Monday, November 21, 2022

Present Dynamic Pricing Transparency

Dynamic pricing is a system in which the marketer moves the price for an identical item up and down frequently in response to factors such as the availability of the item, what competitors are charging, or customer characteristics. When done properly, dynamic pricing increases a marketer’s profitability directly, by charging close to the maximum shoppers are willing to pay, and indirectly, by coming closer to optimizing the supply/demand balance.
     But if done improperly, dynamic pricing irritates shoppers. Researchers at University of Passau find that presenting an ecommerce dynamic price in terms of a high discount from a reference price reduces the irritation. The common objections to dynamic pricing from consumers are that the pricing policies lack transparency and charging some customers more than others is unfair. The method analyzed by the researchers addresses the objections. In their studies, it increased purchase intentions for the dynamically priced item.
     The displayed discount should be at least 10%, recommend the researchers. When it’s less than this and shoppers become aware that the item’s price changes frequently, they perceive the dynamic pricing practice as unfair and they’ll be more likely to defer the purchase, thinking a better deal is on the horizon.
     Transparency about the marketer’s use of dynamic pricing is also important. In the studies, when the procedures involved the consumer participants discovering the policies and procedures of variation in prices on their own, this aggravated negative reactions, on average.
     Shoppers are more receptive to dynamic pricing when done with attention to their individual characteristics. This customized pricing requires the marketer to gather information about the shopper, and this means overcoming shopper resistances to sharing the information. Tell them how the sharing benefits them. Describe how you’ll use the information and summarize your privacy protections.
     Knowing the shopper well might allow you to analyze their attachment style, and this plays into acceptance of dynamic pricing. Attachment style refers to how accepting and supportive the shopper believes others are toward them. Those who are confident others will be available whenever needed have a secure attachment style. In the research, words that characterized them included wanted, welcomed, liked, and cherished. People who worry about the stability of relationships with significant others have an anxious attachment style. Words used to characterize them included abandoned, neglected, disregarded, forsaken, disconnected, and let down.
     People with a secure attachment style tend to view customized pricing favorably.

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