Industry Insights

2 min read

Dynamic Pricing 101 - What Is Dynamic Pricing and Why Does It Matter For Marketers?

Dynamic pricing is a strategy in which retailers and service providers change the price of a product or service to reflect market conditions.

Before the information era, pricing was slow to change and usually only reflected supply and demand. Now, thanks to technology, pricing can change in the blink of an eye, as these things can be measured in real-time.

For example, most of us know that Uber trips cost more on weekends, after-work hours, and near large events and gatherings. However, the price also reflects how many drivers are currently active in any given area. It’s designed to incentivise drivers to work, and once more of them get on the road, the prices will normalise.

However, dynamic pricing is now more than just supply and demand. Geography, competitor rates, and even consumer browsing history all affect on-screen prices, posing both challenges and opportunities for marketers.

Maximising Profits

If you’ve ever browsed hotels or air travel fees, closed your computer, and revisited the website a few hours later to see the price has gone up – that’s dynamic pricing.

However, it’s a more controversial form of dynamic pricing that uses your search history to gauge your interest rate and spur action. So, if you’ve visited a page multiple times, the algorithm assumes you’re more interested and can therefore charge more. It also gives the impression that there’s a higher demand, encouraging you to purchase quickly before the price gets too high.

It goes far deeper than that. Several studies, including those by the Wall Street Journal and Northeastern University, have found that pricing can be affected by tiny factors. For example, the travel fare aggregator Orbitz charged higher prices to Mac users on the basis that they might have more disposable income. Likewise, prices can even change by browser type or zip code.

It’s not just airlines. E-commerce is notorious for dynamic pricing. For Amazon, it’s a crucial part of its strategy, and it has a complex algorithm that handles pricing. Smaller e-commerce retailers will often also use automated dynamic pricing software to varying degrees of complexity.

Dynamic pricing isn’t without controversy. In 2022, the American ticket sales and distribution company Ticketmaster was criticised for its dynamic pricing system. On the one hand, the company claimed it was giving artists a fair deal. On the other hand, the prices were constantly changing, meaning that it wasn’t clear for fans.

There are also issues with privacy, namely, how the companies collect data. While these companies aren’t technically doing anything illegal, some have argued that this amounts to uninformed consent – that people don’t really know what they’re agreeing to when they click the accept all cookies button.

For Marketers

For marketers, dynamic pricing is a double-edged sword. If you use dynamic pricing, you can generate more revenue. However, apart from being controversial, it also has problems, namely in market research and competitor tracking.

For example, Amazon sellers must accurately track competitors to avoid pricing wars or invest in unpopular products. However, this is harder when pricing constantly fluctuates. There is a way around this.

Proxy solutions let marketers hide their IP addresses, making it possible to access the internet and gather data without revealing their identity or location. Moreover, marketers who use proxy solutions with servers worldwide can simulate user requests from different locations, thereby enabling more comprehensive market research that isn’t affected by their locality.

Moreover, by using proxies, marketers can also bypass the personalisation algorithms that adjust prices based on browsing history or device type – essentially, giving them a fresh slate each time.

It’s not foolproof, and if you save cookies to your local browser or keep your search history on, pricing could still be affected. However, it offers a far more level playing field than otherwise.

Trusted Proxies

A reliable proxy server solution gives marketers the foundation they need to deal with the problem of dynamic pricing accurately and reliably in market research.

However, it's vital to choose a solution that can handle a large amount of online data, have global servers, and can self-heal in instances where anti-scraping measures are triggered.

At Trusted Proxies, we have servers in over 80 different countries, self-healing capabilities, and a proven track record.

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