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eCommerce Pricing Strategies Now and in the Future (or, How I Learned to Stop Worrying and Love Price Optimization)

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Are you choosing your pricing with a dartboard? Or constantly changing your prices to reflect current market conditions? Or employing any of dozens of scam-like pricing formulas that are likely to irritate a user? Frank Fiore advises doing some hard thinking about how to set prices for the products offered on your eCommerce site.
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New Pricing Models

eCommerce today is little more than a reflection of the way business has always been conducted in the brick-and-mortar world. Pricing models such as fixed-price buying at a fixed location, online auctions, and group buying have merely mimicked the offline retail world. In addition, manufacturers and merchants have struggled with the escalating costs associated with the liquidation of excess inventory, resulting in lower returns, and, consequently, greater financial loss.

Pricing a product or service is part art and part science, and represents a critical piece of a company's marketing mix. It's an important element of any company's marketing strategy, but also difficult because creating a pricing strategy inherently includes so many possibilities—but only one price.

Enter the Internet.

This technology has reshaped the pricing landscape. Dynamic pricing strategies such as auctions, group buying, and name-your-price have thrown new elements into the mix. As an eCommerce manager, you'll have to create a pricing strategy that benefits from and takes advantage of the ability of the Internet to provide a true dynamic pricing environment where fixed pricing and the painful process of applying fixed prices are a thing of the past.

There are many benefits to using dynamic pricing to price a company's product or service. First and most obvious, businesses can maximize return per customer by providing customized pricing for different market segments. Second, a company can gather market intelligence on how much a consumer is willing to pay for a product or service. With dynamic pricing, companies can give consumers what they want at prices they're willing to pay.

The one-size-fits-all pricing strategy is obsolete—may it rest in peace. It never really was designed for the long haul, anyway. In short, dynamic pricing is attuned to the digital age—customized and just in time.

Because the Internet has switched the power equation to the consumer, who can shop and compare with a simple click of the mouse, increased competition and customer segmentation are mandating that companies adopt a dynamic pricing strategy. Yet a recent Accenture study of online pricing suggests that not enough companies have integrated dynamic pricing into their online pricing strategies. Changing pricing to reflect market conditions can help to maximize profits and create a competitive advantage.

So why are so few companies putting this strategy to use? There are a number of reasons.

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