What is Dynamic Pricing?
One of the best-known examples is Uber’s surge pricing where prices rise based on demand and driver availability. The fare multiplier stimulates more drivers to be on the road when demand is high and at the same time ensures that customers can get a ride quicker.
Dynamic pricing is beneficial because it ensures that customers can get services even when demand is very high and stimulates the supply side with opportunities to earn more, or reduces prices when demand is low and the asset is under-utilized. There are multiple examples of dynamic pricing today in nearly any industry, ranging from hospitality (hotels, apartments), transport industry (air travel, public transportation), retail (competitor price matching, promotions), entertainment (event tickets) all the way to digital business areas such as online advertising with real-time bidding.
Is Dynamic Pricing the right choice for me?
Dynamic Pricing is an incredibly powerful business technique, but it requires several prerequisites to be in place:
- Your business can technically execute a price change rapidly (update price lists, price tags, and incorporate changing sale prices into accounting) or if that is not practical – at least establish multiple permanent price tiers.
- You are able to collect the data signals, based on which you want to vary price, in an automated fashion (e.g. competitor prices, market demand, stock level, utilisation levels, etc).
If you are able to meet the two prerequisites your business can potentially benefit from Dynamic Pricing especially if the following sounds familiar to you.
We consider an industry a great candidate for Dynamic pricing if these criteria are met:
- Your key asset demand varies dramatically (during the day / week / seasonally);
- You cannot add or reduce capacity/cost quickly in response to demand changes;
- You are not contractually or legally bound to a specific long-term price level which you cannot alter;
- Your competitors are changing price rapidly and you are periodically non-competitive or too competitive at different points in time.
With Dynamic Pricing solution in place, you will be able to change desired prices rapidly – daily or even multiple times per day in response to market signals.
How can we help you build the ideal Dynamic Pricing solution?
Metasite specializes in building bespoke Dynamic Pricing solutions based on our Dynamic Pricing Platform (DPP). DPP has been developed over multiple years and accommodates all typical project requirements with out-of-the-box functionality:
- Real-time price retrieval API;
- A library of pre-developed dynamic pricing control algorithms;
- Scalability to manage many prices (from 1 SKU to many millions of SKUs);
- Ability to run arbitrary pricing logic (pricing logic is fully programmable);
- Ability to ingest decision support data for algorithms from Big Data platforms;
- Full logging of decision to Big Data platforms;
- Support for multiple users/tenants of the platform;
- Built-in reporting (data access and reporting dashboards) to ensure that management can follow and understand how DPP is functioning.
Upon rollout, we integrate DPP with:
- Your systems (e-commerce, POS, ERP, accounting) to ensure that price changes propagate everywhere;
- Your data (market signals, utilisation rates, sales feed and other relevant data) to ensure that DPP can apply automated logic to set the price.
The typical implementation consists of 5 stages
- Initial assessment – can commercial and technical prerequisites be met in your project;
- Algorithm design – our specialists take a sample of your data & requirements and match them to our library of algorithms to identify the best fitting methods;
- Integration – during this stage, the data and systems integration tasks are carried out and the system is set up for operation;
- Initial tuning – during this stage, the system is piloted and tuned to operate autonomously in real market conditions, your staff is trained to operate;
- Monitoring and adjustments – this stage begins after launch and continues while the system is in operation.
What are the expected results?
Every Dynamic Pricing solution implementation produces different results. In most cases, however, the decision to go ahead with implementation of DPP is taken because of clear and significant upside. To establish what is the specific potential upside in your company contact us to request the Initial Assessment.