Is your site ready for this?

By Bob McElwain
Posted Sunday, August 29, 2004

The Web is rapidly changing the way in which business is transacted. And some of the things coming at us are truly revolutionary. Here's an example.

I encountered the concept of dynamic pricing for the first time just a short while back. And the encounter was brief, so I may not have this quite right. But it goes something like this.

In the not-to-distant future, you will place an offer to buy a product at a certain price. Even now, at MySimon.Com and similar sites, you can search for the best price. But coming at us are better bots than presently exist. They will try to find the product at your price.

Sellers queried by the bot will know if they were passed by for having a price too high. They may or may not adjust their price. They may or may not do so automatically through software installed to monitor bot input.

This Will Bankrupt Everybody!

No. It won't. There is a point below which a business person can not afford to sell. While this price may not be easy to determine, it does exist for every product.

Initially, sellers may make a slight reduction in price. And may continue to do so several times. But at some point, they will refuse to go lower for profit would be insufficient.

Such sellers are not going to make many sales, for those competing on price alone will continue to take less profit. But this is a doomed practice. To sell at less than a
profitable price leads only to bankruptcy.

This will not all happen in a uniform manner. But in time, those who care only for profits will be forced to close up shop and go away. Even large corporations will find themselves at risk. Some will be forced to change the way in which the deal with their customers or else they will also fade away.

What Happens Then?

The next person who enters a "bid" in the amount thought to be suitable, will find no sellers at the offered price, for the price-only types are gone. This person must raise their "bid" if they still want to make a purchase.

Equilibrium

The best price will be determined over the course of thousands, and in some cases millions, of transactions. It will prove to be that price at which the profit satisfies the seller and at which the consumer feels they have received not just a fair value, but more than expected. The reason the consumer must get "more than expected" is that only then will they remain loyal to the seller.

While true equilibrium may remain only a goal as prices continue to adjust, the wild swings and great range of prices we see today will vanish.

Who Will Survive This Bloodletting?

If you understand the fundamentals of good business and they are implemented on your site, you are ready for this, and whatever else may come along. That is, if you truly value your customers, demonstrate this with great support and fair prices, you are already establishing a loyal customer base.

Such customers are not going to flee your site to save a dime on a book at Amazon.Com. They will be unwilling to abandon a space in which they feel comfortable to save a few pennies.

While all this change is happening, some customers seeking a specific product may purchase it elsewhere because of a significant difference in price. But when those selling price alone have been busted out, they will return to you.

I'm Not Ready For This

Then it's time to make some changes. Start now providing excellent support and fair prices. Demonstrate that you value your customers. Your profits will increase even now. And you will be ready for whatever awesome change presents itself, even dynamic pricing.

About the Author
Bob McElwain
Want to build a winning site? Improve one you already have? Fix one that's busted? Get ANSWERS. Subscribe to "STAT News" now! mailto:join-stat@lists.dundee.net

Web marketing and consulting since 1993
Site: (http://sitetipsandtricks.com)
Phone: 209-742-6783