Dynamic pricing versus fixed pricing
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Discuss the advantage of dynamic pricing over fixed pricing. What are the potential disadvantages of dynamic pricing? If you were in charge of pricing strategy, what pricing strategy would you use and why?
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The solution compares the advantages of dynamic pricing over fixed pricing.
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Dynamic pricing changes the nature of the price relative to the current status of supply and demand. Pioneered by American Airlines in the 1980s, the point is to take advantage of peak demand by charging higher prices. In retail, it might refer to the pre-planned rise in prices during heavy shopping seasons such as Christmas or Mother's Day. In some cases, collection of personal information is used to regulate prices, deciding which consumers are willing to pay a higher price without question and which are more picky (Saporito, 2013).
In ecommerce, prices are often fixed by special programs that use formulas to bring the price of a commodity up or down. It uses variables such as time of year, seasonable appropriateness, demand, other's prices and many other issues that would go into the price. It is, so to speak, a hyper-marketization of prices as signals relaying information about the marketplace itself (Smith, 2012)
Coca-Cola, for example, attempted to use dynamic pricing based on the temperature surrounding the vending machine. Higher prices, of course, for warmer areas. Several failures with previous companies brought the project to a halt, and it was never implemented. Amazon, probably the most famed dynamic pricer, adjusted the prices of its goods based on the browser that customer's use. They had figured that certain browser specifications and computer models imply more affluent people. Orbitz, the travel firm, adjusted its prices on a similar model: high quality browsers (that is, those browsers that only run with newer ...
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