lead to interesting conclusions. However, to choose an optimal price strategy we must carry out some tests. Their aim is to verify hypotheses that have been made as well as determine strategy for products for which price elasticity hasn’t been defined.
The last stage of this process is putting into effect price strategies and process automation. During implementation we usually strive for a situation in which we manage price fully automatically for 80-90 % of products. We introduce price recommendations for the rest of them.
It is why we should manage price automatically:
- Quick reaction to price changes at your competitors’ stores
- Increasing the price in the case of changes in product availability
- Price testing strategies
- Decreasing the costs of product management
There will be some more posts soon.