Why Do eCommerce Sites Give Different Prices Based On Geo-Location?
In this article we will discuss:
- What are digital retailers hoping to accomplish when implementing a location-based pricing strategy?
- How location-based price fluctuations (or the lack thereof) can affect your business?
- What data collection technology can do to help ensure you are at the top of your market?
What are digital retailers hoping to accomplish when implementing a location-based pricing strategy?
Marketplaces use a strategy called ‘dynamic pricing’ in which they serve different consumers different prices for the same exact products depending on:
- User geolocation – Where a consumer is physically located can have a big impact on prices. User income levels, and willingness to spend a premium can be deduced from zip codes, school tax districts, city, country, or even correlated with local crime rate datasets.
- Browser history – In this context third-party data can shed light on a user’s preferences and/or income levels without collecting Personally Identifiable Information (PII). So for example, if a consumer visits a Paris-based Michelin star restaurant directory, and then glances at a comparison site to look into ‘cost-efficient Paris stays’. You may be looking at a wealthy, yet price conscious customer who is interested in travelling to the French capital, looking for affordable luxurious experiences. A fact that can help create tailored pricing, and offers.
- Operating system – A good example of this is when The Wall Street Journal once accused the travel aggregator ‘Orbitz’ of jacking prices up on flights for people who were using a ‘Mac’.
- Acquisition channel – Using big data to determine Customer Value (CV) and Customer Lifetime Value (CLTV) based on user engagement commonalities, for example people who click on your site through a Wall Street Journal (WSJ) mention of your property investment services may be willing to spend more than those who simply search Google for ‘property investments’.
- Supply, demand, and current trends – So for example if a company selling a certain brand of shoes sees that supply of a certain model is low among competitors, yet demand is high then their algorithms will raise prices (and vice-versa). Trending is also an important pricing factor, and pricing can oscillate based on search volume, and/or social media sentiment regarding a specific product or service.
- Time of year, special events, and seasonality – Umbrella, and rain/snow protective gear prices are most definitely affected by seasonality (demind/prices rise in winter). Just as Christmas, and Thanksgiving decorations change before the holiday, and afterwards when companies are looking to offload overstock.
- Competitor pricing – Scanning the web for competitor pricing can also have a major impact on a dynamic pricing strategy. Even if a company still decides to charge an industry premium based on the added value they are providing, pricing may still fluctuate, and react to industry trends.
**Disclaimer: Please note that there are potentially hundreds of parameters to take into consideration when setting a dynamic pricing strategy, way beyond the scope of this article**
The reasons behind this practice include:
- Trying to gauge market demand for a certain product, and at what price point said product sells best in specific locations. In one location consumers may be looking for quality, and are willing to pay a premium while in other less affluent places consumers are more price sensitive.
- Making products more appealing, and increasing conversion rates among savvy consumers. This is done by serving offers that are more competitive on pricing to users who have recently visited price comparison sites or competitors.
- Some retailers change pricing based on zip code. People living in higher earning zip codes will be served higher prices while those in low earning zip codes will be served lower prices. The reason? Capitalizing on wealthy people’s buying capacity, and willingness to pay higher prices.
How location-based price fluctuations (or the lack thereof) can affect your business?
When competing in the digital space for paying customers, getting your market’s price point right can be an extremely important factor in driving conversions. When other companies in your industry are constantly changing prices based on geolocation this can impact your ability to compete, as the IPs that you are using to collect competitive pricing data may be skewed by target sites. For example, if your company is located in New York, and your data analysts are looking at flight prices using your office IPs, you will most likely be served higher New York prices. But if you are trying to compete for customers located in other parts of the country, your pricing model will be off, and irrelevant, causing you to lose out on sales.
Additionally, your own ability to implement a geolocation-based pricing strategy may be seriously impaired if you are not routing traffic using geo-targeting. Companies can choose a variety of reasons for changing pricing based on location – from the cost of shipping to warehousing concerns. Whatever the reason is, you want your company to retain this capability of changing pricing based on a consumer’s physical location in order to ensure you are maximizing profits for each location that you, and your company service.
What data collection technology can do to help ensure you are at the top of your market?
Bright Data has developed data collection technology that enables companies to crawl pricing data (as well as other data points) using highly effective geo-targeting. This is mainly ‘courtesy’ of two main factors:
- Supporting infrastructure: Our fully autonomous data collection solutions, such as Data Collector, delivers data sets on-demand, as well as being supported by our Residential proxy network. This is a global community of real individuals who have chosen to opt-in their device IPs so that you can get more accurate information.
- A strong peer-to-peer network: Our data collection tools leverage the power of our global peer-to-peer network of people and their respective devices located in every country, state, and city in the world.
These two points are paramount in your business’ efforts in retrieving accurate, geo-specific pricing information from local consumers in your target GEOs.
The bottom line
Digital commerce outlets change pricing schemes based on a given consumer’s geolocation. The ability to track these changes and perform location-based dynamic pricing are mission-critical to companies that want to remain competitive and maintain/attain leadership in their industry.