Automating an e-commerce company’s pricing can provide strong benefits under certain conditions. Automated prices save lots of employee hours – especially for companies that have thousands of SKUs to keep updated. E-commerce companies may have encountered automated pricing tools on marketplace platforms such as Amazon, eBay and industry-specific sales platforms. It’s important in today’s rapidly evolving market conditions to keep abreast of opportunities to increase sales and earn the maximum profit possible. Small percentages often make the difference between success and failure.
Pricing automation is a key technology that e-commerce companies use when the job is simply too vast to handle manually. The technology works best when companies have a clear, organized pricing strategy to apply to the pricing algorithms. When markets change too quickly, automated pricing can be a valuable resource. The same is true when there are just too many SKUs and sales channels to keep prices updated often enough to generate the desired benefits.
The Benefits of Pricing Automation
Pricing automation is a subset of the larger category of marketing automation. About 71 percent of companies use some kind of marketing automation, and B2B companies, dropshippers and product managers get tremendous benefits from pricing automation.  Automation drives a 14.5 percent increase in sales. The benefits of incorporating technology to automate pricing include:
- Greater Efficiency
Automated pricing tools are more efficient than manual pricing. These technology applications apply each and every relevant pricing rule based on the data available. The chances for errors are reduced to almost zero.
- Faster Updates
Speed has become the defining criterion for e-commerce success. Customers – whether B2B or B2C – and automation delivers timely updates very quickly when conditions change. The process of changing prices – especially across multiple sales channels – can be very time-consuming and expensive when using manual techniques.
- Advantages for Selling on Marketplace Platforms
Companies that sell products on marketplace platforms receive many benefits by formulating a pricing strategy that covers a variety of market conditions. On Amazon, automated pricing tools can adjust prices to match sales trends, and the products are more likely to appear in the Buy Box on Amazon for a tremendous increase in the conversion rate of a Buy Box product.
- Pricing Flexibility
E-commerce companies can set the rules to trigger alerts when conditions change, update prices automatically and change prices on a predetermined schedule.
- Better Alignment of Marketing and Sales
Getting prices to reflect marketing trends, costs of production, competitor prices and the availability of materials makes it easier to align marketing goals and real-world sales.
- Ability to Track Competitor Prices
E-commerce companies live and die by how they address the competition’s efforts. Price tracking covers competitor prices, and automated pricing helps companies respond quickly to the price changes of their competitors.
- Freedom to Focus on Core Business
Manual pricing requires daily research to identify trends and research competitor prices. Automated pricing leaves more staff members free to concentrate on core business activities, but it’s wise to have someone assigned to monitoring the technology to prevent pricing mistakes caused by lack of information or no rules for certain conditions.
- Better Customer Relationships
Automated pricing helps to keep customers happy because it’s based on pricing items in ways that optimize sales. The technology can also be used to provide marketing insights for CRM systems and customer loyalty programs. For example, companies can offer incentives that aren’t generating high margins to reduce the cost of offering incentives.
The best practices for managing an automated pricing strategy is to update the rules after every price change. Conditions might change, and those changes could make the old rules ineffective. Automated pricing can be used to develop personalized recommendations and marketing communications. Statistics show that 75 percent of marketers use some kind of automation, and 67 percent of companies use a Marketing Automation Platform. 
The Science of Pricing
Scientific studies show how important prices are in optimizing conversion rates and curating sales leads.  Price tracking is an important part of automating prices, and automated prices are necessary to take advantage of price-tracking insights in timely ways. Psychological studies reveal these insights into the scientific basis of pricing:
- Comparative pricing doesn’t always generate the best results.
- Selling time savings often works better than selling on price.
- Setting “useless” prices can actually be productive.
- The practice of setting prices that end in “9” remains effective.
Comparative pricing sets the rules for products with tight profit margins and similar quality, but better products might not fall into the same category. There can be a benefit to pricing products as “high-end” goods. Customers often fear to buy cheap products because they feel “you get what you pay for.” If companies can position their products as premium goods, comparative pricing might not be the best strategy.
More and more e-commerce shoppers are influenced by the benefit of saving time. Selling time savings over price can often be an effective strategy for selling products at higher profit margins, and e-commerce companies can integrate algorithms into automatic pricing that recognize this issue. Studies show that about 48 percent of product advertisements mention time savings as a key benefit.
Useless Price Points Aren’t Useless
Providing price points that don’t deliver any advantage seems counterproductive, but many companies do so. For example, offering a subscription service can illustrate the approach. Companies might offer the following options:
- Web Subscription: $49.99
- Print Subscription: $119.99
- Web and Print Subscription: $119.99
It’s immediately obvious that the second option is useless. Any sensible consumer would order option number 3 to get a better value. However, the “useless” price clearly helps people decide between a bargain price and a value price.
The Mighty “9” in Pricing
It’s astonishing that the power of using the number “9” at the end of prices remains a successful marketing strategy despite the fact that most consumers understand the reason. $99.99 seems less expensive than $100.00, but the difference is miniscule. Customers still respond to this strategy, and one study found that consumers buy more of a product priced at $39 than the same product priced at $34. The only more effective pricing strategy than using a price ending in “9” is offering a sale price and showing the original price – such as Regular Price $50, Sale Price $42. 
Automate Pricing for Greater E-commerce Success
Some marketers approach pricing with blinders. Decision-makers use the simplest strategies for pricing products such as cost plus a standard margin of profit. Updates are often a periodic price increase of 10 percent across the board. That doesn’t consider the volatility of e-commerce sales and the many conditions that can affect how well products sell at certain prices.
The secret to success is developing clear pricing strategies and rules that can be transformed into automated algorithms. For example, B2B organizations can benefit tremendously from dynamic pricing since the strategy often delivers big sales instead of a one-time sale. Good analytics can help e-commerce companies identify the data that drive sales conversions and lead generation.
Unless the company is very small, automated systems are essential in today’s competitive markets. It’s just too slow and difficult to rely on manual processes – even when companies use a hybrid strategy of manual and digital technologies.
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References: Salesfusion.com: 10 of the Most Important Marketing Automation Stats you’ll see this Year
https://www.salesfusion.com/resource/10-of-  Emailmonday.com: The Ultimate Marketing Automation statistics overview
https://www.emailmonday.com/marketing-automation-statistics-overview/  Neilpatel.com: 5 Psychological Studies on Pricing That You Absolutely MUST Read