If you are running a business where success highly depends on the configured value of the product/service prices, then this article is for you. In the flat world, prices are impacted by multiple input criteria (competitors, location, currency exchange rate, news, ...), so having a Dynamic Pricing system will help you stay in the game and of course, guarantee your success in the long term.
What is dynamic pricing?
Dynamic pricing, also referred to as surge pricing, demand pricing, or time-based pricing, is a revenue management pricing strategy in which businesses set flexible prices for products or services based on current market demands.
Businesses are able to change prices based on algorithms that take into account competitor pricing, supply and demand, and other external factors in the market. Dynamic pricing is a common practice in several industries such as hospitality, tourism, entertainment, retail, electricity, and public transport. Each industry takes a slightly different approach to dynamic pricing based on its individual needs and the demand for the product.
Dynamic pricing benefits
Using dynamic pricing helps ensure that businesses get the best margin on every sale, every time. By minimizing costs, e-commerce companies maximize profits and fuel growth.
1 - Control pricing strategy
Dynamic pricing gives you the most effective control of your overall pricing strategy if you have a business strategy of selling below your direct competition, that can be worked into algorithms so that prices react to what competitor prices are doing.
2 - Enhanced competitiveness
Related to the above, you can ensure that you’re always within a reasonable distance — high or low — of competitors. You can help avoid situations where pricing is prohibitive to sales and make pricing decision-making automatic.
3 - Saves company money
Margins will change based on a host of factors. Dynamic pricing helps keep margins at an ideal level and avoids situations where market conditions cost your e-commerce platform money.
4 - Provides greater flexibility
With traditional pricing, you’re locked into a specific price point that may or may not be the ideal price. Dynamic pricing removes this threat and keeps margins at an acceptable level regardless of market conditions.
Since the 1980s, Dynamic Pricing has been applied in Hospitality, Transportation, Professional sports, Retail, Theme parks, ... and proven success stories in the name of some giants such as Booking.com, Agoda, United States Airlines, Uber, Grab, ... But of course due to the complexity of the system and the low-level of AI/ML technologies in the past, the cost of building a Dynamic Pricing system is still a "big wall" that stops all SMEs and startups.
So NOW, as AI/ML becomes more and more intelligent and ... cheap, every individual member can access and exploit the benefit of AI/ML for their individual tasks. That makes the dream of Dynamic Pricing come true for everyone.
Dynamic Pricing Outcomes
Dynamic pricing is a delicate practice that only works in certain circumstances. That being said, it's worth having an understanding of the concept. If your business meets the required elements to leverage it freely, you absolutely need to have a grasp on it. When done right, your strategy should grow your revenue, profitability, and margin performance. Refer to more details about 05 Steps to Build Dynamic Pricing Engine.
Here are some of the results you can 100% build for your business empowered by Investidea Tech's AI Transformation Solution:
- 100% automation in price suggestion flow, system update price dynamically
- Optimize 120% profit by providing the highest selling price (but still very competitive price)
- Reduce 30% in stock duration which helps to save storage cost
- ... and more ...
Please don't hesitate to contact us via firstname.lastname@example.org and share your pricing strategy, we will help you become the "game changer" of your market by using the power of our Dynamic Pricing AI solution.