Dynamic Pricing Strategies

Under a dynamic pricing strategy, prices of products or services change over time, across customers, or due to competitive actions. While the idea that pricing should adjust to changes in customer characteristics and market conditions is not new, the topic of dynamic pricing has gained special interest in certain industry sectors such as e-commerce, airlines, hospitality, and ride shares, where prices change by the weeks, days, and even by the minute. Business Insider reports that Amazon changes prices 2.5 million times a day, which translates into a price change every 10 minutes. While frequent price changes boost Amazon’s profits, it can potentially confuse customers to see prices change soon after their purchase of the same product. Amazon implements their dynamic pricing strategy using its vast reservoir of data on consumer purchase and browsing history and predictive algorithms to set prices of its thousands of products for its 100+ million customers at any point in time…