Pricing in diverse market and competitive situations: Dynamic pricing has pros and cons

October 30, 2017

Pricing in diverse market and competetive situations: Dynamic pricing has pros and cons

Innovations, trends and new technologies are emerging in increasingly higher frequency – the world seems to be turning at an ever faster pace, and price setting is naturally affected by these developments. If you adjust your prices quickly to demand, capacity utilization, the competitive situation or the time of the day, you can tap added profit potential – dynamic pricing is the name of the game.

But beware: With increasingly faster and smaller price adjustments (e.g. prices at supermarkets and petrol stations change hourly, online prices depend on which device you use) transparency, simplicity and fairness end up suffering. Customer acceptance and trust are at risk and it’s crucial to have good judgment here. For example, the travel industry has been using dynamic pricing for years now. However, whilst their customers accept the model, they do so grudgingly and only to a certain degree.

Advice of Simon-Kucher experts:
Don’t think of dynamic pricing as a cure-all. Introduce dynamic pricing in small steps and analyze customer acceptance and the lasting effects on volume, revenue and profits every step of the way.