Dynamic pricing is one of the most important topics for any kind of business. It is a great opportunity to explore a concept that can boost revenue. It’s not a completely new and unknown concept for companies. But there are some things that you should know in order to make this concept more understandable.

What is dynamic pricing?

Dynamic pricing is the concept of selling the same product at different prices to different groups of people or at different point of time. A lot of factors are influencing price of a product, such as costs, competitor’s prices, supply and demand, and other external factors in the market.

Dynamic pricing decisions won’t work for every business or industry. But industries that often use dynamic prices include:

  • Hospitality
  • Travel, including the airline industry
  • Entertainment
  • E-commerce businesses
  • Retail
  • Wholesale
  • Electricity
  • Public transportation

Importance of dynamic pricing

The importance of dynamic pricing can be seen from the fact that it allows real time change in the pricing. Simply by collecting and doing the analysis of the data about targeted customers, you are able to accurately predict the value of the product or service and price it. With the software that have dynamic pricing modules, you can know the approximate value of the price that the buyer is willing to pay and then according to those standards you will set prices.

Using dynamic pricing can have some advantages. Let’s discuss some of the most important ones.

Advantages of dynamic pricing

  • Boost Sales

Dynamic pricing can be used to lower prices. There are times when a lower price can convert to more sales, helping a business meet its sales target for a period of time.

  • Maximize profits

Dynamic pricing also can be used to maximize profits. For example, a customer wants to purchase a pen. Your competition sells pens at $2 each, while you sell them at $0.75 each. Dynamic pricing strategies would let you sell that pen to the customer shopping around at $1.25, giving them the perception that they’ve saved money.

  • Learn more about your customers

With the help of dynamic pricing you can analyse the demand curve for each customer. The demand curve can display what price customers are willing to pay for certain products.

  • Keeps you competitive

Dynamic pricing allows to stay competitive in the market. You could lower your pricing to undercut a nearby competitor. This helps you stay on top of it in the market and drive customers in your direction.

Factors to consider when pricing products or services

Nothing can cause confusion and doubt in a business like pricing your products and services. The purpose isn’t to put the lowest or the highest prices on the market, but instead to find the optimum price at any time. Here are factors to consider when pricing your products and services.

  • Costs

First you need to be financially informed. Before you set your pricing, work out the costs involved with running your business. These include your fixed costs and your direct costs.

  • Customers

One of the most important aspect to consider when setting the product pricing strategy is the customers. It is important to know what do the customers want from your product or service. Are they driven by the cheapest version available? Or they consider that expensive is equal to quality? What role does the price play in their purchasing decision?

  • Positioning

The price that you set for your product or service will create a brand perception in the eyes of your potential customer. For example, you can position yourself as a low-cost leader, where customers will know that low price is your strongest weapon.

  • Competitors

Competitors – a huge impact on pricing decisions. Competitor strength influences whether a business can set prices independently, or whether it simply has to follow the normal market price.

Inventory Management Strategies: Using Smart Pricing To Get Rid of Excess Stock

  • Place the cheaper product near the expensive products

This pricing strategy is very effective. Place an expensive product first. When customers see a product of their choice with a higher price first, they are more likely to go for the cheaper alternative product. Thus, improve your chances of getting rid of the excess stock.

  • Sell the excessive products in bundles

The idea is to place two or more products together. By grouping two product together to present a reasonable offer, this will prompt the customer to buy-in to the offer since it provides good value for your customer’s money.

  • Give away the excessive products as gifts

Free products are loved by everyone. So, this trick will help to off-load excessive stock items from your inventory. If you attach the free gift with a good performing product, you are not only getting rid of the excessive products, but you are also improving the buy-rate of the successful product which is expected to increase in demand.

In other words, you can get rid of any deadstock through applying the appropriate smart pricing strategies mentioned above.


As you can see, dynamic pricing is very important for a lot of companies.

For retail and wholesale operators inventory management system can help a lot in setting right price at the right time for the right customer!

So, good inventory management system helps to make better pricing decisions, which in turn provides indirect control over the inventory management process.