1. Definition

Dynamic pricing, also known as flexible pricing, refers to a strategy where the prices of products or services are adjusted in real-time based on factors such as demand, supply, competition, or specific customer attributes. The aim is to maximize revenue, enhance competitiveness, and respond effectively to market dynamics. This method relies on data-driven analysis and often utilizes algorithms or AI to manage price changes efficiently.

2. Scope

Dynamic pricing is widely used across various industries and has become increasingly popular due to advancements in digitization and modern analytical tools:

• Retail: E-commerce platforms adjust prices based on demand, customer behavior, or inventory levels.
• Travel and Transportation: Airlines, hotels, and ride-sharing services alter prices depending on demand, availability, or booking time.
• Leisure and Events: Ticket prices for concerts or sports events are dynamically adjusted based on popularity and seating categories.
• Utilities: Electricity and water providers modify prices during peak usage times.
• Online Marketplaces: Platforms like Amazon use algorithms to regularly update prices to stay competitive.

Dynamic pricing is supported by data-driven technologies such as big data and machine learning, enabling real-time pricing decisions.

3. Types of Dynamic Pricing

Several approaches exist, varying by objective and industry:

• Time-Based Pricing: Prices change depending on the time of day or day of the week, e.g., higher prices during peak hours.
• Demand-Based Pricing: Prices rise or fall depending on how much a product or service is in demand.
• Competition-Based Pricing: Prices are adjusted based on competitor offerings to remain attractive.
• Segment-Based Pricing: Customers are divided into groups (e.g., students, seniors) that receive different prices.
• Event-Driven Pricing: Prices change during special occasions or events, such as holidays or festivals.

While dynamic pricing offers numerous advantages, it carries risks, such as potential customer distrust if prices are perceived as unfair. Transparency and clear communication are therefore essential.