5 Ways Dynamic Pricing Can Help the Consumer Electronics Industry Succeed

While our last dynamic pricing blog dealt with industry-specific features of dynamic price optimization in the fashion industry, today we’ll look at consumer electronics. The consumer electronics industry is one of the most challenging because of demand and competition. In order to survive as a retailer here, dynamic price optimization using AI software is essential. This is how you ensure your profitability and simultaneously establish yourself as a global competitor. Let’s explore the five most important success factors that can be achieved with dynamic pricing.

Clean and detailed product master data

High data quality is the fundamental basis for successfully digitizing and automating processes. For dynamic price optimization, the quality of product master data is crucial. The cleaner and more detailed the data is, the more successfully a pricing software functions, and the more diverse the possible business cases become. For example, if product master data contains attributes such as brand, color and model of an item, you can easily price entire product families intelligently and dynamically by these categories.

When it comes to dynamically pricing longtailers, or slow-moving items, the process becomes easier when the number of product attributes that are stored in the master data increases. For this purpose, the attributes of all articles are analyzed and corresponding price groups are formed. Then the longtail products are assigned to these price groups based on their attributes. Once the initial price level is determined for these articles, further price optimization can follow.

Calculate price elasticites for each product

For the consumer electronics industry, it is particularly important to be able to calculate price elasticities at the product level at least daily. In addition to pricing decisions, this can also be used for advertising. In both cases, the demand for a product highly influences any business plans. In the consumer electronics sector, margins are often very low, so many product prices do not have much room to fluctuate - especially when measured against competitors.

Here, price elasticity can be used to identify products that are lower in regards to customer perception. This means that customers hardly react to price changes (even to uplifts) of these products, and that is why they are also less relevant to competition. The pricing software then prices these product based on gross profit margins, ensuring profitability and competitiveness in the long term. In addition, product-level demand can be used a basis for decision-making in order to actively control advertising campaigns. For example, you may prefer to include products with a high demand in your marketing campaigns in order to increase customer frequency, turnover and sales.

Determine cross-price elasticites

When it comes to dynamic price optimization, it is important to be able to strategically consider complementary goods and substitutes, and also to be able to price them separately. Complementary goods that are purchased together - such as a monitor and the matching cable - can be determined via cross-price elasticities and offered directly as a bundle. The central advantage of this approach is that bundles can increase both profit and frequency. However, to avoid cannibalization, pricing software should take substitutes into account, so the sale of one item does not automatically lead to a decline in demand for its substitute(s).

Target sales data and target sales ratios

Having target sales data and ratios enables the optimal use of supplier bonuses or market development funds. At the same time, it also supports your inventory planning team to plan your storage capacities in such a way that, for example, discontinued models are sold out before a new generation is introduced.

Regular pirce adjustments

Industry giants such as Amazon often dictate the dynamics of the competition, as is the case with consumer electronics. What’s more, Amazon adjusts its prices multiple times a day, even hourly during peak times. In order to at keep up, you should rely on regular price changes. A dynamic price optimization solution supports you in this and takes a large part of the manual price maintenance off your hands. According to assortment and current influences (e.g. new releases, upcoming holidays or changed demand due to the pandemic), you can adjust prices daily, weekly or monthly. For each price change by the pricing software, you can also specify the business KPIs on which the price adjustment should be based.

Consumer electronics retailers can only remain competitive in the long term if they rely on dynamic pricing. Reach out today to learn how dynamic pricing can benefit your business.