Introduction

Dynamic pricing is becoming more and more accessible to all sorts of companies, B2B & B2C. But you may wonder what companies use dynamic pricing and what you can learn from them. In this blog we have 5 examples of companies that use dynamic pricing from different industries.

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Dynamic Pricing Example #1 – Amazon

How is Amazon using dynamic pricing as a winning pricing strategy?

Who hasn’t heard of Amazon? The former bookstore is now one of the biggest (if not) the greatest online retail store in the world. It sells everything. Books, pipes, electronics, wine and more. One of the reasons they have grown into one of the biggest companies in the world is their use of dynamic pricing.

Amazon changes prices on its products every 10 minutes.

According to research, Amazon changes their product prices on average every 10 minutes. Which means that on average, product prices change 144 times a day, 1008 times a week and 52.560 times a year. This amount of price changes is insane. But it also leads to Amazon being able to offer the right price at any given moment.

All the data Amazon gathers from customers’ buying behaviour, competitors, profit margins and inventory is used to increase profitability. And with success. Amazon boosted its profit with 25%. That’s how incredibly effective a dynamic pricing strategy could be.

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Dynamic pricing results for Amazon

• Increased amount of price changes for products
• Best price at any given moment
• Boosted profits with 25%

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Dynamic Pricing Example #2 – Uber

Dynamic pricing strategy at Uber as mayor profit gainer

Uber uses dynamic pricing for two different reasons – for boosting profits but also for making sure that taxis are covering all demand. When demand for taxis in a certain region is high, Uber automatically increases prices for customers to make these rides more attractive for Uber chauffeurs.  

These prices make sure that people that do not care about the price, pay significantly more than normal, but it also results in more Uber drivers coming to the area in which demand is high. When the demand is met, the prices go back to normal. People also call this surge pricing.

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Dynamic Pricing Example #3 – AirBnB

How AirBnB is using dynamic pricing on their rental platform

Although AirBnB acts as a mediator – it is a rental platform which connect properties with renters – it also has dynamic pricing function built in, in its platform. AirBnB calls this function “Smart Pricing”, and it automatically changes the prices of your property if certain factors are changed, such as season, demand, property features or location.  Next to this, people are also able to add their own constraints, such as a minimum price per night. This looks a lot like pre-defined business rules, that B2C & B2C companies frequently use in their pricing practices.  

Property owners that use Smart Pricing are 400% more likely to receive a booking than property owners that don’t

AirBnB states that people who use the “Smart Pricing” function are 4x more likely to receive a booking than people that do not use this function. They state that this function alone increases revenue for people with 12%. And Amazon profits from this too, by receiving more commissions.

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Dynamic Pricing Example #4 – MediaMarkt

Why MediaMarkt implemented dynamic pricing in their retail store

Dynamic pricing is not only implemented in online web shops, but it can also be implemented in brick-and-mortar stores. MediaMarkt, a European electronics company with more than 500 stores in different countries implemented dynamic pricing with electronic price tags in stores. According to their price manager, a tv can have different prices during different times of the day, but this also brings risks. Therefore, they decided to partially refund customers two weeks after their purchase, if the price of the bought product was lower than when they bought it.

The key-takeaway of this is that dynamic prices can harm the customer’s trust. For some products, people are more likely to accept frequent price changes than for others. They do not want to feel cheated. MediaMarkt specifically counters this disadvantage of dynamic pricing, by offering a partial refund.

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Dynamic Pricing Example #5 B2B wholesaler with SYMSON

How SYMSON combines dynamic pricing with human intelligence for clients

SYMSON implemented a dynamic pricing strategy for a wholesaler which sells technical irrigation systems. In the past, this company mainly priced its products based on discounts and they calculated the optimal discount for each customer.

To optimize pricing for this wholesaler, SYMSON implemented a key-value item pricing strategy, a geograpraphical pricing strategy and a rule based pricing strategy. Within the limits of the rule based pricing strategy, there was room for price optimization (aka dynamic pricing). For many companies it may be hard to throw out all pricing rules and make a pricing decisions based purely on an algorithm. Therefore, SYMSON implemented a pricing strategy which allows room for dynamic pricing in combination with set business rules, based on the experience and knowledge of its client.

In this example, dynamic pricing and human intelligence are combined to form a symbiotic relationship between AI & humans. Instead of replacing old habits, dynamic pricing strengthened existing pricing practices.

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Final Thoughts

A wide range of companies use a dynamic pricing strategy for multiple reasons;

• For increasing profitability in webshops (Amazon),
• Matching demand with supply (Uber),
• Or to offer the most up-to-date price in brick-and-mortar stores (Mediamarkt).  

One of the main similarities of all these companies is that they use their platform(s) to gather as much data as possible, to optimize their prices fully.

These are all big companies as examples of companies that use dynamic pricing. However, smaller companies and e-commerce also started to implement this pricing strategy into their core business practices, with the help of SYMSON.

Do you want to hear more examples of dynamic pricing? Or do you want to know more about how SYMSON can help you implement dynamic pricing in your business? Do not hesitate to reach out!

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