Pricing Tips: How to Compete on Price (Without Going Bust!)


It used to be that Web-only retailers could get away with checking their competitors’ prices, at most, once a week. Now, with e-tail behemoths like using dynamic prices to shift pricing on a dime (particularly on in-demand products), other retailers have to scramble to catch up.

Is this something you can or should catch up with? Maybe. Maybe not.

Let’s look at some pricing tips that can help you compete on price… without losing profitability. We’ll start with a review of Amazon’s strategy, then review smart tactics you can employ and how it all connects with conversion optimization.

What Exactly Is Dynamic Pricing?

Just as its name implies, dynamic pricing involves changing pricing as major competitors update their own prices, so you’ll likely always have the lowest price. In a world where comparison shopping is the norm rather than the exception, being able to stay ahead of the numbers isn’t just smart business sense, it’s survival of the fittest.


A chart of changing prices of large retailers on a month-to-month basis. Source: 360pi

How Often do Dynamic Prices Switch?

According to Internet Retailer:

In a study during the 2013 holiday season of items in the electronics, toys and hardware categories, price-monitoring technology vendor Ugam recorded 9,715 online price changes on between Nov. 24 and Dec. 14, far more than the number of price changes made by such major competitors as Best Buy Co. Inc., Target Corp., Wal-Mart Stores Inc. and Toys ‘R’ Us Inc.

“No one can keep up with Amazon,” says Jenn Markey, 360pi’s vice president of marketing.

She says Amazon might change a product’s price up to 10 times a day—more often on price-sensitive products, such as power tools, and less often for apparel. She says the most active retailers change prices daily on 15% to 20% of their product assortments.

As many as 20% of all online product prices change at least daily, with some of the hottest items changing price every few minutes, says Michael Paulson, vice president of product and business at, an online price-tracking firm recently acquired by eBay Inc.

Is all hope lost?

Let’s face it, you’re going to have a pretty rough go of it if you’re going head to head with Amazon. But if you’re not, there are some ways to differentiate yourself without getting into a price war and trying to subsist on meager margins.

Be Ultra-Selective on the Products You Choose to Throw into the Competition

You don’t have to throw everything at the dynamic pricing wall and hope some of it sticks. When you stick to only the most in-demand, seasonal or other hot items, you can leave the margins for your other products alone.

splurge-saveGiving customers multiple options in their price range lets them splurge or save

The “must have” items will sell themselves, and even if you have to take a slight hit on profits, promoting accessories and other items to help the customer get the “full experience” or the “hottest look” may make up for the difference.

Reward Loyalty with Lower Prices

Selling online is all about negotiation—you give a little, in order to get a little. Customers know this, and will most likely upgrade their order or otherwise buy from you if you give them a compelling reason. For example, if you have a loyalty program in place, why not reward your best customers with discounts that no one else gets?

Offer Exclusives for Die-Hard Fans

Similar to the loyalty program, it has become a trend in recent years for major retail brands to offer new gaming console bundles specifically tied to a particular franchise. If the customer really wants that console, they’ll need to buy the store’s exclusive bundle to get it.


Of course, the lure being that they’ll either be the first, be exclusive or be one of the few to own that particular thing. With consoles being one of the most in-demand items of the holiday season, retailers can pad their pockets with the bundle bounty.

Price is Not the Only Factor

Sure, some customers will be looking for the lowest price, but when combined with a larger selection, customers are often willing to pay a bit more for the value of having more to choose from. That’s exactly what happened with retailer eBags when they launched a three-piece luggage set in 2001 called the Carnival Hardside Spinner.

rocklandOne of the top selling luggage sets on eBags since 2001

At $ 180, prices were pretty stagnant for the product, until eBags began a strong marketing campaign for it, as well as enlisting dynamic pricing. Knowing that customers might very well be using image-based shopping like Google, TheFind or other visual comparison-based engines, they decided to lower the price but up the selection by adding three new colors.

According to Peter Cobb, the co-founder of eBags, “With this set [and many other items] we were attempting to be ‘in range’ with a price that would deliver the right balance of sales and margins…We were not always trying to be the lowest price on the item.” But, he noted, eBags had to be price-competitive because luggage is “a highly price-competitive and price-elastic category.”

The combination of price adjustments and an added selection paid off, together with the heavier marketing campaign. eBags’ sales of this particular luggage set quadrupled, and it remains one of the top sellers on the site.

What’s more, customers searching for that particular item number on comparison search engines will often bring up eBags’ product page first in the search engines, bringing in even more high-converting traffic.

Let’s Make the Connection to Conversion Optimization

Pricing is one important element of conversion optimization. Price too low, and you can change the value perception of your product. Price too high, and you can lose sales to price-conscious consumers.

But sometimes, price alone isn’t the issue. As you can see in the tips above, how you communicate price is an important part of your strategy. And incenting action is always a good idea. So from a CRO standpoint, here are a few things to consider:

1. Images always help conversions. Consider adding more images, including close-ups of the details of your product.

2. Employ some type of reward system. Something like “no shipping and handling if you purchase $ 100 or more” or “buy 10 times and you get a free gift worth $ xx.” Add a touch of urgency, and you could really impact conversions.

3. Focus on the upsell. Before final checkout, make one more offer: “Other buyers bought this as well.”

NOTE: With the holidays coming up, now is a good time to review your holiday ecommerce strategy.

The Bottom Line on Pricing

Of course, you can be walking a very narrow tightrope when competing solely on price. Your competitors may have more pricing leverage, faster shipping or other tricks to tantalize their consumers into buying from them. That’s why shifting your pricing into dynamic territory isn’t the only strategy you should be using.

Look for ways to create more value or more simplicity. If your competition is offering a “comprehensive solution,” you can position yourself as the “easy as 1-2-3” brand, or vice versa.

Every customer has a need that’s just waiting to be filled, and pricing is just a small part of the equation. By delving deeper into what they truly want, you’ll show that your business is ready and willing to work with them to not only satisfy that need, but make them look, feel or do better in the process.

What are your thoughts on competing on price? Should it always be about the numbers? Share your thoughts with us below in the comments!

Read other Crazy Egg articles by Sherice Jacob.

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