Value Creation by Dynamic Pricing through Digitization and Industry-Wide Perspective

Abstract

Dynamic Pricing (DP), also known as surge pricing or dynamic price management, is the adjustment of prices for goods and services depending on the current market situation. Its purpose is to maximize profit, and the practice is getting more and more common. Dynamic pricing was first spotted in online retail; Also in offline retail, it can be found, e.g. as electronic price tags, as well as in on-demand services in mobility and smart meters in the energy industry. Dynamic pricing offers opportunities for vendors. The goal of this paper is to examine the current status and the new opportunities and risks of Dynamic Pricing in retail, mobility and the energy sector, made possible by digitization. This is done on the one side with expert interviews and on the other with an online research. 5 experts were interviewed and 238 respondents answered a questionnaire. 12 hypotheses were formulated, out of which 9 were confirmed, 1 was completely rejected and 2 were partially rejected. The unexpected results were: (1) Electronic price labels in stationary retail trade do not worry consumers with regard to momentary price changes. (2) Consumers do not prefer dynamic pricing models in car sharing. (3) Consumers can benefit from dynamic pricing models in the case of the aviation industry. The aim of this work to provide readers with insights as on how to utilize DP in their respective industries.

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