The practice of dynamic pricing is not a new concept. Some see the origin in the airline Industry where its use started in the 1980s. But even beforehand it was common practice in small grocery stores to discount perishable products like bread over time. At its core, dynamic pricing simply means that a company sells a product at different prices. Today, dynamic pricing is widely used in retail and especially… Read More »What is dynamic pricing?
Understanding your product’s price elasticity of demand is the key to set optimal prices. Managers need to understand how customers react towards a change of prices to tap the full potential of pricing. Based on price elasticities you can… …identify products that are important to your customers and thus are crucial to build your price image. …identify products where your customers regularly compare prices. …calculate the profit and revenue scenarios… Read More »Price elasticity – the key to optimal prices
Rule-based pricing or rule engines are the traditional way of pricing in retail and online retail. Most online retailers change prices using this methodology. In this case prices are changed according to static formulas. This type of pricing can also be dynamic. For example, a retailer can set the rule to always match the third cheapest competitor price. This way prices can change everyday or even multiple times per hour.… Read More »Rules based vs. machine learning based pricing