Dynamic Pricing

Dynamic pricing is a pricing strategy that allows businesses to set different goods or service prices based on market demands. In a broader perspective, dynamic pricing is part of pricing intelligence, a

process of acquiring and processing data in order to optimize their pricing structure and drive profit growth.

There are several types of dynamic pricing strategies based on different factors: 

• Group-based – offering discounts for specific groups – e.g., senior citizens;

• Time-based – following demand fluctuations throughout the day and adjusting price accordingly; 

• Cost-plus pricing – selling a product for more than it costs to make it;

• Competitor based – analyzing your competitors’ pricing and adjusting your own accordingly; 

• Value-based pricing– selling products for a price the company feels their customers are willing to pay; 

• Price skimming – charging the maximum price that customers can afford, then gradually decreasing it.   

• Bundle pricing strategy – grouping several products and selling them together instead of charging for them separately. 

• Penetration pricing – a pricing method where a company offers lower product prices than their competitors – usually, upon entering the market – and raising it gradually. 

Dynamic pricing engine is a tool that uses data that’s given to it and changes pricing accordingly. These tools are used in the e-commerce sector to reprice products based on market demands – e.g., setting higher prices upon increased demand to make the biggest profit.