Published on March 4, 2014
Dynamic Pricing in E-commerce Betül Gökçe – Münir Geden Supervisor: Assist. Prof. Dr. Hüseyin Karaca
Outline What we had done before? Price-Awareness Survey Interview with an Expert Our Business Model External and Internal Pricing Parameters Similar Emerging Businesses
Pricing Literature Review ‘Return for a product in a commercial exchange’ Subject Main References # of Literature Reviewed PRICING Dynamic Pricing Liang Peng & Haiyun Liu, Prithviraj Dasgupta & Louise E. Moser & P. Michael Melliar-Smith, 2001 Virginia Journal of Law and Technology, Simon Lee and Abdou Illia (2010) & Assion Lawson-Body (2011), Ellen Garbarino , Sarah Maxwell (2006) Pricing Strategies Pricebots 13 Pricing Goals Kang Bae Lee & Sungyeol Yu & Seong Jun Kim, Dong-Qing Yao, Ziping Wang, Samar K. Mukhopadhyay & Yu Cong (2010), Ravi Arona, Arun Sundararajanb, Siva Viswanathan (2004), Grover, Varun;Ramanlal, Pradipkuma (2000), Xing Pan, Brian T. Ratchford & Venkatesh Shankar, Ram Bala (2004), Raj Venkatesan, Kumar Mehta, Ravi Bapna, Kurt Komaromi, Robert J. Kauffman (2004) 14 Profit oriented Market oriented Competition oriented Yuxin Chen, K. Sudhir (2004), Michael D. Smith (2002), Amy R. Greenwald, Jeffrey 0. Kephart, and Gerald J. Tesauro (2000), Mui Kung, kent B. Monroe, Jennifer L. Cox (2003), Narahar,Cvlraju, Ravikumar and Sourabh Shah (2005), Jeffrey O. Kephart, Amy R. Greenwald (2002), Roger Waldeck (2005) 11
Pricing Strategies Coupons A quick and simple way to save money for customers! Coupons offer a great incentive especially for new customers and increase cart size of the store as customers may purchase over coupon’s amount. Discounts Different ways to offer discounts Seasonal discounts Product specialized discounts Customer based discounts Best Price Companies guarantee to give the best price for some or all products ‘Best Price Guarantee’ strategy offers customers to pay back in a case of lower price of the same product on another online store. Loyalty Companies value continued business of customers thru a token of appreciation Loyalty pricing is a way to consider the loyalty points at the time of purchase and push the customers to a further purchase on the same store.
Price Comparison Sites (Pricebots) Price comprasion sites are an electronic intermediaries between the sellers and the buyers. Aggregate the price data of different online merchants and provide as comparable information to the customers. Mostly, the price data is collected directly from the sellers by data integration. Other solution is to implement shopping search comparison (SSC) algorithms that can collect the prices data by crawling on the web. Most of the revenue models are per-click rates and advertising is another option
Consumer Survey Aim of the survey To collect information about shopping behaviours, expectations, price awareness of Turkish e-commerce customers. Methodology and Tools Multiple-choice and scaled type questions, Google forms, ~150 responses Metrics 1 – 5 scale (Never – Always, Aggre Strength )
Expectations from the Retailers
Price Awareness and Pricebots
Interview with an Expert A. Öztürk Education Bogazici University - M.Sc, Biomedical Engineering Technische Universität München - BSc., Electrical Engineering Career Profile Quality Manager & Online Marketing – Visual Meta GmbH Berlin Team Leader – Ucuzu A.S. - MIH Allegro Group / Naspers Academic Staff – Bogazici University Student Trainee Technology Marketing Department - Technische Universität München
Interview Highlights What are the expectations of e-commerce websites from price comparison websites? • Price comparison websites are effective alternative conversion channels for reliable e-commerce platforms like hepsiburada.com, Teknosa, Kliksa and e-commerce platforms offering price advantage. • Price comparison websites are effective tools to increase e-commerce website traffic for e-commerce platforms offering average prices with the aim of attracting attention of purchasing companies. What are the main factors determining pricing strategy on e-commerce platforms? • Competition in the market • Positioning of the company • Reliability and credibility of the company in the market • Overall cost of the product How e-commerce platforms track competitor’s products and pricing strategies? • Use price comparison websites. • Track in market valuable products manually.
Interview Highlights How is the feedback exchange between price comparison & e-commerce websites? Price comparison websites take over consultancy role and give advises how to improve its traffic, conversion rates, reliability. i.e. improve cpc and bidding rates. Do e-commerce websites give customized offers in Turkey? • Offer x% discount for remaining items in the basket • Reminds products in the basket • Offer discount within a restricted time as of the visit of the customer. Is there any legal restriction? • There isn't any legal restriction for customized offers.
A New Business Model Internet became the largest marketplace of the history. All of the price information of the whole world is now reacheble by just a few clicks. What if the pricebots evolve to B2B tool instead of B2C. Possibly, they are used by price definers of merchants to manually adjust the prices. Why pricebots can’t form a basis and provide data for a computer based dynamic pricing mechanism that works by needless of human labor.
Our Business Model Collect competitors prices and stocks with pricebot agents by web crawling. Provide price comparison service to customers. Collect customer analytics data on price aggregator site. (Searched products, most clicked competitors). Use the data to forecast demands and position competitors. Provide the vertical(customers’ tracks) and horizontal(competitors prices and stocks) information for the company also in historical dimension. Build an expert system that uses these information for dynamic pricing.
Dynamic Pricing Mechanism External Parameters f: Demand forecasts of the product p: Product price of the competitors s: Product stock information of the competitors r: Competitors’ credibility and market reputation t: Historic market price information of the product (trend) Improve the Expert System Trace and Analyze Effects To Sales Internal Parameters or: Retailer’s own credibility and reputation oc: Cost of the product os: Stock and availability of the product op: Current sales performance Adjust Prices with an Expert System Internal Parameters Price Adjusting Function f(f, p, s, r, t, oc, oc, os, op) => new price An expert system that runs for a new competitive price or an acceptable or reasonable new profit margin, which can result in higher or lower prices. And coefficients of parameters can be improved by a machine learning system(Neural Networks) by collecting the adjusted price effects to the sales. External Parameters
Constraints and Necessities To sell or to use the price data of the e-commerce companies, crawling technique should be used. Data integration between e-commerce sites and price aggregator sites cannot be used since nobody will permit usage of their price information data horizontally. Well-designed database infrastructure needed that stores internal parameters for each product. (cost, sales performance, etc.) In the long-run, these expert systems can be applied by competitor retailers and can cause to lower profit margins and be closed perfect market efficiency.
Similar Emerging Businesses PRISYNC WISEPRICER Turkish entrepreneurship founded in at beginning of this year in Bogazici KOSGEB works employee number under 10. Founded in 2012 and get seed funding at the end of the year and now works 18 employees. Got 4.25 million $ funding and supported by TUBITAK They claim that retailers can increase their revenue by 22% and bottom line margins by 7%. http://www.youtube.com/watch?v=J0Bggqb2jEA
Thank you Q&A
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