Price automation – does automated price change improve ROAS?
- 29 December 2022
Adequate pricing is one of the main challenges for retailers. This task is even more complex when we take e-commerce under consideration. Indeed, the e-commerce industry is the most dynamic business branch we’ve ever encountered. Rapid changes that we can observe in this industry make improving ROAS even more difficult. However, is there a method to boost return on ad spend? In this article, we’ll take a closer look at price automation and its impact on ROAS results. Is automatic price change able to improve ROAS? Let’s find out!
What impact do prices have on e-commerce?
E-commerce prices and technology development
As far as e-commerce is concerned, the price is usually one of the main factors that decide about the company’s profitability due to clients’ interest and the profit it makes. Nevertheless, the approach to pricing strategies has changed drastically over the years. The main culprit is technology. On the one hand, technological development caused changes in price dynamics, so now the prices can fluctuate even a few times a day. On the other hand, thanks to new-tech solutions, data acquisition is much easier and more common than a few years ago. Therefore, currently, barely any retailers make pricing decisions without technological support and up-to-date market data.
You could say, that technology and the transparency it brings have revolutionized pricing strategy in e-commerce.
Prices and UX
Yet the price is not the only factor that matters when it comes to online retail. Online consumers’ experience counts as well. That’s why companies should also pay attention to their website’s UX. Google and Amazon’s cases make a good example. According to research, when shopping, buyers are more willing to use Amazon’s search engines than Google’s, as they are better organized and accessible than Google’s one. Of course, that affects the sales results, because when talking about e-commerce, searching for the product is the first contact line between a retailer and a client.
The assortment is another matter that counts. We will set different pricing strategies for luxury or shortage products. Moreover, our offer must be displayed to the right audience – using even the lowest prices may not help to achieve satisfying results if it’s offered to the wrong audience.
Pricing differentiation in B2C and B2B models
E-commerce retails is not homogenous – we don’t use just one offer in one sales channel. Nevertheless, when it comes to B2C commerce, using different pricing depending on a sales channel may be a bad idea that will damage the company’s credibility. Nowadays clients are well-informed. Thus, setting different prices in various sales channels may be confusing, and as a result – may cause a loss of trust.
However, the same situation looks different in the B2B model. While cooperating with other companies we sell not only various products, but also a various amount of items. Therefore, pricing differentiation according to the client will be legitimate.
The importance of price management in online shops
Price management in e-commerce
As we mentioned, the price is one of the crucial e-commerce factors. Customers pay close attention to the products’ prices not only because they are interested in the cheapest items, but also because today they can easily compare the prices. Thanks to platforms such as Google Shopping, consumers are able to filter and find the cheapest offers within seconds.
That’s why price management in e-stores is so important. In some cases, just a few cents difference can persuade buyers to make a purchase and cause a gain (or a loss) for a particular retailer.
However, you should keep in mind that even though the price in e-commerce is essential, you shouldn’t lower it to the extremes. Apart from the amount of money the client needs to pay, product quality also matters. Offering the newest iPhone for pennies on the dollar will make clients feel suspicious. That’s where price management comes in handy. It will bring you a profit but also make a price adequate to the item’s real value.
To sum up – price management benefits include:
- profit maximization in every sales channel,
- new clients acquisition as well as customers retention,
- better visibility in Google search results as well as comparison websites,
- building a strong and consistent brand image.
How to optimally set prices?
- Define your margin.
Decide how much you’d like to earn on offered products. However, don’t clutch to one particular value – establish a price range that will make you more flexible e.g. when creating a promotion.
You can also use repricing rules. For instance, you can make your price to keep you at the TOP3 of the cheapest retailers every time when changes occur, as long as it’ll give you a minimal satisfying profit.
- Identify competitors.
Nowadays, there are no retailers without competition. Even if you operate in a niche industry, it’s still very likely you have at least a few competitors in the market. Therefore, get familiar with the shops that are your direct competition, analyze their price policy, and create your own, better strategy.
There is also no e-commerce without technology. Price monitoring along with Business Process Automation are everyday practices in online retail. Automation will help you generate higher profits as well as save lots of time. Arduous competition tracking and manual updates may consign to history – let the algorithms make the job for you. Of course, you can verify their actions at every stage of the process. It’s an easy way to become a leader in your industry, maximize sales volume, attract new clients and expand market share.
Price monitoring tool by the example of Dealavo
When we talk about automation, we certainly will need the right tool. Nowadays you may find numerous apps to monitor price changes. However, we’d like to present you with one particular tool – Dealavo.
Dealavo is a price monitoring platform for e-commerce that allows you to track prices and assortment in e-stores and marketplaces such as Google Shopping or Amazon. We monitor data of millions of items and we deliver them to our clients in a form of customized reports.
Information we provided is gained due to Machine Learning algorithms, and then manually verified to guarantee you the highest quality and accuracy of data.
Dealavo provides a broad range of useful functionalities such as:
- Price monitoring at the most popular platforms (e.g. Google Shopping, Amazon, Idealo) as well as tracking individual online shops,
- Promotion monitoring,
- Competitors’ Assortment Reports,
- MAP/MSRP tracking,
- Price automation according to set pricing rules (Dynamic Pricing).
Price Automation with Dealavo
Pricing rules with Dealavo’s app
What is Dynamic Pricing and how does it work?
Dynamic Pricing (also known as repricing ) is a pricing strategy that due to automating processes & algorithms support allows price optimization. Algorithms permanently monitor the prices on the market and change them in your e-shop according to the prior pricing rules.
Yet, don’t be afraid that algorithms will implement any changes that may harm your business. To avoid such a risk you can use various pricing rules, as well as verify each suggested change individually.
Using Dynamic Pricing may bring you numerous benefits including better positioning, profit increase, and reduction of human error risk.
Pricing rules – how to use them?
Let’s be clear – a universal or simply the best pricing rule doesn’t exist. Your choice should depend on your industry as well as your business goals. Therefore, don’t be afraid to try different rules, implement them, verify and improve.
To make your decision-making process easier we’d like to present you with a list of the most popular pricing rules you can use in your store.
- TOP 3 on the particular platform – use this rule to be included among the first 3 offers in a specific sales channel, e.g., Google Shopping.
- Between two competitors – the rule allows for automated price setting between the selected competitors.
- Below/above selected numerical attributes – this option offers the possibility to set the target profit margin as a specific amount or percentage (e.g. the specified product price should include a margin of at least 5%).
- Below/above selected competitors – if we use this rule, the algorithm will generate lower or higher prices than the prices of our selected competitors.
- Increase/decrease by a specific amount/percentage – this option allows you to decrease the price by a specific amount or percentage in a specific period of time. This means that, for example, the price of a product will be reduced by PLN 1 every three days
Dealavo app provides also multiple integrations that will facilitate data management and data transfer between different platforms. With Dealavo you’ll easily integrate with platforms such as IdoSell, WooCommerce, and Subiekt GT as well as through API.
Dealavo & IdoSell Integration
Thanks to the full integration between Dealavo and IdoSell you won’t need to transfer and compare data manually. Our team will do this for you! We’ll import products’ prices from your IdoSell and compare them with the current market prices. How does it work? You just simply need to generate a product feed in your store and send us.
By using price rules you’ll be able to automate your pricing strategy and monitor it via the admin panel in our app.
Dealavo & WooCommerce Integration
Our app also offers integration with one of the most common e-commerce platforms – WooCommerce. Our consultants will integrate Dealavo with your store, set up the admin panel, and show you how to use the Dynamic Pricing feature effectively.
Dealavo & Subiekt GT Integration
if your company belongs to the SME sector there is a chance you also use Subiekt GT – an innovative sales system. With an installed and set up endpoint, you can integrate with Dealavo as well. What you need is a plug-in that will synchronize products between ERP (Subiekt GT) and an e-commerce platform (Dealavo). You can set up plug-in configuration based on the provided manual.
Data on prices can be integrated into the system via our API.
API documentation is available after logging into the “Files” section. You can also get access to all the data through the links that we share. The first contains up-to-date information from the market and the second – is an optimized product feed.
Adrenaline.pl – how to increase ROAS in practice?
As we already explained what is price automation and what benefits it may bring to e-commerce retailers, let’s see how it works in practice.
The perfect answer to this question would be the case of one of our clients – Adrenaline.pl.
Adrenaline.pl is an online sports shop, also running a chain of brick-and-mortar shops under the names of Nike & Adidas throughout Poland. Adrenaline.pl used Dealavo to adjust their prices on Google Shopping to competitors’ prices, and increase ROAS level. The task was not easy as the market is full of competitive retailers who want to attract new clients with low prices.
Nevertheless, with a help of Dealavo solutions, Adrenaline.pl managed to increase their ROAS by 29% within one month! For more details check the video below.
Price automation helps to increase ROAS
Technological development significantly influenced on price management method used in e-commerce. Intensified dynamics as well as common transparency made automated price optimization a necessity. However, it may also bring various benefits, and a ROAS increase is one of them.
Nevertheless, to carry out the process smoothly and trouble-free you’d need a tool. For instance, you can use Dealavo.
Contact us and try out a demo of our price automation tool to increase your ROAS and achieve results of Adrenaline.pl!