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Online retailers are excited about the new dynamic pricing strategy that has come in to the online space.Dynamic pricing allows companies, for instance, as used by airlines today, to charge different prices to a similar set of customers for the same product or service that is being offered.What is surprising to note, is that the pricing varies greatly from customer to customer.

Smaller percentages of changes in price are common, while a drastic change in price is typical of the phenomenon. Dynamic pricing is being adopted by a number of retailers for a number of reasons today. It is believed that this strategy may bring profits in the short term, but from a long term perspective, it’s pegged for doom. Pricing is definitely a key component of the brand, and how brands keep changing the price of the services offered, is not only going to change how they perceive the brands, but also how they shop.

A few companies have learned a lesson about this pricing, and it has not been easy but this why they are buying dynamic pricing optimization as Upstream Commerce. Customers who made purchases early, were agitated when price discounts were announced quickly and other customers were also agitated when prices were increased all of a sudden as well. This is not great for market share, nor for consumers.

 

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Customers will waste no time, and on realizing that they have been charged more than others, will bring the house down, because of dynamic pricing.Trust is important and the brand gets affected, when this is lost with the retailer.Especially when retailers promise and pledge not to increase the prices from up to a certain price.Prices are fast changing today, and the pledge does not do much to instill trust consumers.

Airlines and hotels follow this strategy and customers are abiding by it, so why the commotion over this strategy when it’s being adopted by other retailers.Hotels and airlines cannot use any other method of pricing, and that is the key difference.The demand for hotel rooms and airlines seats vary, and they also expire after a certain point and therefore, this strategy is used.

With the demand changing constantly, it is necessary that these companies adjust accordingly. Customer who book tickets last minute are ready mentally to pay high prices, and they are in agreement when they enter a plane that is fully booked.

Two outcomes can be predicted if retailers continue to follow dynamic pricing. They will lose brand loyalty. This could lead to changing the way people shop online.

 

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Retailers will no longer trust the sites they used to visit, as the aspect of trust is out of the equation and they will start comparing prices before every purchase.This pricing strategy will online push consumers to compare and then buy the cheapest option available, which is not in the best interest of the retailer.

The overall brand will be affected by the pricing strategy.While dynamic pricing should not be done away with completely, retailers should definitely pay attention to how it is used.Automatic refunds to customers in prime programs, refunds to customers who have seen a lower price after they have made their purchase and a cap on price fluctuations can indeed help you.