Is the purpose to price downwards to cover periods of low demand or to maximize profit in times of high demand? Why do you want to use dynamic pricing, and what are your objectives? How to implement a dynamic price strategy 1. Generally, people do accept that they have to pay higher rates according to demand and time.Īs long as your dynamic pricing policy is not seen as manipulative or exploitative, then it should generally be perceived as fair by your customers. However, be careful to avoid pricing mistakes. When demand is high, you charge more and maximize your profits, but when it drops, you can lower prices to persuade customers to buy. You will often find that utility companies will reduce rates when there is less demand (such as during the typically hotter summer months), then raise them again when demand soars in winter.ĭynamic pricing allows you to sell your product or service year-round. For example, hotels in Southeast Asia will charge more from December to April as that is the region’s high season. They tend to be very seasonal and will adjust rates because of this. If you look at hotel prices over a year, you will see a massive fluctuation in room rates. What are some dynamic pricing examples?Įxamples of dynamic pricing can be found everywhere: This model is used extensively in the hospitality industry hotels and airlines will increase their prices when there is the greatest demand, such as during school holidays. This form of dynamic pricing recognizes that there may be times of the day, week, month, or year when there is greater demand for the products/services you provide and that you can charge customers more at these peak periods. You may also want to use dynamic pricing in pricing proposals to close B2B deals. Your business may choose to use time-based dynamic pricing if your customer wants same-day delivery.Īlternatively, you can charge less for slower delivery or for preorders. An example of dynamic pricing down would be in persuading a customer to buy now rather than later. With this model, you can dynamically price up or down according to what you see as demand and need. With time-based dynamic pricing, you adjust prices according to the time that the product is provided. Do you offer different versions of the same product? For example, you may offer physical or digital versions of that product, allowing you to adopt dynamic pricing. Are certain demographic segments of your customer base more likely to purchase from you and allow you to use dynamic pricing? Does the location of your business-or the location of your customer-mean that you can consider a dynamic rate for your products or services? There are three factors to consider with this pricing type: Think sports teams, music events, and airlines. You do this when you have segmented customers who perceive the value of your product in different ways. With segmented pricing, you have different prices for similar products. What are the types of dynamic pricing models? 1. Restaurants, for example, will not usually adjust prices because of changes in demand, but an airline or hotel company certainly will.ĭynamic pricing shouldn’t be confused with variable pricing, which covers things like auctions and stock markets. It’s also known as time-based pricing, demand pricing, or surge pricing.Ĭontrary to that dynamic pricing definition, with static pricing, the cost of a service or product remains constant and rarely changes.Īnother simple definition of dynamic pricing is that it’s a strategy where organizations adjust their pricing to take demand and other factors into account. That’s why dynamic pricing like this is so familiar.īut what is dynamic pricing exactly, and how can you use it to your advantage in your business? What is dynamic pricing in marketing?ĭynamic pricing is highly flexible and liable to change on a day-to-day basis. These vagaries can be frustrating to customers but are common across many industries.Īfter all, the purpose of any business is to make money and maximize profit. Have you ever planned a holiday, looked at the cost of flights one day and then, a few days later, noticed that those same flights have dramatically risen in price?
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