So you’ve decided that you want to use a dynamic pricing software...
But what happens next?
It’s a reasonable question to ask. And it usually comes with countless more. What do I need to do besides install the software? Who do I talk to? How long does it take to get started? What is the process?
If these questions are swirling through your head, don’t worry. In this post we’ll walk you through the “Roadmap to Dynamic Pricing,” a 5-step approach to organizational dynamic pricing success.
Step 1: Define your goals for dynamic pricing
Before you implement a dynamic pricing software, you need to have a clear idea why you want to use the software. Do you want to reduce the amount of time you spend updating your prices? Or just start updating your prices with the market? Do you want to build strategies at the category level? What about the product level?
Gather all the stakeholders involved, and discuss the reasons why you’re bringing dynamic pricing software into your organization. You might realize you have more than one goal, which is fine. One of our customers, for example, wanted to:
- Optimize prices for margin
- Improve their price perception
- Reduce time spent on manual labor
The more specific you can be with these goals, the better. They should also align with your overall commercial objective.
Want more insights on how to define your pricing goals and build a strategy? Check out Five Steps to Successfully Implement Dynamic Pricing. You can also take a look at our Partners Page to see who we trust to help you define your goals and build a strategy around them.
Step 2: Establish dynamic pricing responsibilities
When you introduce a dynamic pricing software, many of the responsibilities on your team will change. Your teams will need to work together in new ways, and when you get the software up and running you’ll likely experience a reduced workload — meaning more time for your employees.
So how do you manage all of these responsibilities and changes? And what happens to accountability when responsibilities change?
Your organization is unique, so finding the right balance of responsibility will also be unique. In general though, the goal should be to have your buying, category, and pricing teams share responsibilities and the execution of price changes.
Our advice? Start small with rolling out, beginning with just one product category or market. This way you can learn more about how your organization needs to change, and apply these lessons to future roll outs.
Step 3: Build dynamic pricing strategies
When you begin using a software to manage your pricing online, it’s an opportunity to dig deep into your pricing strategy, evaluate what’s working for your company, and discover areas for improvement.
If you don’t take time to organize and plan your strategies, your pricing can quickly become complex when automated.
Take some time to review pricing strategies, and make sure everyone in your organization knows your planned strategy. You can ask a consultant to help you with this step, or you can also subscribe to the Omnia blog to get free advice on pricing methods and strategies.
And when it comes time to actually set up the strategy in your software, do it together with all relevant parties. This should also be a repeatable process: define your objectives, strategy, method, and rules for every product or category.
Most importantly though, keep your strategies and pricing methods transparent across your organization. All involved parties should be able to clearly explain your strategy, and any changes should be easily accessible for all levels of the company.
Step 4: Prepare your systems and data for dynamic pricing
Before implementing dynamic pricing, most retailers have a pricing strategy that’s grown organically over time.
And while you might still want to use the same basic strategy after implementing the software, chances are your current pricing system is spread out across different departments and owners. Just take a look at the question we got from one of our clients:
“The process of changing prices takes about 3 days and data is scattered and not owned by any department. How can we be dynamic and accurate in this environment?”
Dynamic pricing software lets you centralize this information into one, easy-to-use location. But it does take time to do this.
We advise customers to start small with this part of the process. Much like we mentioned in Step 2, it’s useful to start small, learn from mistakes, and improve as you scale. Begin by focusing on one channel or part of your assortment, and invest in the system, process, and data during the pilot phase. Then apply those lessons to your next roll out.
Step 5: Test and monitor your dynamic pricing methods
You’re tuning the most important profit lever and investing heavily in both people as well as tools. How do you know if starting dynamic pricing was worth it?
To answer this question, you need to test and monitor your results.
One simple way to test is to establish a baseline before you fully implement Dynamic Pricing. You should look at all aspects of your business, including revenue, gross margin, logistical cost, marketing cost, FTE, and price image.
Another option is to do some A/B tests against control groups. However, A/B testing does have some significant downfalls, so we suggest a slightly more sophisticated way of testing your online pricing’s effectiveness: compare across products within similar categories.
Testing will ultimately help you build a business case for the software.
Getting started with dynamic pricing software is a journey, and it’s never bad to have a little help.
That’s why at Omnia, we invest heavily in customer success. When you use our software, you automatically will get a dedicated onboarding manager, solutions consultant, and customer success manager to help you navigate the road to dynamic pricing.
Ready to try Omnia free for two weeks? Click the button below to get started.
Grace Baldwin is a pricing and marketing specialist at Omnia Retail. Before Omnia, Grace gained experience in content management at EDIA and through a freelance content management business. She holds a B.A. in Government from Colby College.