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Dynamic Pricing -Gaurav Lakhotia
- 1. School of Data Science and Forecasting DAVV, Indore Dynamic Pricing Submitted By- Gaurav Lakhotia M.B.A(BA)-2nd Semester Submitted To- Mr. Avinash Navlani
- 2. Introduction: Dynamic pricing, also referred to as surge pricing, demand pricing, or time-based pricing is a pricing strategy in which businesses set flexible prices for products or service based on current market demands. Businesses are able to change prices based on algorithms that take into account competitor pricing , supply and demand, and other external factors in the market. The goal of dynamic pricing is to allow a company that sells goods or services over the Internet to adjust prices on the fly in response to market demands.
- 3. Supply and demand based on locality. As an e-commerce business, the supply and demand of different items may differ based on geography. Looking at these factors, prices can be adopted by country, state , or city. Time-based dynamic pricing. Time can also play a role in dynamic pricing. Consider how bars and pubs offer a happy hour, during which the prices on drinks and food are discounted. Competitor pricing. What are the prices being offered by competitors for the same product? Businesses could ensure that their pricing is always lower, or even raise their price to match inflated competitor pricing. Types of Dynamic Pricing:
- 4. Customer behavior. The way that a customer behaves can also influence pricing. If a customer has come to your website three times and looked at the same product, perhaps a small discount would convince them to buy? Using customer actions to trigger pricing changes can be an excellent way to run tests. Segmented Dynamic Pricing. Customer data can also be used to influence dynamic prices. If a customer has filled out a survey and indicated that they have high levels of income, you can use that information to charge a higher price.
- 5. Peak pricing. Peak pricing refers to changes in price based on current Supply . If your company finds that they are unable to fulfill all requests for a specific product, increasing the price of the item makes sense. For example, Uber uses peak dynamic pricing to increase prices when they are at heavy load, and drivers have too many ride requests to adequately serve each person. Dynamic pricing allows for a lot of creativity. While automation and machine- learning ultimately drive measurable growth, there is an almost unending number of ways that data can be used to influence price.
- 6. Case Study : Ola/Uber Surge Pricing India witnessed entry of app-based taxi services through aggregators such as Uber and OLA somewhere in 2013. Uber group entered Indian Radio Taxi Services Market in 2013 and started its operations in Delhi in December 2013 and offered services under three band names namely, Uber Black, Uber X and Uber Go. ANI Technologies Pvt Ltd. an Indian Aggregator, introduced OLA app-based Taxi and auto services around same time. PRE- UBER / OLA SCENARIO : Before the entry of Ola and Uber, intra-city taxi services in major metropolitan cities in India were ordinary non-a/c black & yellow taxis, cool cabs, few a/c radio taxis and large number of 3-wheeler autorickshaws. ENTRY OF UBER / OLA & THE CHANGED SCENARIO : Uber and OLA entered the taxi services as aggregators to provide app-based taxi services to passengers in major metropolitan cities in India. Both Ola and Uber offered passengers air-conditioned taxi services at comparatively cheaper fares.
- 8. OLA/UBER Dynamic Pricing: The Ola/Uber fare rates automatically increases , when the taxi demand is higher than drivers around you. The Ola/Uber prices are surging to ensure reliability and availability for those who agree to pay a bit more. When the Ola/Uber prices are surging , it also encourages more drivers to get back on Roads & be able to earn more money. The Ola/Uber surging only last for few minutes depends on the demand & the amount of available drivers in your area. You will never pay the surged fare price unless you accept the fare price , the Ola/Uber app will always ask you first to confirm the higher fare before requesting a car for you.
- 9. Pros for Dynamic Pricing: 1. Flexibility: youll be able to easily adjust to the different season (sales/ Christmas, etc.) and you can adjust your prices to demand and offer. 2. You can completely automate, so you always have the best price in the market. 3. You can easily combine sales strategies, like coupons or discount codes.
- 10. Cons for Dynamic Pricing: 1. Transparency : disadvantaged customers. Some customers will pay more for the same product and might feel disadvantaged. They might be compelled to give bad reviews, which are obviously bad for your PR. 2. By always being cheaper than your competitors, you might initiate a price war. 3. Customer expectations may not be met. If you claim to ask the cheapest price, but the customer finds a cheaper offer somewhere else after they have bought from you. Or the other side: if a customer decided to buy from you half a year ago, but had to save up in order to have enough money and than finds out you raised the price a lot. Thats painful. 4. It takes a lot of time and energy to keep analyzing the market and your competitors. Scraping websites, limited offers etc.