Dynamic Pricing: Four Pitfalls to Avoid

Over the last two decades companies in the travel industry have effectively introduced price differentiation based on constantly updated data, so called dynamic pricing. In this industry, there are numerous examples of constantly fluctuating prices, e.g. for flights or hotel stays. Through the influx of digitalization, dynamic pricing is broadening and many companies outside the travel industry are adopting dynamic pricing. They have started to see that dynamic pricing can help to further exploit the willingness to pay and to introduce more sophisticated price differentiation models. Examples include Uber for taxi rides based on supply and demand, consumer electronics shop MediaMarkt that has installed electronic price tags to constantly change prices depending on competitor behavior and gas station chain Tanq4you that bases its prices on the actual oil price and the weather condition. But what pitfalls should you avoid before…