Are you wondering how to implement Dynamic Pricing? This all sounds good in theory. But how do you do it in practice? Here are the 6 steps you will need to take to implement Dynamic Pricing:
Step 1: Build a database (which could be a spreadsheet) which stores the price you charge for each product on each day, how many units of each product were available each day and, how many sales were made in the past.
Step 2: Ideally, collect similar information about your competitors from their websites each day.
Step 3: Analyse the data to understand the sensitivity (we call this elasticity) between price, product features, competitor prices, seasonality, and the likelihood of your customers purchasing. Other factors which might be relevant include weather, events, and anything else that drives demand in your industry.
Step 4: Predict what future sales volumes will be for each product, date, and possible price.
Step 5: Calculate the price for each product and date that will optimise your profits.
Step 6: Update your pricing database regularly (ideally daily) with the optimal prices.