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How do you feel about dynamic pricing?
'dynamic' pricing based on real-time supply and demand is rapidly spreading, and electronic Price displays, such as Boxie Sign's Electronic Price Display Markers help retailers optimize in-store efficiencies, improve sales and margin, and price accurately across channels. Do this by remotely changing prices, launch promotions, and update inventory on your shelf-edge displays across one store or thousands. It gives retailers a competitive advantage, so why do you think the US is still slow to catch on to digital price tags, and what are your thoughts to promote the product better and get through to new customers?
Comments are encouraged!!
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Thinking about this a bit more, we can come up with some factors that affect pricing:
Customer history
If the company is an airline with whom the customer in question has signed on as a frequent flier, then the company can figure out how frequently the customer buys services from the company, how profitable the customer’s relationship with the company is, etc. A customer who frequently flies with a given airline may be shown a less expensive ticket than is shown to someone about whom the airline knows nothing.
Demand
Uber’s surge pricing is the most obvious and controversial example of this kind of practice, in which an increase in demand for a service causes the price to increase.
Alternative options for the customer
If a customer has to fly from NYC to Los Angeles, there are only so many options for the customer. If the customer has to go across town, there are usually more options. The fewer the options for the customer, the more leverage the service provider has over transaction pricing.
Revenue targets
Airlines practice something called “yield management,” which means that each plane they fly has a target revenue number, and they try to meet this revenue number by dynamically pricing seats on the plane. In practice this means that the passenger sitting next to you on a flight likely has paid a much different fare than you. Sometimes these fares can differ by hundreds of dollars.
Other exogenous factors
Bad weather can increase demand (more people want an Uber when it is raining).
Both dynamic and fixed pricing have its own advantages and disadvantages.
If you want to implement dynamic pricing, then you may need to incur more time on your pricing mechanism to reflect the most current costs and demand-supply factor. You may also need a more complex system to control your pricing.
However, I believe you may also lose some customers if they prefer prices which are fixed. Under dynamic pricing, customers may need to compare prices among the sellers before each purchase. Bear in mind, when you change your price, your customers may also need to change theirs, if they choose to maintain the same profit margin.
Therefore, some customers may want to have a peace of mind and prefer to have a fixed price in the long term basis. Therefore, fixed price somehow will establish a base of permanent customers (but I can’t tell the size of the base, of course).
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