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Dynamic Pricing – Always the right price

beautiful clothes in modern fashion shop

Fixed prices were yesterday. The future of price policy is not only dynamic, but also democratic. In other words, everyone is involved in setting prices and everyone can benefit – retailers as well as customers.

Dynamic pricing has largely established itself in online retail businesses and is nowadays also being used more often in brick-and-mortar stores. In order to react to changing market conditions, retailers adjust prices for products and services more frequently than ever. The decisive factors here are supply, demand and competitive prices, but also the weather and special events such as Valentine’s Day or Easter. The prices are then no longer constant but change several times a day. This has long been common practice when it comes to gas stations and air travel. In online shops it has also become common that a pair of jeans may cost 200 euros in the morning and decrease as much as 80 euros in the evening. Meanwhile, brick-and-mortar retailers such as Rewe, Media Markt and Saturn have been using electronic price tags for several years to adjust prices multiple times a day. Due to the numerous influencing factors, dynamic pricing leads to a democratization of prices in which not only retailers but also customers can influence pricing – and use this to their advantage.

Best possible price, maximum revenue

Each customer has an individual price limit, which indirectly determines which price he is willing to pay for a product. Experience shows that those who have sufficient financial resources pay a higher price to purchase a product right away than those who do not have as much money available and only become active when the product is later on offered at a lower price. In dynamic price management, retailers take advantage of customers’ willingness to pay by offering goods so cheaply at certain times that consumers become active and buy the products. This enables retailers to optimize their inventory management over the long term, avoid overstocking and thereby save costs and use their freed-up space for new products. At the same time, they make the most of their customers’ willingness to pay and increase their revenues.

More time for essentials

aifora has developed a cloud-based platform for intelligent price and inventory management, supporting retailers in dynamic pricing, among other solutions. Algorithms automatically calculate the optimal price in real time, based on a multitude of influencing factors. This relieves retailers because it automates the complex process and allows them to operate profitably with little effort. The resulting free time can then be used to concentrate on customer-oriented processes, such as on-site consulting. This is particularly advantageous for brick-and-mortar retailers, as they focus on customer experience to compete against the online pure players – also, customer satisfaction increases.

Advantages for bargain hunters

Of course, dynamic pricing also has advantages for consumers. They gradually get used to price fluctuations. Bargain hunters can simply wait until there are discounts for the products they want and only buy when the retailer offers them a price which they are happy with. The result is a price differentiation in favor of the customer, where everyone only pays the price they are willing to pay.

In the end, everyone wins

Overall, dynamic pricing and the associated democratization of prices is a win-win situation for all parties involved. While retailers can sell their goods at the best possible price at any time, customers have more opportunities to make a bargain, if they adjust to price fluctuations and wait for the right time to buy. In this way, everyone participates democratically and benefits from dynamic pricing.

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Patrick Brüns - Head of Marketing

Patrick Brüns
Head of Marketing

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