How the Internet Capitalized on Dynamic Pricing in Marketing
By: Kimberly Grant
If you’re an expert, a professional, or an amateur marketer, you’ve heard of the marketing mix: product, price, place, promotion. This mix has been around for so long that other mixes have been added to it: people, process, and physical evidence. It’s all about the customer-centric approach. But this post isn’t about all seven marketing approaches.
No. No. Let’s get specific. The digital age has grown so rapidly that it’s hard to imagine that just a decade ago there was no such thing as Tik Tok. There was just barely an Instagram. Now, digital is the only way to go. If you’re a startup or established business, you must have an online presence. In fact, there’s so much transparency in the digital world that a company or brand needs to constantly monitor their online presence; which includes pricing.
The Price is Right
The Internet’s digital universe has four main implications on price
- Increase price transparency (everyone can see the actual price of your products/services at a glance)
- Downward pressure on price (price comparisons)
- New pricing approaches (dynamic pricing, testing, and auctions)
- Alternative pricing structures/policies (adjusting the price of a specific product based on the customer segment)
That looks like a lot. Let’s drill down and look at just one: dynamic pricing. As you know, I am a self-published author on Amazon. Engaging in dynamic pricing is a way of life for me. I literally have the power to change the price of my novels at a moment’s notice with real-time pricing through Amazon’s Kindle Direct Publishing (KDP).
Me & Amazon KDP: The Dynamic Duo
Dynamic pricing is basically updating your price based on your customer or market conditions. (For the pros and cons of dynamic pricing, you can read Melanie’s Unleashed Software.com article “Dynamic Pricing Strategy: The Good and The Bad”.)
If I’m trying to attract new customers, I can decrease the price of one of my novels for a period of time using a Kindle Countdown promotion. Usually, when I first publish a new book, I offer the book free under the Kindle Free Book Promotion for the first two weeks. This is a very popular one for obvious reasons. Who wouldn’t want a good book for free?
Another way that dynamic pricing can be used as a marketing tool is to use a discount or free promotional offer for loyal customers. For instance, Amazon Prime customers are able to download all of my books for free through their Kindle apps.
Not An Endorsement, Just A Good Deal
Now, this is not a paid advertisement; it’s just an example. Amazon’s royalty payment structure includes something called Kindle Edition Normalized Pages (KENP). KENP provides the self-published author a percentage of Amazon’s KDP’s global fund; which has a steady growth that’s currently above $40 million. KENP will pay me a percentage of its global fund based on how many pages of my novels that people read. The more pages read = more money from the global fund. Not a bad payment from a free book.
As we all know, Amazon’s KDP is a very large, very lucrative venture for self-published authors and lovers of books alike. Their dynamic pricing allows KDP and authors to stay competitive in the saturated novel marketplace. Now, I haven’t made my first million dollars, yet. However, self-publishing with KDP allows me to earn something for my work. The best part is I don’t have to answer to (read: pay) an agent or manager. It’s all me.
Curious about more dynamic marketing insights? You can read my post about digital marketing environments here.
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