How do you use dynamic or personalized pricing to capture more value from your customers or segments?

Dynamic Pricing in this industry is to find the best price that consumers are willing to pay for the product or services. This form of price flexing is used to try to maximize revenue based on the willingness to pay for different market segments with different needs and time of purchase.

Dynamic pricing makes sure that the hotel is able to sell it's product in the market at a right price at the right time. Having a static rate used to restrict a hotel from getting their fair share as well as incremental revenue. Instead of having static contracted rates many hospitality brands now offer a all year round discount percentage on their best available rate which has made a huge difference to their ADR index as well as Revpar. This has also changed the guests perception as well wherin they percieve the competitive pricing and associate the same with the quality of product they will be delivered. Dynamic pricing is the base of hospitality industry nowadays.

Dynamic pricing or differential pricing allows the opportunity to provide access to your brand to a broader customer base, consider differing dynamics in not only willingness but ability to pay.

Dynamic pricing and personalized pricing strategies are potent tools for capturing greater value from customers or segments. Dynamic pricing leverages real-time data to boost revenue during peak demand, ensuring competitiveness by swiftly adjusting prices as demand fluctuates. This approach optimizes resource use, much like basic demand-supply model, increasing prices during higher demand. Meanwhile, personalized pricing, based on individual behaviors, boosts conversion rates through targeted promotions and bundles aligned with customer preferences. Together, these strategies not only enhance revenue but also foster customer loyalty by delivering tailored, competitive pricing solutions.

Dynamic or personalized pricing can be a powerful tool to achieve various business objectives, tailored to your market conditions and customer segments. Research shows that businesses using dynamic pricing can increase revenue by up to 25%. By targeting price-sensitive customers with lower prices, you can boost sales volumes, while maintaining higher margins from less price-sensitive customers. Dynamic pricing also allows for inventory optimization by adjusting prices based on demand and supply fluctuations. This approach personalizes the customer experience by aligning prices with specific needs, preferences, or behaviors, enhancing customer satisfaction.

To be clear: "dynamic pricing" is not synonymous with "personalized pricing." My points, however, refer to the latter. Personalized pricing is about setting a price that approaches customers' maximum WTP without creating the impression of unfairness. A common tactic in B2C and B2B is to set a relatively high price (commonly referred to as "list price"). Now, you set up individualized discounts so that customers do not pay a personalized price but receive an individualized discount. In B2B, this task is up to the salesperson (and her sales guidelines/system ensuring the discount properly reflects the customer's value to the company). In B2C, individualized promotions or coupons are the means for personalized discounts delivered at scale.

I agree with Dr. Markus and would like to add from my personal perspective: Dynamic pricing generally involves the ability to react to changing “triggers,” whereas personalization involves clustering customers based on their preferred behavior or historical performance. This often leads to personalized offers, typically involving markdowns or earned points, to avoid price discrimination issues in the retail industry and beyond.

It all starts with data and analysis. Implementing dynamic or personalized pricing involves leveraging data analytics & customer insights to tailor prices based on real-time demand, customer behavior, as well as market conditions. Start by segmenting your customer base to understand individual needs and price sensitivity. Adjust prices dynamically, ensuring optimal pricing for different segments. Personalized pricing can be achieved through targeted promotions, loyalty programs, and customized offers that reflect individual purchasing patterns. By continuously monitoring and analyzing market trends and customer responses, you can fine-tune your pricing strategy to capture more value, maximize revenue, and enhance customer satisfaction.

My proven approach is a three step process: (a) customer segmentation - identify customer cohorts each with different demand and willingness to pay characteristics, (b) demand forecasting - estimate unconstrained demand from each customer segment, and (c) price optimization - identify the prices that you want to offer to the different customer segments, such that it maximizes your business KPI (revenue, margins, growth, etc.) while fitting within your business contraints (limited inventory, limited supply chain, focused competition set, brand protection, etc.) A strong business leadership and a stronger tech platform is a pre-requisite for implementing dynamic / personalized pricing.

Dynamic pricing is a key profit maximisation strategy given the resource constraints. For example, dynamic pricing in the airline industry allows airlines to optimize their revenue by adjusting ticket prices based on various factors such as demand, time until departure, seat availability, and even a customer's browsing history. This strategy helps airlines maximize profits by charging higher prices during peak times or for high-demand flights, while offering discounts or promotions for less popular flights or to specific customer segments. It also enables airlines to respond quickly to changes in market conditions and competitor pricing.

Dynamic pricing adjusts prices based on customer behavior and market conditions, but it faces challenges: Technical Hurdles: Implementing systems for real-time data analysis and price adjustments can be cumbersome and cost-prohibitive. Legal and Regulatory Compliance: Adhering to industry-specific regulations to avoid discriminatory practices. Customer Perception: Risk of perceived unfairness, damaging brand reputation and trust. Competitive Response: Potential for competitors to undercut prices, leading to customer churn. Careful management is required to navigate these risks.

One major challenge is maintaining customer trust and perceived fairness; if prices are viewed as arbitrary or discriminatory it can negatively impact your brand. Data collection and collation needs to be free of bias and transparent. Ensuring data privacy and security is another critical concern, as personalized pricing relies heavily on collecting and analyzing customer data. Managing these systems requires robust technology and expertise which can be costly. Market volatility & demand fluctuations can also make it difficult to set optimal prices consistently. Considering these factors while ensuring transparency & maintaining a positive customer experience is essential for the successful implementation of dynamic or personalized pricing.

é necessário um Modelo de Pricing com particularidades de cada negócio. O Modelo de custos e pricing oficial, ao ser padronizado (para todos) perde-se importantes características, que tratadas em um Modelo de Pricing da contabilidade gerencial, torna-se diferencial competitivo! Sabia que no passado, era comum termos duas contabilidades? (a tradicional e a gerencial)

One of the main concerns in dynamic pricing is how customers perceive price changes. If customers feel that prices are unfair or inconsistent, they may lose trust in the company, leading to decreased loyalty and sales. Additionally, dynamic pricing can create competitive pressures, potentially triggering price wars as competitors react to each other's price changes, ultimately reducing profitability for all involved. Furthermore, you must verify legal and regulatory compliance issues when implementing dynamic pricing, ensuring that pricing practices adhere to laws and regulations related to price discrimination and consumer protection.

There are surely some challenges/risks involved in the dynamic or personalized pricing technique, and they are as follows:- 1. There could be some technical defects faced while collecting, analyzing and applying the data. 2. There could be some regulatory or legal issues. 3. Customers who are regular buyers can notice the dynamic pricing and may feel that pricing is unfair to them, and this can eventually result in losing customer trust.

Conducting your business in an ethical manner is paramount, especially in pricing. Below is how I have advised CEO’s to approach it: -Maintain transparency by communicating your pricing strategy to customers -Ensure fairness & avoid discriminatory pricing practices -Collect and use customer data responsibly -Focus on value by aligning your pricing strategy with the value provided to different customer segments -Invest in technology that can handle the complexities of dynamic pricing -Monitor market trends, conditions and customer behavior -Engage with customers & regularly seek feedback By implementing dynamic and personalized pricing ethically and strategically, you can capture more value while maintaining customer trust and loyalty.

Pricing can be dynamic or personalized, but it should never be discriminatory. It is extremely important to understand which criteria or attributes are being used to define/segment/change prices at your company. Your pricing strategy should account for that, and the owner of the strategy should be able to veto and remove any attribute that might be considered discriminatory or unethical. In addition to that, companies should always be aware of the regulations around which criteria and data points can be used in their markets to define prices. Without considering this, it could be that the define pricing strategy is not only unethical, but also illegal.

There is nothing unethical about dynamic pricing - to make sure that certain extreme customer scenarios are not faced with steep price increases you can always apply some exception rules and boundary conditions. Dynamic pricing when applied in an ad-hoc manner leads to excessive customer backlash and fails to achieve the underlying business potential. A strategic approach here is rooted in three pillars: - identification of customer segments - estimating their demand potential - determining the right price for each customer segment Dynamic pricing will lead to changes in customer behaviour. Some will churn, some will change their consumption behaviour (How much, When, What). As a business you need to predict and plan for such changes.

Dynamic and personalized pricing, when executed strategically and ethically, can be a powerful tool. The key is transparency. Customers should understand why prices vary – whether due to time, demand, or personalization based on their buying history. It’s also crucial to ensure prices reflect the true value of the service or product. This approach must be balanced with fairness, avoiding discrimination or exploitation. Strategically, it allows for adjusting prices in real-time for optimal sales, while ethically, it respects customer trust and promotes long-term loyalty. Done well, it can dynamically align product value with customer expectations, driving both satisfaction and revenue.

Dynamic pricing can be used in ethical ways too. First and foremost way can be to be honest with customers and maintain transparency by telling how and why the amount will be used and what are the benefits in return will be provided to the customers. Maintaining consistency and fair pricing across all pricing channels and customer touchpoints should also be taken care of. Example:- Cab service platforms have dynamic pricing, and when they charge higher, they mention on their app that "fares are higher due to increase in demand".

Dynamic pricing is the art/ science of tweaking product/service prices according to demand, market trends, customer behavior, and competitor landscape. Industries like airlines, hotels, entertainment, e-commerce, and media leverage it to maximize profits. Here are some examples: 1. Amazon: Frequent price changes based on real-time data. 2. Uber: Adjusts ride fares based on route, traffic, and demand. 3. Airlines: Higher prices on high demand routes, holiday seasons, last minute booking etc. 4. Hotels - Pricing vary based on stay period, duration, time of year, demand, city event etc. 5. Movies - First weekend show higher pricing for a hyped movie. and more! Remember, dynamic pricing helps businesses stay agile and optimize profits.

Dynamic and personalized pricing captures more value by tailoring prices to individual customers or segments. This involves setting different prices based on factors like customer behaviour, preferences, purchase history, and real-time demand. For instance, offering discounts to loyal customers, charging premium prices to high-value segments, or adjusting prices based on product availability can optimize revenue while maintaining customer satisfaction.

I've found that the biggest challenge is maintaining transparency and customer trust. Dynamic pricing can be perceived as unfair if not communicated properly. It's essential to implement these strategies ethically by clearly explaining how prices are determined and ensuring customers understand the benefits. For instance, during high demand periods, higher prices can help manage demand and maintain service quality. Strategically, this approach requires a balance between optimizing prices and maintaining customer satisfaction. Continuous monitoring and feedback are crucial to refine pricing strategies and address any concerns.

Dynamic pricing is one of the tools available on the RGM (revenue growth management) playbook. First and foremost you should define a real problem, so you can assess the available tools and decide which one will be better. The dynamic pricing can show tremendous outputs, but the salesforce routine and company processes must be aligned to it, to guarantee you have the changes in the market when you need it. Otherwise, it will be a failure.

Dynamic pricing works well in B2C, where prices are fixed and customers simply accept or reject them. In B2B, it's also useful, especially in volatile industries like logistics or chemicals. However, it may not suit industries with stable pricing. Moreover, B2B deals often involve negotiations, and fluctuating prices can erode customer trust and complicate sales. Generative AI can help explain price changes, but in stable industries, it might complicate the sales process. Important to note that the situation is evolving, and in the coming years, dynamic pricing could become more acceptable in B2B, expanding its potential use cases.