How to Reap Higher Profits With Dynamic Princing

Arvind Sahay

45 citations0/0 files storedDialnet (Universidad de la Rioja)

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Consumer Market Behavior and Pricing Supply Chain and Inventory Management Digital Platforms and Economics

Abstract

Dynamic pricing, in which prices respond to supply and demand pressures in real time or near-real time, has long been used by airlines and hotels. Now dynamic pricing is making inroads in many different sectors including apparel, automobiles, consumer electronics, personal services, telecommunications and second- hand goods. These companies are making use of new findings on dynamic pricing and of increases in data-processing power to raise their average realized prices, thereby increasing revenues and profits. There are two mechanisms for dynamic pricing: posted prices that customers can see; and price-discovery mechanisms, in which customers determine prices through their own actions. These two mechanisms are employed in seven different forms: yield management (commonly used by airlines), demandbased pricing, three types of auctions, group buying and negotiations. The article describes eight situations for using the various forms of dynamic pricing. An important constraint in employing dynamic pricing is consumers? Latitude of Price Acceptance, which varies for different products and situations and which can be discovered through observation, surveys or analysis of demand elasticities. Customer participation in the pricing process decreases the chances of a consumer backlash. Customers also tend to embrace dynamic pricing in the following situations: where the price reflects intensity of demand for the product, there is communication between the seller and the consumer, and the price difference is explained by a difference in perceived value across channels through which the transaction occurred. The more the seller understands the buying cycles and habits of the customer, the more he is able to manage price margins to the rhythm of the customer?s shopping, to segment customers and to develop price discrimination.

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2015Unfairness in consumer services: Outcomes of differential treatment of new and existing clients 2011Neural network demand models and evolutionary optimisers for dynamic pricing 2012The Role Demographics Have on Customer Involvement in Obtaining a Hotel Discount and Implications for Hotel Revenue Management Strategy 2015Marketing Flexibility: Significance and Implications for Automobile Industry 2012Impact of Dynamic Pricing Strategies on Consumer Behavior 2010Competitive pricing in European hotels 2015Patriotism, national athletes and intention to purchase international sports products 2009Analysing the Effect of Demand Uncertainty in Dynamic Pricing with EAs

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