Dynamic pricing: Be more open about what you are doing

August 26, 2005 |

When it comes to dynamic pricing, companies are recognizing it's important to be fair, and customers are becoming more knowledgeable about what is going on with pricing. They want things to be more transparent.

Wharton’s marketing professor Jagmohan S. Raju says companies can engage in flexible pricing in a way that minimizes customers’ potential antagonism: They can be more open about what they are doing. “Companies are recognizing it’s important to be fair, and customers are becoming more knowledgeable about what is going on with pricing. They want things to be more transparent. Transparency does not mean not charging different prices; it means companies being open about their strategies. Companies want to make sure their existing customers are happy, and their prices have to be in line with that goal. There is a recognition that customers are more knowledgeable about prices and can talk to each other about prices…. This does not mean that companies cannot charge different prices, however. I think they can still do that.”

Most observers agree that consumers will have to become accustomed to flexible pricing because it is here to stay. Fader says the companies, offline and online, that will benefit most from dynamic pricing will be those that conduct frequent experiments with pricing strategies—continually charging higher and lower prices to different people, offering coupons, discounts and other incentives—to see which work best at improving the consumer’s shopping experience and increasing revenue and profit.

“A lot of learning comes by experimenting,” Fader notes. “Companies that know what experiments to run and read and act on the results are going to get richly rewarded. I’m looking for the time when we have electronic price tags on shelves in stores instead of bits of paper so that retailers can change prices during the course of the day or even as customer X is walking down the aisle. Companies will try it, and some will do it stupidly. But some will do it well and find ways to keep customers locked in and keep revenue flowing in.”

Get the full story at Knowledge@Wharton (free registration required)

Most Popular Articles

Does your hotel really need a social media strategy?
11 Mar, 2010 | Hospitality Industry

How TripAdvisor engages mass influencers
12 Mar, 2010 | Online Travel

6 ways to drive more online travel sales in 2010
11 Mar, 2010 | Online Travel

Top ten best practices for today’s online hotel marketer
17 Mar, 2010 | Hospitality Industry

Why should I open your e-mail?
09 Mar, 2010 | Internet Marketing

The need for a more holistic approach to revenue management
10 Mar, 2010 | Hospitality Industry

How have Web 2.0 & social media shaped online hotel marketing?
16 Mar, 2010 | Hospitality Industry

Google Marketplace drives corporate travel apps
15 Mar, 2010 | Online Travel

Starwood runs loyalty pilot program that targets rivals’ customers
15 Mar, 2010 | Hospitality Industry

Five creative strategies for hotels to attract new repeat guests
17 Mar, 2010 | Hospitality Industry

Economic Downturn

Recovery over a year away, say European hotel executives
16 Mar, 2010 | Hospitality Industry

China expected to stimulate world travel economy in 2010
16 Mar, 2010 | Online Travel

IATA sees brighter 2010 outlook
15 Mar, 2010 | Online Travel

Virgin America’s guide to not screwing up customer service
12 Mar, 2010 | Internet Marketing

UK travelers plan to take multiple trips abroad in 2010
09 Mar, 2010 | Online Travel

Un-stoppable growth in OTA bookings, GDS still lacking behind
05 Mar, 2010 | Online Travel

Global hotel prices dropped beyond 2004 levels during 2009
02 Mar, 2010 | Hospitality Industry

Things are looking up for U.S. airlines
02 Mar, 2010 | Online Travel

Asia leads travel industry’s recovery
26 Feb, 2010 | Online Travel

Meeting buyers see budget cutbacks ease
25 Feb, 2010 | Hospitality Industry

Travel companies grapple with “new normal”
23 Feb, 2010 | Online Travel

Europe likely to see recovery, not growth, says STR
22 Feb, 2010 | Hospitality Industry

Hogg Robinson Group sees early signs of recovery
22 Feb, 2010 | Online Travel

US Travel growth expected in 2010
18 Feb, 2010 | Online Travel

IHG’s profit drops 18%, as hotel rates continue to fall
16 Feb, 2010 | Hospitality Industry

E-Mail Newsletter


Visit our sponsors: