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4 Ways to Increase Your Marketing ROI With Dynamic Pricing

Ekin Ozcan
By Ekin Ozcan
BeProfit logo - a white letter "b" on a purple background
Edited by Staff Editor

Updated April 26, 2023.

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Want to increase your marketing ROI? Looking for high click-through sales and a high conversion rate? You are in the right place.

Marketing ROI is a crucial performance measure for any marketing team.

This is because when a marketing team is about to start a new marketing campaign it has to estimate the costs. To make their calculations efficiently, they will look at profitability with ROI (return on investment).

In this blog post, we will first understand what ROI and marketing ROI are. And then, we will go over ways to increase your marketing ROI with dynamic pricing.

Let’s dive right in!

What is ROI?

ROI is used to calculate the performance measure based on the efficiency and profitability of the business. It measures the return to your business on a specific investment.

Marketing ROI

Do you know how to measure the performance of your marketing activity and the profitability of your online businesses? For the marketing team, ROI metrics are extremely insightful. You can calculate the return of a digital advertisement and click-through sales to your business.

To put it simply, you can track how the money you spent on your business is generated back.

How to calculate ROI?

‘’(Sales Growth - Marketing Cost) / Marketing Cost = Marketing ROI’’

The goal to calculate ROI is to make more of each dollar you spend on marketing activities in return.

Marketers who calculate their ROI are 1.6 times more likely to receive higher budgets for their marketing activities.

This metric will help you understand whether your marketing strategy is working or not. You will also gain the ability to see your most effective marketing campaigns. By observing results you can make better decisions on how and where to distribute your marketing budget properly.

» Improve your ROI by learning the best email marketing practices

Dynamic Pricing

There are a number of effective business models, in which one of the most popular models is dynamic pricing.

Setting a product’s price is extremely tricky, and merchants can never be sure whether they are offering a good, optimal price in the e-commerce world. Business owners need to know that the price is one of the most important differentiators to customers. It affects every stage from visiting your website to researching your brand and purchasing a product. Any change might affect your marketing team’s efforts, whether positively or negatively.

Introducing a dynamic pricing strategy to your products could be a game-changer. Let's first define dynamic pricing.

Dynamic pricing is a strategy where you set flexible prices based on market demand and your competitors’ prices. You will constantly track and observe changes in the e-commerce market and price your products accordingly to those changes.

E-commerce businesses, retail, and entertainment often use dynamic pricing strategies. It's an effective strategy to boost your sales, get higher revenue and maximize your profit. This is because it gives you a competitive advantage. By adopting it, you will monitor the market and track your competitors.

Understanding your competitors’ actions and analyzing the market changes will help you take your online business to the next level.

Now, let’s focus on increasing your marketing ROI with dynamic pricing.

How to Increase Your Marketing ROI with Dynamic Pricing

There are several ways to improve your ROI and dynamic pricing could be the right method for you.

Dynamic pricing is more than price changes. It's also about working with internal and external factors in the market. Then, make necessary changes accordingly. While using a dynamic pricing strategy you will be observing your customers' reactions to your price changes. At what price point are they not willing to buy? Will your customers accept buying the same products at higher prices?

For dynamic price optimization, there are lots of things to consider. Let’s go one by one.

1. Monitor Your Competitors

How much do you charge for your products? You know the answer right away. But do you know about your competitors' prices?

Tracking your competitors' prices is good for competitive e-commerce. You will see if there is a potential to increase your prices. If competitors are charging significantly higher prices and you are not, you might be losing profit.

Since the e-commerce world is growing very fast, online sales are growing more than ever. Merchants are working to adapt their operations based on changes in the market. On the other hand, customers are making more rational decisions.

  • Customers compare prices easily and rapidly.

As statistics show; 90% of online shoppers say they actively compare deals before making a purchase. And nearly 50% of consumers only purchase discounted products.

60% of shoppers say that pricing is the key factor when making a purchasing decision.

To optimize your dynamic pricing, you need to observe your competitors’ prices. Working with their pricing information can be your guide while offering dynamic prices.

There are two ways to monitor your competitors' prices; Manually tracking and working with price tracking software.

Manually tracking your competitors is time-consuming and not effective at all. Think about tracking all price changes just happening in a single day!

To make it clear let’s look at some statistics;

Amazon makes over 250 million price changes every day with the prices for millions of its SKUs changed every 10 minutes to ensure it offers the best prices to its competitors.

Price change information will show you how much competitors are selling their products for and how much demand there is in the e-commerce market.

Globally, many online retailers use this strategy to maximize their profit. You will gain a competitive advantage by understanding your competitors’ actions.

2. Start Marketing Campaigns According to Price Changes

The effectiveness of your marketing campaigns isn't determined solely by the campaign itself. It's also determined by price changes.

A competitive dynamic pricing strategy offers high click-through sales and a higher conversion rate. When merchants change the price, it affects your click rate and conversion. This might be positive or negative. But the important thing is that the marketing budget needs to be adjusted and be ready for those changes. Therefore, pricing and marketing strategies need to be managed together.

Some companies use a low-pricing strategy to have higher sales. They also get a bigger market share.

To increase your sales, the marketing team needs to start to invest in some activities such as advertising on Google Ads. This can be advantageous to have more traffic to your e-commerce website. Whichever pricing strategy you use, your marketing activities will need to work accordingly.

3. Set Dynamic Price Rules

Some products have a minimum and a maximum selling price. Merchants do it to maintain their brand image.

If you haven’t implemented this tactic in your business, you definitely should! You will determine the minimum price that you are willing to sell each product. You can set rules based on changing market dynamics.

The actions in the price rules may be;

  • Offer the lowest price compared to the competitors.
  • Offer the average price in the market.
  • Round up the price to the nearest ‘’.99’’

4. Test Your Dynamic Prices

Online stores realize the extremely competitive environment of e-commerce. Moreover, competition is not just between merchants. Customers love to make quick decisions by comparing prices and they are also looking for deals and promotions.

In such an environment, testing different prices can be a good idea.

You can observe your customers' response to price changes.

See how different prices perform on different occasions. Observing your customers' response to price changes can lead you to comparison. Now you can see which price points are more effective for high sales and high conversion rates.

Takeaways

Good marketing ROI is something every marketer would want. Testing out new strategies might be a good idea for online merchants.

Since dynamic pricing is becoming increasingly important and profitable for e-commerce merchants, marketing teams can increase their marketing ROI by adapting it.

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