Dynamic pricing: a blessing or a curse for e-commerce?

How dynamic pricing is defined

Dynamic pricing (also known as dynamic price adjustment or dynamic price management) defines prices that are automatically changed within a relatively short period of time based on market conditions and pricing strategies (in contrast to static prices, which rarely change). For example, prices in e-commerce are dynamically adjusted when a particular offer has expired or a certain purchase volume has been reached in B2B.

Advantages and disadvantages of dynamic pricing

One major advantage of dynamic pricing is definitely the customer experience. For example, when an online shopper automatically sees the sale price for a product displayed in real time on their wish list, this has a positive effect on the customer experience. The same applies to B2B buyers, for example. Once they have reached a certain purchase volume, they are happy to see their purchase price automatically reduced. As long as dynamic prices are not unfair to the customer and are transparent, they have a positive influence, even adding value for customers, and thus represent an advantage in e-commerce.

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The disadvantage of dynamic pricing arises from the definition of possible influencing factors. For example, if a different price is charged for MacBook users than for PC users, or if a price difference is made between mobile and desktop users, this can lead to very negative sentiment among customers, as they consider this dynamic pricing to be unfair. This price change usually has a negative impact on the customer and thus also on the company's brand. It is precisely for this reason that dynamic pricing has gained a rather negative image.

➔ Whether dynamic pricing is an advantage or a disadvantage depends on the factors that influence dynamic pricing.

Example of dynamic pricing at TUI in emails

In the travel industry, it is common for prices to change constantly. This applies to flights, hotels, and rental cars. It usually depends on occupancy rates. If these are low, discounts are offered and prices fall. If occupancy rates rise again, prices increase. This means that prices can change by the minute. It is therefore important that prices are kept up to date both on the website and in emails so that there are no discrepancies. With emails in particular, several hours or even days can pass between sending and opening, which can lead to confusion when the website is opened. That is why TUI uses dynamic pricing in its email marketing.

TUI newsletter with dynamic price adjustment

Personalization in the context of dynamic pricing

Personalization is about addressing customers individually and ensuring they have a positive customer experience. Dynamic pricing can help achieve this if it is calculated to the customer's advantage.

Conclusion: Dynamic pricing can optimize the customer experience

When used correctly, dynamic pricing can be a blessing. Your customers won't get any nasty surprises, but rather excellent service. However, if you want to increase your profits at any cost, this can quickly have a negative impact on your image and long-term success. Overall, however, it can be said that, especially in industries with strong price fluctuations, such as the travel industry, there is potential in dynamic price adjustment that should be exploited to create a better customer experience in e-commerce while simultaneously increasing KPIs.