Contrary Opinion | Dynamic Pricing: The Plus & the Minus

Have I Got a Deal for You

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Doug_F
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Prospector
Dynamic Pricing - a social good!
Doug_F   1/9/2013 10:48:11 AM
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I'm sure this post will generate a ton of comments, but... dynamic pricing is a social good! 

I work with airlines to help them price. I also work with manufacturers to help them price.  The bottom line is this:  dynamic pricing allows a company to offer a price that is at or below a customer's willingness to pay for their good.  This provides more customers with the opportunity to consume more goods that they need and want, while still offering the manufacturers / providers a profitable enterprise.  

As an example, prior to airlines using dynamic pricing, the number of miles flown was relatively small, and flying was only affordable by business travelers or the elite.  With the advent of dynamic pricing, airlines now can offer a seat for less to the casual traveler (because they can still charge higher to the business traveler), allowing more people to fly to more places.   I think this is a good thing!

Manufacturers have experienced similar benefits.  One company I work with offered their main product in two ways - one came with faster delivery, superior customer service, better documentation, and more options, but only if their customers were willing to pay for it.  Those that were, did;  those that were not willing to pay still received the product, but without the extra things they did not value. 

In this way, companies can offer their product to a wide range of customers, maintaining some "economic surplus" for all customers and keeping them in business. 

Alexis
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Data Doctor
Re: Not for me
Alexis   1/1/2013 10:34:46 AM
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We all know the airlines do this and we all have a lot of resentment about the policy!

Lyndon_Henry
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Blogger
Re: Not for me
Lyndon_Henry   1/1/2013 9:27:58 AM
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..

Beth writes


 the article you cite notes that retailers risk destroying a brand if it becomes "very public that retailers are charging different customers different prices at the same time." Isn't this what the airlines do?  -- and, yet, people still fly. I don't think people will like the practice, but I would be surprised to see huge backlash.


 

Well, as I've said before, the public's capacity to tolerate abuse continues to amaze me.  How will the public react to this?  Backlash, acceptance, or something unexpected?

Adopting a kind of Wheel of Fortune model to consumer pricing would, it seems to me, change people's shopping and budgeting practices, but in what way, remains to be seen.

My colleague arranges and bankrolls travel for our professional trips, so I don't have much direct personal experience with the new frenzy of dynamic pricing by the airlines.  However, it's almost driving my friend beserk.  His reaction seems to be to try to find some alternative way to travel, or else to avoid making the trip altogether.  Maybe that's a clue to the contours of a more widespread "backlash", but it's too early to tell.

 

Lyndon_Henry
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Blogger
Re: Not for me
Lyndon_Henry   12/31/2012 3:03:19 PM
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..

Sandra writes


 I do agree there is a fine line and the practice has to be clear. I thought of another example: Jewelry. When you go in to a nice jewelry store, they size you up, much like a car salesman would, and decide what their sliding scale of "dealing" will be. So my great price for a ring might not be the same as the next person to walk in the door. 


 

Ah — this is the "If the customer blinks..." routine.  I know it well.

You quote a price (for a product or service), and if the customer blinks (indicating he or she is a bit frightened by the price), your next line is something like "Of course, we usually give a 10% discount for cash..." or something along that theme.

 

kicheko
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Blogger
Re: Pricing games
kicheko   12/31/2012 9:14:25 AM
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Although i disagree with the concept of price differentials overall, i tend to think that it is much better online because then at least you aren't being jusdged based on your appearance or some other unrelated factor. It is likely to be closer to fair and you can hold them to their word as opposed to physical stores where you could end up paying even double for an item.

BethSchultz
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Blogger
Re: Not for me
BethSchultz   12/28/2012 8:47:31 PM
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Lyndon, the article you cite notes that retailers risk destroying a brand if it becomes "very public that retailers are charging different customers different prices at the same time." Isn't this what the airlines do?  -- and, yet, people still fly. I don't think people will like the practice, but I would be surprised to see huge backlash.

BethSchultz
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Blogger
Re: Putting the real time in multiple shopper browse and buy
BethSchultz   12/28/2012 8:40:51 PM
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Ha. Would you believe I literally just ciicked "Buy" on three bridesmaid dresses? (daughters standing up for my sister's wedding). i think the online process was pretty smooth without real-time collaboration, to be honest. The bride texted, "Hey, check out these dresses." All the bridesmaids looked, liked, and ordered (from three different cities). Nobody balked or complained about color or style. Then again, these dresses were so hugely on sale -- reduced from $240 to $24 -- so who could complain?! I'd rather retailers spend their efforts elsewhere.

sgittlen
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Blogger
Putting the real time in multiple shopper browse and buy
sgittlen   12/28/2012 5:38:01 PM
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Something else to throw to everyone: Companies will have to build collaborative apps geared toward the need for real-time browsing among multiple parties vs. click and send and look at later. For instance, bridesmaids online at the same time should all be able to look at a few dresses and hit buy.

sgittlen
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Blogger
Re: Not for me
sgittlen   12/28/2012 5:32:59 PM
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@Lyndon, thanks for sharing this. I do agree there is a fine line and the practice has to be clear. I thought of another example: Jewelry. When you go in to a nice jewelry store, they size you up, much like a car salesman would, and decide what their sliding scale of "dealing" will be. So my great price for a ring might not be the same as the next person to walk in the door. 

Maryam@Impact
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Blogger
Pricing games
Maryam@Impact   12/27/2012 12:56:26 PM
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I have had the same experience with Target, Children's place and The Gap; they all have similar policies so the consumer needs to shop online before going in store. I have seen much wider price differentials for the same product online vs. in store for the same vendor. As a consumer it irritates me but I have also made it the stores responsibility to honor the difference either through a return or call to customer service. I personally think its poor proctice and creates channel conflict unnecessarily, it also create consumer distrust.

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