Every marketer or business-owner must know the circumstances, that give them reasons to alter price. This blogpost’ topic builds on the advice about the impact of the change of season on your marketing mix. You can review all those bulletins on here.
Introduction to seasonal and dynamic pricing
Altering a product’s price point in line with the season is most significant for those markets, that have periods of high season and an out of season. For example ice-cream and swimwear.
A manufacturer might try to manage its fluctuating demand, by changing its price. n response to levels of demand and supply. Especially, when those are affected by the weather or holiday festivities. Or any variable that is reasonably predictable.
By contrast, consumer goods manufacturers, like Birds Eye Walls, might aim for a fixed price for its ice cream throughout the year. Use discounting tactically to stimulate demand in the circumstances that I list further down.
Seasonal pricing is an example of dynamic pricing
Seasonal pricing techniques have evolved in the digital era. It is now one instance of what is referred to as ‘dynamic pricing’. In dynamic pricing, there is no fixed price. Prices change in real time to respond, to current demand. It is commonly used by: airlines, hotel booking sites, car insurers and Amazon.
For example, Amazon changes a product’s price every ten minutes, on average. Dynamic pricing is an essential element for many businesses, where e-commerce distribution plays a significant role. You can use it can be to generate leads online and deliver the highest amounts of profit, by taking into account the characteristics of each customer.
Dynamic pricing was the basis on which lastminute.com was founded. Their site offers visitors deals, that is their main reason to alter price.
For dynamic pricing to work, you need to stay very close to your customers. Have the ability to tailor your product offer accordingly. That is very useful during uncertain times. Dynamic pricing allows suppliers to set the highest price, that each customer is prepared to pay at the particular moment. It relies upon access to large amounts of data.
We have all become familiar with the rise of their distributors- price comparison sites, to find better deals for utilities, insurance and second-hand cars. This method of pricing equips online sellers to behave like traditional market-stall-holders. Here are some examples of times, when you might consider altering the price for your product/service.
Four reasons to alter your price
Changing your price will work best when used together with other elements of the marketing mix, for example:
1. Encourage trial purchase
You can apply price discounts to encourage trial purchase and attract new customers to try a new brand. Such as Bird’s Eye’s Magnum minis.
2. Trigger new usage
You can use discounts to stimulate a new way of thinking about using a product. For example, eating ice-cream as an alternative, upmarket canape on hot summer evenings.
3. Respond to behavioural change
You can apply Discounts and promotional activity tactically in response to behavioural change by your customers. In summer 2021 the Ice Cream Alliance trade body is encouraging its members to join its campaign. Just to promote ice-cream for ‘The Great British Ice-cream Staycation’. Some self-employed sellers (ice-cream vans), might choose to give price discounts too. .
4. To support publicity activity
It is useful to know, that any type of publicity activity provides a good reason to alter price. Shoppers will react to the convergence of stimuli, by buying more than usual. Combining price with a message to customer is more likely to trigger a purchase. Have you noticed that TV advertised brands are often on special offer in-store?
Using a dynamic pricing approach, or promotional pricing can attract your customers to buy more. Sometimes at higher prices, throughout the year. But successful implementation requires a deep understanding of the customer, demand characteristics. Your own cost structure and your competitors’ likely reactions to make it work successfully. Otherwise, you may find yourself losing a race to be the cheapest and destroying everyone’s profits along the way.