Pricing Strategies: Dynamic Pricing

Dynamic pricing is a pricing strategy in which different price is charged from different customers that means the price is altered for different customers. The alteration of the price depends upon the customer willingness to pay for the same product and the service. There are a number of examples of dynamic pricing strategy in the market. For example the pricing strategy of airlines, hotels and electricity is considered as dynamic prices. For example the airline industry varies its price of the ticket depending upon the type of the seat, class of the seat, emergency requirement of the seat and certain other reasons. This means different prices of the seats are offered by the airline in the same flight. Similarly a same hotel can offer different prices to the customers depending upon the size, configuration and the facilities available in the rooms. Dynamic pricing strategy is used in concert by the all players of the industry dealing in the same business. If a single player in the business implements dynamic pricing strategy it can steal the customers from all its competitors. It is also implemented when the supply of the product is quite high where as demand of the product is a bit low as compared to supply. There are a number of advantages and disadvantages of this strategy. The best advantage of this strategy is that it results in profit maximization. Another advantage of this technique is that it clears out stocked and slow moving inventory. There are certain disadvantages of this strategy such as confusion among the customer, inventory management problems, increase marketing activity and its management problems and competitor monitoring.

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