Black Friday: Dynamic Pricing helps you win the discount battle
Black Friday is just around the corner. For months, the entire online retail has been preparing for the biggest discount battle of the year: Products are selected, inventories are stocked up, strategies are worked out, advertising campaigns are planned, teams are divided into shifts and, above all, the discounts are fixed. After all, Black Friday is no longer a single promotional day; the so-called Black Week has become the most important week of the year for (online) retailers.
But what if, in this crucial week, the planned discount is too low, and the competition can take all the sales for themselves? Or what if the discount is too high, the stock is sold out far too quickly and valuable margin is given away? Then Black Friday will not be a complete success despite intensive planning.
React dynamically to changes
Promotions like Black Friday develop their very own dynamics that are difficult to predict, even for companies with many years of experience. If these companies cannot react to changes quickly, months of preparation may have been in vain.
Dynamic pricing solutions such as MARGIN MAXIMIZER support retailers and brands that sell their products online in this situation. Certain specifications are made in advance so that during Black Friday they can react automatically to changes.
What exactly dynamic pricing means, we have already discussed in a separate article.
Considerations for Dynamic Pricing on Black Friday
Before a dynamic pricing strategy is developed, there are some questions that retailers and brands selling online need to ask themselves:
- What products do I want to observe during Black Friday, with the option to dynamically adjust their discount?
- What is more important to me: the highest possible sales number, the highest possible profit margin, or securing my inventory?
- Do I strongly want to prevent a high return rate, or do I accept it in order to attract new customers?
Especially the last two questions are relevant to decide on a strategy. There are various options here. Companies that primarily want to secure inventories, value a high margin, and want to prevent a high return rate can align their pricing strategy with their own inventories, for example (option A).
Companies that are primarily interested in achieving the greatest possible number of sales and consider the return rate to be of secondary importance can adjust their own discounts to those of the competition and thus generate as many purchases as possible (option B). This means that, in addition to the products, the competitors to be monitored must also be defined in advance.
Option A: Dynamic pricing depending on stock level
With this option, on Black Friday prices are dynamically adjusted to the current stock level. Due to the high demand, it can easily happen that, for example, popular sizes are quickly sold out in a fashion shop, while very small or large sizes are left over. Here, dynamic pricing offers the opportunity to avoid sell-outs and gain margins.
Example: A certain hoodie is in stock 1000 times in size M at the beginning of Black Week. The retailer starts the week with a 40% discount on the hoodie. The smaller the stock becomes, the lower the discount will be.
With MARGIN MAXIMIZER, it is possible to define an individual strategy for different product categories in advance.
500 – 1.000
|300 – 500||30 %|
|100 – 300||20 %|
|50 – 100||10 %|
|Below 50||No Discount|
Option B: Dynamic pricing adjusted to the competition
This option also allows a company to start Black Week with a baseline discount (e.g. 20% on watches, 30% on apparel, 10% on electronics), which can be dynamically changed upwards or downwards during the week. This is achieved by observing how much discount the pre-determined competitors give on the same products. Your own discount can then be adjusted to outperform the competition, but on the other hand not give away too much margin.
One challenge here is that the frequently changing prices can lead to duplicate purchases and thus to returns and dissatisfaction among customers. One possible solution to this problem, however, is for example an (automatic) refund of the overpaid price.
Option C: An individual dynamic pricing strategy
With a dynamic pricing provider like MARGIN MAXIMIZER, it is of course possible to combine the different strategies individually and thus get the most out of Black Friday. Contact us and together we will find the perfect dynamic pricing strategy for your company.
Conclusion: With Dynamic Pricing, Black Friday can be a great success
The week leading up to Black Friday is the most important week of the year for retailers. The effort put into preparation is enormous and must be financially worthwhile in the end. Dynamic pricing gives retailers and brands control over their discounting strategy and helps them achieve their company's goals. Whether that is maximizing sales, increasing margins, or selling out of stock as evenly as possible.
You would also like to dynamically adjust your prices on Black Friday to your inventory or to the strategy of your competitors? We would be happy to advise you in a free consultation appointment and present our dynamic pricing solution to you.