INTHEBLACK June-July 2024 - Flipbook - Page 34
Dynamic pricing replaces
fixed costs with a responsive
approach to real-time data
and algorithms.
Its increasing prevalence is driven
by technological advancements such
as AI and reflects a strategic shift in
pricing strategies for businesses.
A limited regulatory
framework raises
concerns about potential
discriminatory practices.
The surge of
dynamic pricing
As generative AI and technology reshape how businesses
operate, strategic adoption of dynamic pricing is growing,
but with it comes questions about opportunities versus risks.
Words Megan Breen
Dynamic pricing goes by many names,
including surge pricing, personalised pricing
and price discrimination. It is a pricing
strategy where businesses adjust the prices
of their products or services in real-time based
on demand, competitor pricing, time of day,
customer demographics and other factors.
The strategy allows businesses to
optimise pricing to maximise profits,
increase revenue and respond to market
changes, and it is a longstanding practice
in travel and hospitality.
Airlines first started to use dynamic
pricing in the 1980s when the industry was
deregulated in the US. It was later adopted
34 INTHEBLACK June/July 2024
by accommodation providers as a strategic
revenue management tool, which allowed
them to maximise revenue by adjusting
room rates based on real-time factors.
Dynamic pricing has more recently been
adopted in ecommerce, entertainment and
transportation. Ride-share platforms, for
instance, have seized on the concept by
increasing prices during busier periods.
The significance of dynamic pricing has
notably increased in the era of ecommerce
because advancements in AI and technology
are enabling more businesses to move beyond
traditional supply and demand dynamics to
inform pricing decisions.
