How to define your pricing strategy
Pricing across multiple markets
Once you have categorized your portfolio into groups and defined margins for each group, you can take advantage of additional tactics for strategic pricing.
Dynamic pricing is a concept that aims to capitalize on the current market situation. It is used in airline ticket sales, concert ticketing, food delivery services, and increasingly in online commerce. In e-commerce, it assumes that you can track relevant market data, demand, competition, stock levels, etc., and adjust product prices accordingly.
With a well-chosen dynamic pricing strategy, you can quickly increase revenue or margins, making it easier to achieve your pricing goals (and thus the overall business objectives).
As in the previous chapter on strategic pricing, the foundation here is also grouping products into categories. Once this is in place, you have a solid foundation to start applying elements of dynamic pricing.
By the way, not all groups need to be dynamically repriced right away. As outlined in the chapters on pricing strategy, different tactics apply to different groups. You can decide which groups are suitable for dynamic pricing and which should remain unchanged at the start.
The most common form of dynamic pricing is competitor-based pricing (we will discuss pricing for products without competitors in advanced tactics). A common myth about competitor-based pricing is that it simply means undercutting competitors, which ultimately destroys market margins.
A key prerequisite for competitor-based dynamic pricing is having a high-quality data source—the easiest way to obtain this is from the authors of Pricing Academy.
Another requirement is a basic understanding of your competitors. At this stage, no deep analytical work is needed—just define your relevant competitors based on your current market knowledge.
In most cases, it is not advisable to compete against the entire market, as you are often up against hundreds or even thousands of online stores.
Dynamic pricing is mostly based on rules. These rules function on a simple principle: when a certain market, stock, or demand condition occurs, the product price adjusts according to a predefined setting.
The core logic behind dynamic pricing rules is simple: "If X happens, reprice the product to Y."
For example, you could create a rule with the condition: "If we are the only seller with this product in stock, set a 50% margin." You could then add a second rule: "If we are not the only seller with this product in stock, set a 30% margin."
Congratulations! You’ve just set up your first dynamic pricing rule—offering a 30% margin in a competitive market and automatically increasing to 50% when you have exclusive stock.
For many new users, dynamic pricing can feel unfamiliar and uncomfortable in the first few weeks. It changes established workflows—suddenly, prices may adjust without manual input from the product manager. That’s why we recommend starting with the simplest rules and implementing dynamic pricing gradually.
Here are two low-risk dynamic pricing rules that change prices infrequently, making them a good starting point:
The most common rule we see when businesses start with dynamic pricing is light competition-based pricing. You define your target margin. If all competitors are priced higher, your price increases to match them. If competitors are priced below your target margin, you keep your predefined margin instead of undercutting further.
In reality, by implementing dynamic pricing this way, you will:
