Variable Pricing & Real Time Pricing: The Standard Pricing Methods for Products and Services

What is the meaning of real time pricing?

In simple terms, real time pricing in business environment could be considered as the overall charges for delivered electric power along with energy that vary on an hour to hour basis for retail customers who are specifically non residential and that vary on a frequent basis during the day for residential customers associated with retail.

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What Is Dynamic Pricing and How to Implement It?

Dynamic pricing, which is also known as real time pricing, is considered as an approach towards considering the cost for any specific product or service which is highly flexible in nature. The prime objective of this kind of pricing is to assist an organization that sells products and services over the Internet and other social platforms (through internet) in order to set prices in response to the current conditions and demands of the market.

Therefore, any successful dynamic pricing setup is dependent on five effective and core steps. These are:

Defining the objective of commercials
Developing a proper pricing strategy
Choosing the most suitable pricing method
Developing proper rules for pricing
Implementing, testing, and evaluating the organizational strategy

What is the importance of the pricing strategy?

Pricing of products and services is responsible for impacting everything related to how product is perceived by the customers and the markets. Therefore, it is critical to comprehend the necessity of a proper pricing strategy. Any product or service’s price that is relatively low might not develop sufficient interest or have sufficient profit margin in the short or long run. On the contrary, setting the price relatively high might result in losing the interests of the customers.

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What is the difference between variable and dynamic pricing?

There are primarily three types of pricing strategies that is available to attract and keep involved the customer at present. These include:

Variable Pricing: in simple terms, variable pricing is when Price varies based on the day, however does not shift or transform over time later. Dynamic Pricing: whereas, dynamic pricing is when Prices varies based on the conditions of the market, and then accelerates through many price points on the basis of the overall capabilities of the e-commerce platforms.

In addition to this, based on the criticality of the e-commerce system in use, dynamic prices might either increase automatically or might need adjustments that are manual in nature. On the other hand, in case of variable strategy, prices might be based on the specific time slot for which the product or service is purchased. Every day in case of variable pricing is priced on the basis of demand, which in turn guarantees more sales and revenues thereby increasing the overall profits.

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What are 4 examples of dynamic pricing?

Dynamic pricing is a considered as a method that allows organziations to consistently adjust the overall price of goods and services on the basis of current demand. For instance, if there is an increment in demand, organziations might respond towards the data available in market by escalating the price. At present, new technologies has evolved and emerged the scope for more variable dynamic pricing, and it is increasingly utilized by majority of the organization in different industries or sectors including airlines, taxi companies as well as hospitality. This is because Dynamic pricing is responsible for enabling an organization to set different prices thereby maximizing the total revenue.

Dynamic pricing needs

An extent of market power within setting prices for products
customers with varied elasticity’s of demand
willingness to pay for products and services
An ability of the organization to be cautious of how market demand shifts
Preventing reselling among different prices.

Examples of dynamic pricing

Price setting for Uber taxis – where the organization advertises the price might vary based on demand and situations. Customers are able to observe the hike in price they would pay before committing to the taxi service.

Tickets for professional sport. Major league baseball clubs also uses dynamic pricing in order to set prices for available seats. This is because, Demand differs based on form, opposition’s quality and other elements. For common games like cricket, prices will eventually rise.

Price of flights Easyjet, Ryan air are few organziations that constantly revises its price revised based on how well the organization is selling.

Electricity companies. Organziations might vary the price of electricity based on current demand and supply in market. For instance, in summer seasons with more supply from solar panels along with less demand for heating, the prices will gradually fall. Whereas in case of cold days, prices can be escalated.

Benefits of dynamic pricing

Organziations could increase revenue and enable to run a comprehensive range of services.
Varying the price can enable the firm to pay employees a higher wage to work during peak times. This gives an advantage to organziations, however equally, it can might result in reduced wages of individuals during a slump in demand along with greater ineffectiveness over cases of wages.
Dynamic pricing works best for less frequented events as compared to periodic activities like skiing or golf tee times.
Dynamic pricing is the best method to prevent queues along with excessive supply in business. It could result in smooth consumption over fluctuations in demand and supply and make the processes easier. The objective or goal of Uber was that it might avoid time where an individual could not find a taxi.

Disadvantages of dynamic pricing

Customers who are willing to pay the higher price for specific products
Increased pricing might result in bad headlines, for instance, high prices during a tragic situation or emergency.
To overcome these encountered bad headlines, organziations could place manual restrictions on the amount prices increases by.
Customers might feel they cannot trust an organization who is consistently and continuously altering the product’s prices. This might harm market share in the long term.
Cost to the organization for evaluating and enhancing data is more.

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