Dynamic Pricing Strategy- What and How?

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Dynamic Pricing Strategy- What and How?

Dynamic pricing is the outcome of an assessment made by companies on the present market demands and requirements. This assessment is to determine the changing dynamics of the market demand. As a result, the same product or service is sold at different prices. Hence, surge pricing or real-time pricing is used to define it.

When the products or services are being used at a high rate, the price substantially goes up, and vice versa. It is a strategy for businesses to make profits or minimize losses, depending on how the market timely responds to their offerings.

In this article, we will discuss in-depth dynamic pricing strategy and how it benefits businesses.

What is a Dynamic Pricing Strategy?

A dynamic pricing strategy works towards helping your business make profits by operating at various price points. But this strategy is not effective for all business models. You can expect an airline to raise the prices of its seats based on the number of seats left and the time until takeoff. But you cannot expect a restaurant to raise its prices every time it sees a rush of customers.

The purpose of implementing a dynamic strategy in pricing is to optimize the margins and increase the chances of sales. Companies use variable prices instead of fixed tags. Retailers have the accessibility to update the cost of their products or services numerous times throughout the day.

It is to ensure they capitalize on the constantly changing market. While using a dynamic pricing technique, you must observe your products and their relative value in contrast to the rest of the market.

Is Dynamic Pricing Suitable for Your Business Model?

As stated earlier, dynamic pricing is not for all business models. To determine if it is suitable for your operational practices, here are a few things to consider and answer for yourself:

  1. You need to determine if your business model has the scope to identify how the market fluctuates and how it affects your growth scale.
  2. Check with the fact that your customers will be accepting the dynamic prices of your products or services.
  3. You must check whether or not other key players in the industry are using dynamic pricing. If you are not the market leader, then by imposing a dynamic pricing strategy, you will be repelling your customers to your competitors.

Different Dynamic Pricing Strategies

Once you have evaluated if your business model supports dynamic pricing, you must determine which strategy would suit you the best. Different strategies are accountable for varying situations. Therefore, it becomes important for businesses to understand and analyze each one of them before implementation:

  1. Time-Based Dynamic Pricing

It is considered when the increase or decrease in demand is connected to a specific time. Brands use this technique to encourage customers to make faster purchasing decisions. For instance, Amazon’s dynamic pricing often introduces flash sales with heavy discounts that last only a few minutes.

  1. Segmented Dynamic Pricing

It is the dynamic pricing strategy where you set up two price tags for similar products. Such a strategy is effective only if your audience accepts the different values concerning the service they are offered. For instance, airlines offer economy and business class seats at different prices.

  1. Peak Dynamic Pricing

Peak pricing is a simple strategy of hiking the price of products or services during seasonal demands. For instance, hospitality and transportation companies increase prices during the holiday season. For instance, if you are visiting Dubai during the Expo months, all the fares involved will be higher.

Steps on Implementing Dynamic Pricing Strategy

Now that you know what dynamic pricing is, it is time to learn how to implement it in your business practices. Here are the steps for you to get started with it:

  1. Define Your Objective

Your objective might vary if you want to attract more customers to your business or increase the profit rate. Therefore, set a determined one and create goals that will reciprocate onto the strategy. Following that, you must determine what metrics you can use to measure your customers’ behavior and market demand.

  1. Build Your Dynamic Pricing Strategy

A strategy for dynamic pricing is what will use your objective as fuel to suggest price changes. You must pick a dynamic pricing model that goes well with your business approach, depending on the current market conditions. Choose among segmented, time-based, peak pricing, market-based or penetration pricing.

  1. Implement & Monitor Your Strategy

Implement the strategy for dynamic pricing, and monitor your customers’ responses toward it. Meanwhile, keep a tab on market changes to adjust the goals and your overall strategy. Depending on how your customers respond to the pricing strategy, you can decide to change or continue with your objectives.

  1. Keep Constant Tab on Market Changes

When your dynamic pricing strategy succeeds, continue monitoring the market for further changes based on your model. It will help you stay competitive and earn more sales and profits.

How Can a Digital Tool Help with Dynamic Pricing for eCommerce Companies?

If you are running an eCommerce company, you must cater to your dynamic pricing needs through a digital tool. When you get the right tool, you can ensure that your products over the store are priced lower than what your competitors have priced. But at the same time, the set price should also stand up to the minimum profit margins.

These digital price intelligence tools are accountable for helping you with some powerful features, which include:

  • Perfect Repricing: Active promotions, competitor pricing, and stock availability will help you determine the rightful pricing strategy. You can detect if you need to change your dynamic pricing strategy.
  • Get the Pricing Suggestions: The digital tool will consider the catalogue prices, acquisition and the number of existing competitors for all your products. Your pre-established pricing rules and competitor analysis over the tool will decide what should be the price for each of your products. Hence, this will help you with dynamic price optimization.
  • Minimum Margins will Always be Protected: Whether you are imposing a pricing strategy for Amazon or your eCommerce site, using a tool will ensure your profit margins are always met. Even with the frequent price changes, your rules will ensure that you don’t sell your products at a loss.

If you want to compete only with select sellers, then these digital dynamic pricing tools offer that feasibility too. Choose only the sellers whom you consider a big rival over various marketplaces.

If you are selling your products over Amazon or are running your eCommerce stores, you need a proper pricing strategy imposed by a digital tool. As many of your competitors are selling on Amazon and other such marketplaces, you need to automate the price optimization aspects to stay ahead of the competition. You need to acquire more sales than your competitors. And that is possible by implementing a digital dynamic pricing tool.


If you have started a new business and are willing to leverage the potential of a dynamic pricing strategy, now is the time. If you have studied your industry demands in the market among the customers, then get along with the steps.

When running an eCommerce business, staying updated with the market trends at all times manually is not at all possible. So, seeking help from a digital tool seems like a smart move. Take a bold step towards making your business stand out in the crowd of intense competition with dynamic pricing. You can consider Weavr Sense’s price tracker to get you started on acing your dynamic pricing strategy.

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