My drunken subway friend was complaining about this form of dynamic pricing - having a price go up or down based on time. Most lawsuits and consumer backlash involves this form of dynamic pricing (although, few of these lawsuits have been won by consumers). This can be as simple as a split A/B test or more sophisticated by predicting a higher willingness to pay based on machine type, location, demographic information, and more and showing a different price to a particular group. In this scenario, companies are using machine learning algorithms or just statistical splicing to offer different prices to different groups. and is incredibly difficult to prove) or was anti-competitive, which is highly unlikely to occur in an online market.Īs a result, businesses have taken it upon themselves to institute dynamic pricing in two forms: 1. In fact, US Courts and the Federal Trade Commission have repeatedly shot down dynamic price discrimination cases unless the discrimination took place on the bases of a suspect category (gender, race, sexual orientation, etc. Yet, that Act has more holes than a wheel of swiss cheese, which makes any legal basis of a price discrimination lawsuit incredibly grey, especially when dealing with non-commodity goods online. Technically, this is the same definition as “ price discrimination”, an illegal practice with roots in the Robinson-Patman Act of 1936. In practice, retailers can update their prices whenever they want to capitalize on the changing market. At its core, the idea behind the dynamic pricing model is to sell the same product at different prices to different groups of people. What is dynamic pricing?ĭynamic pricing is a pricing strategy that utilizes variable prices instead of fixed ones. To ensure you don’t make the same mistake(s), let’s take a dive into what exactly constitutes dynamic pricing, review some pros and cons, and then present some ways to make your pricing dynamic - without the backlash. While the push for fatter margins through pricing is admirable, these implementations fell short of a few tests to ensure customers and the business were ready for such a dynamic and variable step. Yet, over the past few years companies utilizing dynamic pricing have come under fire from consumers. Whenever pricing strategy becomes worthy of a drunken rant you know it’s a big deal - and a great opportunity to explore a concept that can boost revenue. Interestingly enough, that same week I encountered an intoxicated gentleman on a Boston bus openly complaining about the New England Patriots’ new dynamic pricing policy for ticket prices. Recently I was interviewed about dynamic pricing by Tixboo, a dynamic ticket pricing company out of the UK.
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