Dynamic Pricing Consulting. When to Reach Out for Expert Pricing Strategy Services?

Dynamic Pricing Consulting. When to Reach Out for Expert Pricing Strategy Services?

Krzysztof Suwada - January 5, 2023

Dynamic pricing is a pricing strategy that allows businesses to adjust their prices based on market and customer demand, competition, and other factors. It is becoming increasingly popular in today’s market, allowing companies to optimize their pricing in real-time and increase their profitability.

Dynamic pricing consulting services provide businesses with the expertise and tools needed to implement and optimize dynamic pricing strategies. These services can help companies to increase revenue, improve customer satisfaction, and make more informed data-driven decisions. In this article, we will explore dynamic pricing consulting services in more detail and discuss how working with pricing consultants can benefit your business.

What Is Dynamic Pricing and Its Importance in Today’s Market

Dynamic pricing is a flexible pricing strategy that rejects fixed prices for the sake of dynamically changing ones. It aims to maximize the company’s profits by constantly recalculating the given price based on current market conditions.

Dynamic pricing algorithms may consider different variables depending on how they were designed, the most common ones being current supply and demand, competition factors, and other factors that may affect their final margin. They use the time-based opportunity to calculate the perfect price points at a given moment. Some algorithms may also analyze shopping habits and other relevant behavioral traits in order to segment the customer and find the highest price they are ready to pay.

Static pricing (with single price point) vs. dynamic pricing (with multiple price points)

Static pricing (with single price point) vs. dynamic pricing (with multiple price points)

Today, the dynamic pricing model is slowly replacing fixed prices as customers become accustomed to it. The fear of their reaction was one of the main barriers stopping the companies from introducing this strategy. Now that it’s slowly dissolving, it is becoming a standard to use dynamic pricing, particularly in hospitality, transport, or logistics industries.

Reinforcement learning model for dynamic pricing algorithms

Reinforcement learning model for dynamic pricing algorithms

What Is Dynamic Pricing Consulting?

There are many ways in which dynamic pricing algorithms can work, and none of them works for everyone. To provide you with all the benefits we have listed below; it should match your brand identity and business objectives.

If you want to implement a dynamic pricing strategy thoughtfully, you should adjust how your prices are estimated to various factors. Among them are your company’s specifics, its niche, the markets you operate in, and customer habits. And that’s just the tip of the iceberg! Here’s where dynamic pricing consulting comes into the scene. As a service, it aims at maximizing the benefits of implementing the dynamic pricing strategy or improving the existing one with that goal in mind.

You may ask: why should I develop my own dynamic pricing strategy independently when I can use something which is already available? Companies that offer their services or products through marketplaces or booking platforms tend to rely on the dynamic pricing solutions provided by those, forgetting that they are designed to serve everyone.

As a result, they will never make the most out of dynamic pricing with these models - quite contrarily. They could actually lose their customers. For instance, the most commonly used dynamic pricing models tend to align the prices with the demand. Some customers may migrate to other companies in reaction to such price surges, considering it disappointing and not in line with the brand’s image they used to like.

Dynamic Pricing Consulting and Its Role in Helping Businesses Implement and Optimize Dynamic Pricing Strategies

That is only an example, but it teaches us that dynamic pricing requires a deep understanding of your target groups and markets you are providing your services or products. At the same time, you also need to understand what actually constitutes a price (in your specific case and in the case of your competition) and how different factors impact it.

Developing your own model and strategy is a time-consuming process that generates costs, so it is better to plan things well at the beginning to avoid unpleasant surprises later. Dynamic pricing consulting helps companies with that.

Through consulting sessions, they first analyze and establish their business objectives and margin expectations to know which direction their strategy should take. For instance - it may adopt an entirely different shape when its main objective is to gain a competitive edge than when they aim at dynamizing sales during low-demand periods.

Types of Dynamic Pricing Consulting Services Available

Depending on your specific case, you may need different dynamic pricing consulting support. In our daily work, we usually provide the services listed below. Let’s take a closer look at each of them.

Dynamic Pricing Strategy Development

Many companies reach out to us when they want to implement a dynamic pricing strategy but don’t know where to start. We conduct an AI Design Sprint workshop focused on pricing strategy with them to understand their specifics, needs, and goals and research how they have approached pricing before. This aspect is essential when it comes to the success of your pricing strategy.

Radical changes may be a double-edged sword. If your pricing patterns change 180 degrees from day to night or lose consistency with the brand image you have been building so far, the dynamic pricing strategy may not bring success but rather the opposite. The pricing consultants help you carry out that transition smoothly and without disappointing your clients’ expectations, getting you to pricing excellence smoothly.

When we already have a deep understanding of your objectives and benchmarks, we draft a strategy and assist customers with its implementation. It may include custom dynamic pricing model development, but not necessarily - it all depends on the conclusions we come up with at the first stage. Sometimes, all you need to do is use the already available tools and integrate the clients’ systems with the existing software or make the data processing more efficient.

Pricing Data Analysis

In order to implement a successful dynamic pricing strategy, you need to gather and process a lot of data to understand the correlations between sales and pricing patterns. And when we say a lot, we really mean it! Processing and extracting insights from these large datasets requires advanced data analytics skills and tools.

As your pricing strategy consulting partner, we can build a data analytics pricing model for your specific case to identify trends that may impact your price and find the most profitable price points in different scenarios and target groups. Through thorough data analysis, you will find the relevant benchmarks (competition/perceived value) to maximize the chances of success of your pricing strategy and give you a competitive advantage.

Should you go for value-based pricing, cost-based pricing, or competition-based pricing? The answer is in your data. These insights can serve you in the dynamic pricing strategy development or improvement and help you choose the most adequate tools.

Custom Dynamic Pricing Software Implementation

Custom dynamic pricing software development and implementation are one of the most challenging types of service, but we love challenges! Here, we get to consolidate all our competencies and skills, developing custom models and data processing systems that help our customers draw relevant insights from different data sources: their own shop, marketplaces or booking platforms, CRMs, social media channels, and so on.

Based on the specified objectives, we build dynamic pricing models that estimate the optimal price points based on the relevant variables identified through data analysis and update the prices across channels with an established frequency. It is possible to implement different scenarios for different channels, considering their particular characteristics. For example, companies who have their own online shop but also sell via marketplaces can manipulate the variables to adjust to the customer expectations on each platform.

Benefits of custom AI software development and further integrations that bring pricing power

Benefits of custom AI software development and further integrations that bring pricing power

Pricing Tools Integration

Instead of developing a tool from scratch, we can also help you with integrating the existing pricing tools into your systems so that you can update your prices smoothly and automatically, as well as acquire and process data in order to improve your pricing strategy.

Companies often reach out to us because they have a particular pricing tool in mind or they have even already invested in it, but they need someone who will integrate it with their CRM, ERP, DMS, and eCommerce channels.

How Dynamic Pricing Consulting Can Benefit Your Business

Dynamic pricing can bring multiple advantages when properly implemented. You already know what the dynamic pricing consulting services are and what exactly they may consist of, but why would you actually reach out to them? Here’s our insight on that.

Increased Revenue and Profit Through More Accurately Pricing Products and Services

Dynamic pricing benefits companies in various ways, helping them adjust to changing market conditions. This way, they can keep their margins the highest possible while keeping prices relevant. Having them fixed may compromise their financial stability in the dynamically evolving market. Now that unpredictable surges and drops in demand are becoming something common, and dynamic pricing is the only strategy that allows for keeping prices accurate and relevant.

With a flexible approach, you don’t have to choose between artificially inflating the prices and risking losing customers or lowering them and compromising your financial safety. You can have a cake and eat a cake, keeping your sales high. The algorithm automates the estimations, always keeping them accurate. It is hard to achieve that with a manual approach.

Improved Customer Satisfaction by Offering Competitive and Fair Prices

With the increasing popularity of dynamic pricing, more and more companies choose this strategy, not fearing customer rejection anymore (in the past, this aspect was causing doubts). As a result, the customers get accustomed to that dynamics and learn to benefit from it. If the low price is their priority, they can monitor the changing prices, finding the most affordable moment to buy. Fixed pricing deprives them of that possibility.

Effect: clients actually start expecting the companies to adopt this strategy. If the brand doesn’t do that, they may migrate to another one. Here’s how the domino effect forms, making dynamic pricing an essential tool to ensure customer satisfaction.

In the last decade, we saw a shift in approach to dynamic pricing, before approached with a dose of suspicion, and now - considered fairer than other models. Many business leaders holding the biggest pricing power in their niche have decided to migrate to this model.

At the same time, dynamic pricing becomes a tool for gaining a competitive edge in an increasingly competitive market. Algorithms that use competition prices as the main variable can help businesses keep their own prices relevant and attractive, fuelling sales and maximizing their profit.

Enhanced Data Analysis and Decision-Making Through the Use of Advanced Software and Tools

Companies can learn a lot in terms of pricing based on the data they have access to through their ERPs, CRMs, e-commerce, and social media channels. The key is to process it in the right way and structure them based on relevance. With appropriate software and tools, they are capable of extracting precious insights from data and using it in practice in order to improve their dynamic pricing model and maximize the chances of sales. The relevant customer data may include the following:

  • their frequency of purchases,
  • the way they react to various price points,
  • other behavioral patterns (do they tend to wait for a lower price or buy right away),
  • the number of products they compare before making a purchase,
  • the other brands they buy from.

Dynamic pricing also contributes to the overall efficiency of the company’s processes while reducing its environmental imprint. While it may fuel consumption, which is objectively not environmentally friendly, it can also help logistic companies reduce empty miles.

Dynamic pricing also helps businesses survive low-demand periods, stimulating sales by finding price points that are attractive enough to convince a particular user. Algorithms may lower the price, but they will keep it as high as possible in order to extract the maximum margin.

Choosing the Right Dynamic Pricing Consulting Firm

When your mind is already made up, and you want to implement or improve your dynamic pricing strategy, it’s time to choose the partner in crime! It does not have to be a tough nut to crack if you stick to a few rules. Here’s what we recommend to take into consideration.

Expertise

You obviously expect your dynamic pricing consulting partner to know what they are doing. Nobody wants their project to be a playground to learn on. Dynamic pricing is a complex domain that requires a deep understanding of how prices are actually formed and how they impact your customer decisions.

To avoid issues, make sure to choose a company with extensive expertise in dynamic pricing, not only in consulting but also in strategy development and implementation.

Experience

Regardless of what you are working on, experience is always the most significant criterion in choosing your partner. Verify the portfolio of the companies you take into account - the more projects involving dynamic pricing, the better.

Make sure their consulting expertise is backed with practice - that’s the best way to learn!

Novel Technologies

In order to develop and implement a successful dynamic pricing strategy, your consulting partner needs to know the new technologies both in theory and in practice. AI and machine learning expertise is a must to polish the dynamic pricing models that draw relevant insights from data and estimate the prices based on them, getting better at their estimations with time. AI-specialized company with many dynamic pricing projects in their portfolio is what you are looking for.

End-To-End Offering

Most companies that reach out to us do not have a team with expertise in dynamic pricing or the existing strategy in use and need support from scratch. Working with them in the end-to-end model, we take all dynamic pricing-related processes on us, letting them focus on their core activity.

End-to-end teams are more independent and can provide you with coherent results. This way, you also do not have to worry about the knowledge transfer and communication between teams responsible for different aspects of your strategy.

References

References are not always easy to collect, but the partner you consider should have at least a few at their disposal. Always remember to ask for them when preparing a final selection of partners.

Questions to Ask Potential Pricing Consultants

If you have never worked in this area before, you may have doubts about what really to ask through the course of your cooperation to make it the most fruitful. Before launching it, it is worth asking the following:

  1. Which project methodology do you use? (we recommend agile project management)
  2. Do you work in an end-to-end model? Can you cover consulting, strategy development, custom dynamic pricing model development, implementation, and maintenance?
  3. Have you worked as a consultant before, or do you have only practical experience in implementing dynamic pricing strategies?
  4. How do you organize the strategy development process? What are its stages?
  5. What will our communication look like?
  6. Which tech stack can you cover?
  7. Do you have experience in integrating dynamic pricing tools?
  8. Do you have expertise in advanced data analysis?
  9. Which data sources can you integrate into my dynamic pricing strategy?
  10. Can you present me with some statistics that prove that your dynamic pricing strategy is successful?

Reap the Benefits of Novel Pricing Strategies With Nexocode Experts

Consulting services can help you understand the impact of various factors on your margins and the way your customers react to different prices. With the help of the consultant, you can choose the right pricing strategy and polish it, identifying the relevant benchmarks and variables in order to improve the accuracy of your model. They will help you choose the right direction and minimize risks related to your new strategy.

If you are considering the transition to dynamic pricing, we would love to give you a hand! We can help you in the form of consulting, integrating pricing tools into your system, or even building a custom system for you. And if you are unsure whether this solution is for you, feel free to contact us. Having extensive expertise, we can provide you with valuable insights!

About the author

Krzysztof Suwada

Krzysztof Suwada

Data Science Expert

Linkedin profile

Krzysztof is a data scientist who applies machine learning and mathematical methods to solve business problems. He is particularly interested in developing end-to-end solutions for companies in various industries using deep learning and NLP techniques.
Mathematician, software developer, and trainer. Krzysztof's expertise in machine learning earned him a Google Developer Expert title. A fan of Albert's Einstein quote: "If you can't explain it simply, you don't understand it well enough."

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