How to Build an Amazon-Like Dynamic Pricing System with Nected?

Dynamic pricing is a key strategy for e-commerce businesses to maximize revenue and stay competitive. Giants like Amazon excel at dynamically adjusting prices based on factors like demand, customer behavior, and competition, ensuring optimized sales and personalized customer experiences.

However, traditional methods for implementing dynamic pricing are resource-intensive, requiring hard-coded algorithms, ongoing maintenance, and technical expertise. This makes it difficult for businesses to adapt quickly in a fast-paced market.

Nected offers a smarter solution. This low-code/no-code platform simplifies dynamic pricing with tools like Decision Tables and workflows, enabling businesses to build flexible, scalable pricing models without complex coding. In this blog, we’ll guide you through creating a robust dynamic pricing system using Nected, helping you replicate Amazon’s success effortlessly. Let’s begin!

How Are Companies Benefiting from Their Dynamic Pricing Strategies?

Dynamic pricing is transforming industries, helping businesses like Amazon and Uber boost revenue and improve customer experiences through real-time price adjustments. Here’s how it delivers value:

• Revenue Optimization: Adjusting prices based on demand and trends ensures optimal pricing for all products, maximizing revenue.
• Real-Time Responsiveness: Businesses can instantly adapt to market changes, staying ahead of competitors.
• Data-Driven Decisions: Leveraging customer behavior and sales trends allows for smarter pricing strategies and better conversion rates.
• Personalization: Customized pricing for loyal customers or specific segments enhances customer satisfaction and profitability.
• Scalability: Automated tools streamline price changes across thousands of products, reducing manual effort and improving efficiency.
• Competitive Edge: Continuous price monitoring keeps offerings attractive and aligned with market trends.

By automating pricing decisions, businesses improve revenue potential and meet customer expectations more effectively. Next, we’ll show you how to use Nected to build a scalable, data-driven dynamic pricing system.

Designing the Dynamic Pricing Flow

Designing an effective dynamic pricing (DP) flow is essential for creating a seamless and scalable pricing strategy. An Amazon-like dynamic pricing flow is designed to analyze multiple inputs and conditions, adjust prices in real time, and provide optimal pricing across various scenarios. Below, we outline the key components of the dynamic pricing flow, which we will replicate using Nected.

Here are the key components of the Dynamic Pricing flow:

1. Data Collection and Initialization: Start by collecting input data that influences dynamic pricing. This includes market demand, customer behavior, location, and time-based factors.Example: "Collect data on peak shopping hours, customer purchase history, and competitor prices for real-time analysis."‍
2. Defining Dynamic Pricing Models:
   Choose and design the pricing models based on your business goals. Below are the key dynamic pricing types that can be incorporated into the flow:‍
   1. Time-Based Pricing: Adjust prices based on the time of day or shopping periods.
      Example: "If the time_of_day is peak hours, increase the price by 10%."‍
   2. Location-Based Pricing: Modify prices based on the customer's geographic location.
      Example: "If the location is a high-demand area, increase the price by 15%."‍
   3. Demand-Based Pricing: Dynamically set prices based on supply and demand.
      Example: "If the inventory is below 20 units and demand is high, increase the price by 20%."‍
   4. Customer-Segment-Specific Pricing: Offer customized pricing for different customer segments, such as loyal or new customers.
      Example: "If the customer_segment is loyal_customer, offer a 10% discount."‍
   5. Event-Based Pricing: Adjust prices for specific events or promotions.
      Example: "If the event is Black Friday, provide a 20% discount."‍
3. ‍Decision Logic Creation:
   Build the decision logic using Nected's Decision Tables. This step involves defining conditions for each pricing model and mapping outputs.
   Example: "For each input (e.g., time_of_day, location, demand), define a corresponding price adjustment rule in the Decision Table."‍
4. Dynamic Price Calculation:
   Use calculated formulas to determine the final price after applying the rules. Nected supports custom formulas that consider multiple inputs for precise price adjustments.
   Example: "Calculate the final price as base_price + (base_price * price_adjustment_factor)."‍
5. Integration with External Data Sources:
   Fetch external data to refine the pricing flow. Use APIs or database integrations to retrieve real-time data such as competitor prices or weather conditions.
   Example: "Fetch competitor pricing using an API call and update the price adjustment factor accordingly."‍
6. Confirmation and Output:
   Confirm the calculated price and pass the output to the connected system or frontend.
   Example: "Display the final price on the product page and log the details for future analysis."‍
7. Feedback and Continuous Optimization:
   Gather feedback from the system and monitor performance metrics to refine the pricing strategy. Example: "Track conversion rates and adjust pricing rules for improved effectiveness."

Following this structured flow, businesses can efficiently implement a robust and scalable dynamic pricing strategy with Nected. In the next section, we’ll dive deeper into how to set up Decision Tables and integrate them with your systems to make this process even more efficient.

Challenges Companies Faces While Building Dynamic Pricing

Dynamic pricing offers immense benefits but comes with significant challenges during implementation. These challenges often stem from the complexity of managing real-time data, maintaining adaptable systems, and ensuring scalability. Let’s explore these hurdles and how low-code/no-code platforms like Nected can help overcome them.

1. Complexity in Managing Real-Time Data: Dynamic pricing requires processing multiple data points, such as market demand, competitor prices, and customer behavior, often in real time. According to industry reports, over 60% of businesses struggle with integrating disparate data sources effectively. Traditional methods involve building complex integrations manually, which can take weeks or even months.
   Nected simplifies data integration with its seamless API and database connectivity. By mapping input attributes like demand and competitor_price to real-time data sources, businesses can centralize data management and reduce integration time by up to 70%.
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2. High Development Time and Costs: Building a robust pricing model traditionally requires extensive coding, consuming significant developer resources. Research shows that custom-coded solutions can take 4–6 months to implement, with development costs exceeding $100,000 for complex systems.
   Nected reduces development time by up to 80% with its intuitive Decision Table interface, allowing non-technical users to define complex pricing logic visually. This low-code approach significantly lowers costs, enabling businesses to allocate resources to other critical areas.
   ‍
3. ‍Difficulty in Adapting to Market Changes: Dynamic pricing models need frequent updates to respond to market fluctuations like seasonal demand or competitor activity. Hard-coded systems require time-consuming edits and deployments, leading to delays and missed opportunities. A McKinsey study highlights that 50% of companies lose revenue due to slow adaptability in pricing strategies.
   Nected allows instant updates to pricing rules without the need for redeployment. Businesses can quickly adjust Decision Tables to add or modify rules, ensuring they stay responsive to market changes.
   ‍‍
4. Scalability Issues with Traditional Systems: As businesses scale, managing dynamic pricing across thousands of SKUs or services becomes a significant bottleneck. Traditional systems often require extensive reengineering to handle increased volume and complexity, making scalability a costly challenge.
   Nected is designed for high scalability, allowing businesses to manage complex pricing rules and high volumes of data effortlessly. Grouping conditions in Decision Tables and leveraging workflows for automation ensure smooth scaling without performance degradation.‍
   ‍
5. Maintenance Challenges and Dependence on Developers: Maintaining a hard-coded system involves continuous developer involvement for updates and bug fixes, which can strain resources. Gartner indicates that 40% of IT teams cite maintenance as a top bottleneck in implementing dynamic systems.
   Nected’s user-friendly interface reduces reliance on developers. Non-technical users can manage, update, and test pricing models independently, cutting down maintenance efforts and freeing up technical teams for strategic initiatives.

By addressing these challenges with tools like Nected, businesses can implement dynamic pricing models that are not only efficient and scalable but also adaptive to the ever-changing market landscape.

Building the Frontend

Building the frontend for dynamic pricing involves creating a user-friendly interface that fetches and displays prices dynamically based on conditions defined in Nected. Below is an example of how to design a basic HTML structure for the product page, integrated with API calls to fetch prices from Nected.

HTML Structure:

<!-- The Code is a Demo Code to show you how the frontend will look like, by changing the API endpoint and key you can check -->
<!DOCTYPE html>
<html lang="en">
<head>
  <meta charset="UTF-8">
  <meta name="viewport" content="width=device-width, initial-scale=1.0">
  <title>Dynamic Pricing Example</title>
  <style>
    body {
      font-family: Arial, sans-serif;
      margin: 20px;
    }
    .product-container {
      max-width: 600px;
      margin: auto;
      text-align: center;
    }
    .product-container h1 {
      font-size: 24px;
    }
    .product-container p {
      font-size: 18px;
      margin: 10px 0;
    }
    .price {
      font-size: 20px;
      font-weight: bold;
      color: green;
    }
    .loading {
      color: gray;
    }
  </style>
</head>
<body>
  <div class="product-container">
    <h1>Dynamic Pricing Product</h1>
    <p>Product Name: <span id="product-name">Smart Speaker</span></p>
    <p>Current Price: <span id="product-price" class="price loading">Loading...</span></p>
    <p>Special Event: <span id="event-name" class="price">Black Friday Sale</span></p>
  </div>

  <script>
    async function fetchDynamicPrice() {
      const apiUrl = "https://nected-XX.nected.io/nected/rule/XXXXXXX"; // Replace with the actual Nected API URL
      const apiKey = "YOUR_API_KEY"; // Replace with your Nected API key

      const requestBody = {
        environment: "staging",
        params: {
          time_of_day: "peak hours",
          location: "high-demand area",
          demand: "high",
          customer_segment: "loyal_customer",
          event: "Black Friday"
        }
      };

      try {
        const response = await fetch(apiUrl, {
          method: "POST",
          headers: {
            "Content-Type": "application/json",
            "nected-api-key": apiKey
          },
          body: JSON.stringify(requestBody)
        });

        if (response.ok) {
          const data = await response.json();
          const dynamicPrice = data?.data?.output[0]?.price || "N/A";

          document.getElementById("product-price").textContent = `$${dynamicPrice}`;
          document.getElementById("product-price").classList.remove("loading");
        } else {
          console.error("Failed to fetch price:", response.statusText);
          document.getElementById("product-price").textContent = "Error fetching price";
        }
      } catch (error) {
        console.error("Error:", error);
        document.getElementById("product-price").textContent = "Error fetching price";
      }
    }

    fetchDynamicPrice();
  </script>
</body>
</html>

Here is the explanation of the API Integration:

1. API Endpoint: Replace the placeholder https://nected-59.nected.io/nected/rule with the actual Nected API endpoint for dynamic pricing.
2. Request Parameters: The API call includes parameters for all types of dynamic pricing:
   
   • Time-Based Pricing: Example value time_of_day: "peak hours".
   • Location-Based Pricing: Example value location: "high-demand area"
   • Demand-Based Pricing: Example value demand: "high"
   • Customer-Segment-Specific Pricing: Example value customer_segment: "loyal_customer".
   • Event-Based Pricing: Example value event: "Black Friday".
3. Real-Time Price Updates: The price fetched from Nected is displayed dynamically on the product page.

This frontend implementation provides a streamlined way to execute and display dynamic pricing strategies using Nected, ensuring real-time updates for various conditions.

Building the Backend

Building a robust backend for dynamic pricing can either involve traditional hard-coded methods or leverage a more efficient and scalable solution like Nected. Below, we explore both approaches to highlight their challenges and benefits.

1. Using Hard-Coded Method

The hard-coded approach involves manually writing every aspect of the pricing logic using a programming language such as Python or JavaScript. While this method offers complete control, it is highly time-consuming and resource-intensive, especially for complex pricing strategies.

Here is an example of building Time-Based and Demand-Based Pricing Logic:

Consider implementing a dynamic pricing model that adjusts prices based on both time of day and demand. Here’s what the hard-coded logic might look like:‍‍

def calculate_price(base_price, time_of_day, demand):
    # Time-based adjustment
    if time_of_day == "peak hours":
        price_adjustment = base_price * 0.10  # Increase by 10%
    elif time_of_day == "off-peak hours":
        price_adjustment = base_price * -0.05  # Decrease by 5%
    else:
        price_adjustment = 0

    # Demand-based adjustment
    if demand == "high":
        price_adjustment += base_price * 0.15  # Additional 15% increase
    elif demand == "low":
        price_adjustment -= base_price * 0.10  # 10% decrease

    final_price = base_price + price_adjustment
    return final_price
    

The main challenges of using the hard-coded way are as followed:

1. Complexity for Multiple Pricing Factors: Adding more conditions (e.g., location-based or event-based adjustments) requires nesting more logic, making the code cumbersome.
2. Time-Consuming Maintenance: Updates to pricing rules require developers to modify, test, and deploy new code repeatedly.
3. Error-Prone: Handling large datasets with multiple overlapping conditions increases the risk of bugs and inconsistencies.
4. Inflexibility: Quick adjustments to pricing strategies are difficult to implement without significant development effort.

Hard Code vs. Nected

So, using Nected is a better choice to offload your work, reduce development complexity, and accelerate deployment. By enabling businesses to design, iterate, and scale pricing models with minimal effort, Nected empowers teams to focus on innovation rather than technical challenges.

Building the Backend Using Nected

As we've established how Nected simplifies dynamic pricing, let’s see how you can easily create a complex dynamic pricing model using Nected. With its intuitive tools like Decision Tables and workflows, you can design, test, and deploy a robust backend in a fraction of the time required for traditional methods.

Integrate Databases and Data Sources

Start by connecting Nected to your existing databases or external data sources to fetch the necessary input data for pricing decisions.

• Log in to your Nected account and navigate to the Integrations section.
• Connect to your database (e.g., MySQL, PostgreSQL) by providing credentials and testing the connection.
• Add external APIs for real-time data like competitor prices or weather conditions.
• Map key fields, such as inventory_level, customer_segment, and competitor_price, to input attributes.

Define Input Attributes

Input attributes are the variables that determine your pricing logic. Define attributes like:

• time_of_day (e.g., peak hours, off-peak hours)
• location (e.g., high-demand area, low-demand area)
• demand (e.g., high, moderate, low)
• event (e.g., Black Friday, Holiday Sale)
• inventory_level (fetched from your database)
• competitor_price (retrieved via API)

Each attribute should be tied to its respective data source or provided as a static input.

Create a Decision Table

Once your input attributes are set, create a Decision Table to define your pricing rules.

• Open the Decision Table editor and add conditions based on your input attributes. For example:

• Group similar conditions to avoid redundancy.
• Add formulas for final price calculation, such as: final_price = base_price + (base_price * (price_adjustment_percentage / 100))

Use Workflows for Additional Functionality(Optional)

If you need to extend beyond pricing (e.g., triggering notifications or automating stock updates), Nected’s workflows allow for more comprehensive automation.

• Create a new workflow triggered by specific events like low inventory or a new pricing rule.
• Add actions such as sending alerts, updating inventory databases, or integrating with sales channels.
• Use conditional logic to tailor the workflow to specific scenarios, ensuring seamless execution.

Test and Deploy

Before deploying, test your dynamic pricing model to ensure accuracy:

• Simulate different input scenarios to validate pricing rules and adjustments.
• Check the calculated outputs against expected results.
• Deploy the Decision Table and any workflows to production once testing is complete.

Nected allows you to build and manage dynamic pricing models effortlessly. By integrating real-time data, defining structured rules, and utilizing optional workflows for extended capabilities, you can deploy a scalable and efficient pricing system that adapts to market demands with ease.

Other usecases that you can build with Nected

Nected's versatile platform enables businesses to implement a wide range of dynamic solutions beyond pricing strategies. Here are several use cases you can build with Nected:

By using Nected's low-code/no-code capabilities, businesses can streamline these processes, reduce development time, and adapt swiftly to changing market dynamics.

Conclusion

Building an Amazon-like dynamic pricing model no longer needs to be an intricate or costly endeavor. By leveraging Nected’s low-code/no-code platform, you can efficiently design, deploy, and manage sophisticated dynamic pricing strategies without extensive development work. Unlike hard-coded systems, Nected offers unparalleled flexibility, adaptability, and ease of integration with data sources and external systems. Whether you’re focusing on real-time price adjustments, customer-specific offers, or market-driven pricing models, Nected provides the tools needed to streamline and optimize your pricing strategy. As businesses continue to evolve, adopting solutions that make pricing dynamic and responsive is key to staying competitive. Start transforming your pricing model today with Nected and unlock growth opportunities faster.

FAQs

1. What is dynamic pricing?

Dynamic pricing is a strategy where the price of a product or service changes based on various factors like market demand, competition, customer behavior, and time, allowing businesses to optimize sales and revenue.

2. Why is dynamic pricing important for e-commerce?

It helps e-commerce businesses stay competitive by adapting to market trends and customer needs, maximizing revenue opportunities, and offering personalized pricing strategies.

3. How does Nected simplify dynamic pricing?

Nected’s platform uses a low-code/no-code approach, making it easier to create and modify complex pricing rules through Decision Tables, workflows, and seamless integrations, all without requiring deep technical expertise.

4. What types of dynamic pricing models can I create using Nected?

With Nected, you can create various models such as time-based, location-based, event-driven, and customer-segment-specific pricing. You can easily customize conditions and adapt rules as needed.

5. How does Nected compare to building a hard-coded pricing system?

Nected offers faster implementation, reduced maintenance complexity, higher flexibility, and better scalability compared to building and maintaining hard-coded systems, which typically require more time and resources.

6. Can I integrate Nected’s dynamic pricing solution with my existing system?

Yes, Nected supports integration through APIs and webhooks, making it easy to connect with existing systems, data sources, and external applications to implement real-time pricing adjustments.

7. How secure is the data used in Nected’s pricing models?

Nected follows industry-standard security measures to protect data, ensuring that your pricing models and related data are securely managed and processed.

8. Do I need technical expertise to use Nected?

No, Nected’s low-code/no-code interface is designed for both technical and non-technical users, allowing you to create and manage dynamic pricing models without deep programming knowledge.

If you have any further questions or want to see Nected in action, feel free to contact us or visit our resources for additional guides and case studies.

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