Uber utilizes dynamic pricing with its surge feature. For example, a hotel room in Northern New England will likely be more expensive during the fall when tourists are interested in seeing leaves change than it would be in the dead of winter when the area sees snow, making local attractions less accessible.

Hotels adjust the price of rooms based on factors like availability and seasonality. Here are some examples of how the practice is employed. Several businesses across a variety of industries fit the bill described above. Unless a business carries some weight or dynamic pricing is a common practice in its space, it likely won't do too much for that company.ĭevelop a deeper understanding of dynamic pricing and how it applies to your business in the video below. If a relatively small business in a crowded industry decides to raise prices on a whim, it could easily be cast by the wayside.

An organization can only set prices at will if it has a significant place in its market for consumers to be receptive to that change. A business needs sufficient market power when setting prices or industry peers also leveraging the practice.If an industry's pricing structures are thoroughly established with consumers who stick to them stringently, there isn't much room for the businesses that compose it to adjust their prices freely. Companies can't expect to successfully use dynamic pricing if potential consumers have no interest in paying extra under certain circumstances. A business needs customers who are willing to pay non-static prices.If a company has no reference points for or understanding of how its broader market fluctuates, it won't be able to effectively adjust prices to suit changing demand. A business has to have the capacity to gauge how and when demand shifts.Here's a graphic representation of the practice.ĭynamic pricing can only be leveraged by businesses that fulfill certain requirements, including these key points. It's the delicate practice of pinning down the right price to suit the right level of demand - operating at multiple price points, hoping to hit one that's on par with however enthusiastic consumers are about your product or service at any given moment. For instance, an airline will shift seat prices based on seat type, number of remaining seats, and time until the flight.ĭynamic pricing is a strategy aimed at maximizing profit off time-based opportunity.

Dynamic pricing - also known as surge pricing, demand pricing, or time-based pricing - is a pricing strategy where businesses adjust the prices of their offerings to account for changing demand.