As a store owner, you need to keep product prices updated throughout the year to stay competitive.
This requires you to track customer data and gather insights regularly to base your pricing decisions on. All this while you still manage inventory, fulfill orders, and ensure customer and employee satisfaction.
What if you had one less thing to worry about?
With price automation, you can eliminate price tracking competitor prices and customers’ buying behavior. Price automation makes it easy to keep your prices updated and relevant in the current market with little to no human intervention.
What is Shopify price automation?
Shopify price automation is the process of using apps to automatically set product prices using a competitor and customer data. The goal is to optimize your prices to maximize profits in a market.
It helps you set the best prices for your products automatically by either studying competitors, analyzing historical data, or utilizing customer data.
Types of price automation on Shopify
Price automation can be done using competitor or customer data. The choice here depends on the market you serve and the branding and positioning of your products.
Price automation using competitor data
Competitor-based price automation is one of the easiest ways to start. You can choose from different competitor pricing apps like Prisync that help you sync prices with your competitors. This style of price automation eliminates the research aspect as you’re directly relying on the prices set by your competitors here.
However, this can cut into your margins if the competitors are able to source their products at lower costs. Hence, this strategy is better used when you do not have enough customer data to base your pricing decisions on.
Price automation based on customer data
Relying only on competitor data can mean leaving money on the table here. There are many types of customer data that can be used to create a pricing automation strategy. This includes data on:
- Pricing preferences
- Buying habits
With this data, you can better understand what customers are willing to pay for certain products or services. Leveraging the insights gained, if you can raise prices without affecting your sales, it’s clear you’re in the right direction. Price testing tools like Dexter can make it easy to run tests and gain statistically significant customer insights from the data gathered
How does Shopify price automation work?
Shopify price automation works by leveraging available data to automate price settings. Consider an example of setting prices based on customer data. With Dexter, you can test multiple prices for a single product and gain the insights needed for raising or lowering your prices.
Let’s assume the current price for a baseball cap is $10 and you want to raise it to $12. With Dexter, you can add $2 to the price and show it to a subset of your visitors. If the conversions stay the same or go higher at $12 pricing, you can confidently raise the price for an immediate improvement in your average order value (AOV). It also gives you an opportunity to test a 20% increase in prices across all your products.
If you prefer competitor pricing, an app like Prisync can be handy. It’s a price sync app that helps keep track of and sync product prices directly from the competitor websites you select. When a competitor changes the price for a specific product, the same automatically reflects on your website.
Why use Shopify price automation?
Shopify price automation can save time and money by automatically updating the prices of your products through market changes. With Shopify price automation, you can:
- Stay competitive: It’s difficult to manually keep track of and make price changes based on market conditions. With price automation, prices are automatically updated so you stay competitive throughout the year with minimal added effort.
- Improve conversions: Price helps customers know the inherent value of your product. And products with higher perceived value tend to sell better too. As you determine prices where customers are more likely to buy, you can adjust your prices to gain a boost in your conversion rates.
- Maximize profits: As you gather customer and competitor data, you will start to see gaps in the market. Since prices influence buyer behavior, these price gaps can help you capture markets that were untapped thus helping you maximize profits with minimal changes to your website.
Apps for Shopify price automation
Depending on the type of price automation you choose to go with, one of these apps can help you get things set up.
Dexter is a customer-focused automated price testing tool. It helps you determine whether updating prices will positively or negatively impact your store’s bottom line. With Dexter, you can set up a price test where you increase or decrease a product’s price which is shown to a subset of your visitors. Once enough data is gathered, the analytics dashboard will display the winning price that converted best. You can set it to be the default to get an immediate improvement in your conversions.
For businesses that prefer competitor-based pricing, Prisync is a handy app. It automatically syncs the prices of your products with that of your competitor based on customized rules. You can set the minimum and maximum prices for the auto-update, choose categories and individual products that you want to update, and more.
Implementing price automation on Shopify
There are a few things to keep in mind when implementing price automation into your Shopify store
1. Define your goals
What do you want to achieve with price automation? Are you looking to increase profits, maintain market share, or both?
Your answer will help guide the rest of the decisions you make regarding price automation.
2. Set a baseline price
This is the starting point from which all automated pricing changes will be based. It’s important to set a realistic baseline price that takes into account your costs (e.g., production, shipping, overhead) as well as the current market conditions.
If you set your baseline too low, you may not make enough profit on each sale, and setting it too high can turn off customers.
3. Decide how much leeway you’re willing to give automated pricing changes
How much can prices fluctuate before you manually intervene? This will likely be a function of your goals.
For example, if your goal is to increase profits, you may be willing to give automated pricing more leeway to increase prices.
On the other hand, if your goal is to maintain market share, you may want to limit automated price increases so that you don’t price yourself out of the market.
4. Data sources
To make automated pricing changes, you’ll need access to data about your competitors and customers. There are a few different ways to get this data, including:
Monitoring competitor prices manually: This involves periodically checking competitor prices and making changes accordingly. This can be time-consuming and difficult to scale as your number of products and competitors grows. But this is a great way to start and get a hang of this pricing style.
Using a third-party pricing tool: There are various third-party tools available that can track competitor prices for you. This can save time and effort, but it comes at a cost (usually monthly or annual fees).
Gathering customer data: You can also leverage customer data gathered from price tests to inform pricing decisions. For example, you can raise prices for products that are in high demand or lower prices for products that are not selling well.
5. Setup price automation and test it out
Choose the apps for your price automation setup. We’ve covered the setup instructions for a customer data-based price automation setup with Dexter below. After setting up price automation, it’s important to test and monitor your results to ensure that it’s working as intended.
Pay close attention to your sales and profits to see if there are any significant changes after implementing price automation. You may also want to survey customers to get their feedback on the new prices.
Price testing with Dexter for customer-based price automation
Price testing is the process of automatically testing multiple prices for the same product. It lets you determine whether changing prices will impact your store’s conversion rate.
While there are a few price-testing tools for Shopify, Dexter is the only one that does not create additional product pages or require theme file editing.
It offers a 3-step setup wizard that automatically changes the prices in place so you can continue to send traffic to the same product URL. Dexter will show different prices to a subset of users and track the same with a cookie. Here are the steps to set up an automated price test with Dexter.
Step 0 – Install Dexter
While you’re logged in to your Shopify store account, go to https://apps.Shopify.com/dexter.
Click [Add app] and follow through with the installation. Once the installation is complete, Dexter will open up a new page that allows you to create a price test.
Step 1 – Select a product
To begin the test, you need to select a product. Click [Create My First Test] to see the list of your products.
Choose one from the list and click [Next: Set Price]
Step 2 – Set the price
You can choose to increase or decrease your price by a certain amount.
For the demonstration, I have raised the price by $35. The new price will be displayed on the traffic split based on our next step.
Step 3 – Split the traffic
Choose the portion of visitors who will see the updated prices. I’ve gone with the default 50-50 split here.
Dexter will cookie-track visitors to keep prices consistent across multiple visits from a single user. Once you’re done, click [Next: Launch the Test] and click [Launch] to get started.
As you bring in the traffic, Dexter seamlessly collects data to help you analyze the best price for your products. After you end a test, any changes that were made to your prices are reverted and you do not need to touch any code whatsoever.
Take the guesswork out of pricing with price automation
Pricing is an ongoing process for all ecommerce businesses. It helps you stay in sync with the market and maximize store profits through seasonality. While a lot of pricing decisions are still manual, price automation can help set optimum prices for your products by leveraging data.
The type of price automation you choose will decide how the prices are set. But with all else being equal, basing decisions on your customers’ responses to price changes will yield results that are more relevant to your audience.
Dexter makes it seamless to gather data on price changes. With a simple 3-step setup wizard, you can run a price test to see whether your customers associate higher value and continue to buy your products at higher prices, or not.
With this data, you can set your prices higher or lower knowing that you’re relying on trustworthy data instead of guesstimates.
“I was able to test multiple price points and determine very quickly where I could add 20 to my AOV!” — SurroundScape™