The shift from outbound marketing, where marketers pushed their messages to the public through TV, radio, and other forms of advertising, toward inbound marketing, where consumers found relevant content on their own while making a purchase decision, was a significant transition for marketing teams. All their old methods of measuring success went out the window, replaced with more precise digital tracking methods.
For the first time, marketers were able to calculate accurate return on investment (ROI) for their efforts. While they could always estimate the ROI from a TV campaign, they could truly calculate the cost of a digital advertisement, follow the clicks through sales, and understand whether or not a campaign or ad was successful. So if a company invested $1,000 in an ad campaign, which directly led to $10,000 in sales, they could see that the ad led to $9,000 in revenue, and a 900% ROI.
As a result, successful marketing teams got very good at creating campaigns that delivered high ROI. However, companies that use dynamic pricing methodologies have added a new wrinkle into the marketing team’s calculation. With dynamic pricing, the marketing team can never be sure of the sales price, and as a result, they’ll also struggle to predict unit sales. Missing those two pieces of data makes it difficult to forecast sales results.
It’s Not Just Calculating ROI
ROI isn’t the only change that will impact your marketing team. When you introduce dynamic pricing into your sales and marketing strategy, it’s vital that the marketing team be on-board with the changing strategy. Whether you’ve adopted a competitive pricing strategy where your products are always the lowest price in the area, or you’re using a different pricing strategy, your marketing team needs to work that strategy into its campaigns.
For example, companies that adopt a low-price strategy will need a high volume of sales to maintain profitability. The marketing team needs to increase their ad investment to generate more traffic, so they can increase sales to the point where the company can survive. Companies that adopt more of a value-based pricing strategy, on the other hand, will need to convey the value their products and service deliver through their campaigns.
Let’s Get Back to the ROI Question
As marketers continue to work in a dynamically priced environment, they’re going to realize that while they may not be able to be as accurate as they once were in predicting ROI, due to changing prices, they are able to calculate ROI.
The challenge for them takes place during the planning phase, and understanding that as price shifts, so does the probability of conversion. By staying aware of these shifts, and seeing the way they impact sales over time, marketing can fine tune their efforts to ensure that they continue to create successful campaigns that deliver the web traffic needed to support sales.