‘Bouncing price’ technique – good or bad?

The more competitive eCommerce becomes, the more pricing strategies are being used by the retailers and brands. Of course, not every strategy is applicable for every business, but the bouncing price technique is especially questionable.

Let’s explain why is that the case.

What is a bouncing price technique?

Well, as the name suggests, a bouncing price technique means that the price of an item is constantly changing (bouncing).

We’re witnessing that certain stores tend to display ‘bouncing’ prices. For instance, the item which was priced $4.95 half an hour ago, now costs $4.55. Half an hour later, it’s back to $4.95.

And this continues, day in, day out…

The question that follows is how this should be performed? And more importantly, how much sense does this make to you?

How the bouncing price technique is performed?

Obviously, this pricing technique is very time and resource-consuming. If it is done manually, it will take a large amount of time. Moreover, humans make mistakes, don’t they? And mistakes usually mean a loss in profit.

On the other hand, if there is some automation behind it, development costs are present. Another important factor is that there must be a human instructing the script which prices should start ‘bouncing’. Again, humans make mistakes, so the whole process can be easily put in danger.

Is this pricing strategy a good solution then?

When we put it all together, it does not make much sense. It’s very questionable how many customers can this pricing technique attract, and the risks/resource costs are higher than the actual gain.

However, if you are looking for a way to confuse automated services for price monitoring (such as Price2Spy) then the ‘bouncing price’ technique can be effective. Price change notifications will appear so often that they will stop making any sense.

Therefore, it’s a double edge sword – it will definitely make your competitors’ job harder. They won’t be able to make any sense out of such frequent price changes. So far that seems like the only good thing about this technique.

However, if your competitors start using this technique as well, you’ll find yourself in the same unfavorable situation. Their prices would also not make sense to your pricing analysts, and it would be almost impossible to draw out any conclusions.

Conclusion

Being competitive is extremely important, but definitely not at every cost. Price changes are necessary and they are taken as a smart business move. However, price changes need to be based upon solid evidence that will indicate what pricing strategy lies behind it. Making price changes just because of the sake of doing it, won’t bring you the wanted results.

Please let us know if you (dis)agree, we would love to hear other retailers’ experiences.

You’re welcomed to share them in the comments below!