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Dynamic pricing strategies—in which price is based on the shopping experience and not just the value of the products—need the right technology and careful execution, says Jupiter Media Metrix.
Price isn’t the only way consumers assess the value of an online shopping transaction-a dynamic that can open the door for e-retailers to realize bigger gains with carefully executed dynamic pricing strategies, according to new research from Jupiter Media Metrix. In fact, as so-called personal value pricing technology improves-–technology that automates pricing based on an online shopper’s buying habits, without the shopper knowing it-–dynamic pricing will account for $11 billion in e-commerce revenues by 2005, Jupiter forecasts.
Personal value pricing models match prices with the value an individual customer receives from a transaction. Consumers decide where to purchase items, and how much they’ll be willing to pay, based on perceived value they get from the transaction. That can go can go beyond price to incorporate intangibles such as trust, Jupiter analysts point out, noting as examples that shopping agent providers have reported that less than half of consumers make purchases at the sites that offer them the lowest price, and that 90% of Amazon.com`s January 2001 customers didn’t visit another bookstore site within the month. Retailers can increase their returns by applying personal value pricing during a product’s entire life cycle and not just at liquidation, Jupiter says – without making the pricing process apparent to consumers.