ONLINE CLOTHING STORE

Step 2: Recommend Offensive Dynamic Pricing Strategy

Your Virtual Internship coordinator asked you to develop an offensive dynamic pricing strategy by identifying products to lower prices on, where to set the reduced prices, when to reduce the prices, and how long to keep prices lowered. You need prepare a plan to market the lower prices to customers.

An Offensive Dynamic Pricing Strategy includes:

2 to 3 lead products on which to lower prices

Where to set the reduced prices

When to lower the prices

How long to lower the prices

A marketing plan for communicating price reductions to customers

Develop Recommendation for Offensive Pricing

Determine which products to lower prices on. Identify 2 to 3 lead products from the available your eBuisness product list. In evaluating what lead products to lower costs on, consider both inventory and sales velocity. Inventory is the amount of product a business has in stock; sales velocity is the rate at which it sells (makeup your sales velocity data if you dont have any). Review the current inventory and sales velocity of those items you identified as lead products.

Example of a product inventory and sales velocity.

Product Type	Product #	Product Name	Price	Cost, Handling and Storage	Sales Velocity	Inventory
Accessories	106	Seagate Barracuda Green 2TB SATA	$114.22	$108.51	Medium	High
Accessories	107	NETGEAR ReadyNAS Ultra 2 Plus (Diskless)	$379.99	$360.99	Low	High
PC	101	Sony L Series VPCL232FX/B	$949.00	$806.65	Low	Low

Examine if your available inventory would support an increase in sales and consider what would happen if the product inventory of a lead item ran out. Think through how sales velocity might influence your decision on which products to recommend lowering prices on. If a product were already in high demand at its regular price, does it make sense to get a lower profit margin on a fast selling item? Would this positively affect the profit margin? Or, if the product isn't in high demand, will cutting the cost make it sell faster?

Determine where to set the reduced prices. The goal in this task is to lower the price of the product enough to cause a significant increase in sales, while still maximizing profit. For each of the lead products you selected, consider how much of a shift in price it would take to encourage a customer to turn to your eBusiness for their purchase instead of the competition. Think through how you will monitor sales data to pinpoint the optimal balance between increased sales and profit.