How to Price for Profit
In the age of Black Friday megasales, ubiquitous smartphones and “big data” mining, the pricing wars have shifted onto an entirely different battlefield. And both shoppers and vendors are turning to high-tech weapons.
On the consumer side, buyers have access to apps and websites that give them real-time price comparisons, but companies such as Decide.com are taking that up a notch. By grinding up historical pricing data for electronics, appliances and other goods, the Seattle-based app maker enables users to game out the timing of their purchases to coincide with low-ebb periods (which, as it turns out, don’t necessarily occur during traditional sales blitzes).
Retailers like Wal-Mart and Target are responding by applying mathematical formulas to shopper psychology, luring us in with a $9.99 backpack but knowing we’ll also buy two shirts and a lunch Thermos for our child. Amazon.com, one of the sharpest players in this arena, taps so-called “dynamic pricing” algorithms that adjust list prices to individual buyers based on such factors as the value of their past purchases.
Where does this leave small companies? Having to raise their game significantly in how they set prices for their goods or services… for the full Profit Magazine, go to