While it is not an entirely new concept and companies have been using it randomly over the years, dynamic pricing is much more relevant in the new age of e-commerce companies. Simply put, dynamic pricing is a strategy in which product prices continuously adjust, sometimes in a matter of minutes, in response to real-time supply and demand.
For example, if you own an e-commerce company, you should seriously consider adopting this pricing model, since it has several benefits for your business. Rather than being overwhelmed by this fast-paced pricing dilemma, e-commerce stores like Amazon have used dynamic pricing to their advantage by adjusting their prices at the same rapid pace of market demand.
A common argument against dynamic pricing is that it reduces your control over your products' prices. As a retailer using dynamic pricing, you'll have access to real-time price trends across thousands of products in your industry.
Actually, many e-commerce retailers shy away from dynamic pricing because of the potential damage to their brand value and user experience. However, Amazon dominated the market by using dynamic pricing strategies that go beyond human capabilities. Since Amazon's pricing engine makes millions of price changes in a day, of course, some customers noticed and complained about this price discrimination strategy.
In essence, dynamic pricing is the concept of selling the same product at different prices based on the changing dynamics of the current market demand. This pricing strategy benefits from high demand at certain times of the year. The penetration pricing model is often used when a new business enters the market, or an existing business wants to dominate the market. After businesses reach a certain amount of customer base and demand, they gradually increase prices.
Also, you can use dynamic pricing to launch seasonal and promotional offers as well, while remaining profitable.
If you're considering adopting a dynamic pricing strategy and tools, feel free to schedule a free call with our experts. WINNOVIA