Int. J.

Production Economics 277 (2024) 109405

Contents lists available at ScienceDirect

International Journal of Production Economics

journal homepage: www.elsevier.com/locate/ijpe

Dynamic pricing for perishable goods: A data-driven digital

transformation approach
Tahir Abbas Syed a , Haris Aslam b,* , Zeeshan Ahmed Bhatti c , Fahad Mehmood d, Aseem Pahuja a
a
Alliance Manchester Business School, The University of Manchester, United Kingdom
b
Leicester Castle Business School, De Montfort University, Leicester, United Kingdom
c
University of Portsmouth, United Kingdom
d
EM Normandie Business School, Métis lab, Paris Campus, France

A R T I C L E I N F O A B S T R A C T

Keywords: In supermarkets, rapid pricing adjustments are crucial due to the short shelf life of products. Adopting a multi-
Data-driven digital transformation case study approach, this study examines the application of dynamic pricing strategies for perishable goods
Dynamic pricing through the lens of a data-driven digital transformation (DD-DT) approach. We introduce a three-phase model of
Perishable food
DD-DT for dynamic pricing: initiation, facilitation, and strategic adaptation. In the initiation phase, we identify
Supermarkets
essential frameworks for robust data collection and analytical processes, which form the backbone of informed
pricing decisions. During the facilitation phase, the study integrates sophisticated algorithms and real-time an-
alytics to process and interpret the collected data, facilitating its seamless integration into pricing strategies. The
strategic adaptation phase is critical as it focuses on the ongoing refinement and enhancement of pricing stra-
tegies, enabling supermarkets to adapt swiftly to market fluctuations and consumer behaviour changes. By
presenting a comprehensive DD-DT framework, this research significantly augments the existing literature on
dynamic pricing and offers actionable insights for practitioners seeking to optimize pricing strategies in a
digitally transforming marketplace.

1. Introduction and research shows that grocery retailers are in a strong position to
curtail this food waste (De Moraes et al., 2020; Sanders, 2024).
The global retail sector exceeded 28 trillion U.S. dollars in sales Dynamic pricing, an approach to adjust prices based on product
during 2023 (Retail Global Market Report, 2024). Projections indicate characteristics, such as inventory levels, product shelf life, and con-
this figure will surpass 30 trillion U.S. dollars by 2024 (Sabanoglu, sumer purchasing patterns (Chen and Chen, 2015), has been argued as a
2023). Despite the industry’s substantial revenues, retail margins fluc- critical revenue management strategy to reduce food waste and improve
tuate between 0.2 and 6.1 percent (Holweg et al., 2016). One significant profitability in grocery retailing (Yang et al., 2022; Keskin et al., 2022;
factor contributing to these narrow margins is waste, particularly con- Scholz and Kulko, 2022). A large body of research has focused on
cerning perishable goods. The United Nations Environment Program’s optimizing pricing strategies for revenue maximization, such as Bitran
(UNEP) Food Waste Index Report 2024 revealed that, in 2024, more and Mondschein (1997) proposed periodic pricing, Chew et al. (2014)
than a billion tons of food were wasted globally, with over 12% of waste test a heuristic based pricing solution, and Cohen et al. (2018) examine
attributed to grocery retailers (UNEP, 2024). In the United States alone, the role of data sampling. Modern digital technologies such as, internet
grocery retailers are responsible for approximately ten percent of the of things, artificial intelligence, distributed ledger technologies, and
total food waste, equivalent to a staggering 43 billion pounds annually multi-cloud environments, have made it possible for the retailers to
(Vadakkepatt et al., 2021; Weigel, 2020). This waste worsens the food capture and analyze large amounts of data (Li, 2020). Recent literature
shortage to the extent that 600 million people worldwide are expected to focuses on the role of digital technologies and data integration in opti-
face hunger by 2030 (United Nations, 2024). Food waste management is mizing dynamic pricing (Xin et al., 2024; Yang et al., 2022). Abbasi et al.
thus a critical aspect of grocery retail performance (Kayikci et al., 2022) (2016) reported that large retailers collect tens of exabytes of

* Corresponding author.
E-mail addresses: [email protected] (T.A. Syed), [email protected] (H. Aslam), [email protected] (Z.A. Bhatti), Fmehmood@em-
normandie.fr (F. Mehmood), [email protected] (A. Pahuja).

https://doi.org/10.1016/j.ijpe.2024.109405
Received 20 January 2024; Received in revised form 6 September 2024; Accepted 7 September 2024
Available online 11 September 2024
0925-5273/© 2024 Elsevier B.V. All rights are reserved, including those for text and data mining, AI training, and similar technologies.
T.A. Syed et al. International Journal of Production Economics 277 (2024) 109405

transactional data every year. Despite the wealth of information on Schallmo et al., 2017). The digital transformation of firms results in
optimal dynamic pricing frameworks and the advanced capabilities of data-driven automated business processes that are augmented by digital
collecting and analysing data, how can grocery retailers implement this technologies (Hanelt et al., 2021). For traditional enterprises, DD-DT is
digital transformation effectively remains an important question (Yang no longer optional but essential for survival in today’s fiercely
et al., 2022). Previous studies, such as Yang et al. (2022), Keskin et al. competitive landscape (Trischler and Li-Ying, 2023; Yonghong et al.,
(2022), and Sanders (2024) etc. provide compelling evidence of the 2023).
potential benefits of dynamic pricing models using data-driven ap- DD-DT entails harnessing data and technology to instigate profound
proaches. However, these studies mostly employ simulation-based shifts in an organization’s operational practices and foundational busi-
methodologies and the controlled environments in these studies limit ness structure (Bag et al., 2023). Recent advancement in DD-DT research
the practical application and operationalization of these strategies in the has contributed to theory development from various aspects including
complex, real-world settings of grocery retail. By relying solely on the antecedents, outcomes, and underlying mechanisms of DD-DT.
simulations, researchers may inadvertently overlook critical factors or Table 1 highlights some important contributions in the area. The
assumptions that could influence the practical implementation of dy- building block of DD-DT is the unprecedent availability of data made
namic pricing strategies. This underscores the need for further research possible by the IT infrastructure in place (Gabriel et al., 2015; Gregory
to explore practical, context-specific approaches for applying dynamic et al., 2015, 2018). The data in the form of equipment, production, and
pricing mechanisms, ensuring that retailers can fully leverage it for sales data along with digital platforms such as cloud, hardware, and
enhanced decision-making and profitability. software (Coreynen et al., 2020) contributes to the refinement of busi-
In this study, we adopt a data-driven digital transformation (DD-DT) ness processes (Jin et al., 2020), fortifying capabilities in information
lens to understand the implementation of AI-based dynamic pricing acquisition, resource reconfiguration, integration, and the creation of
models in grocery retail. DD-DT refers to the integration of digital fresh opportunities for value generation (Nambisan et al., 2017; Tian
technologies and data analytics into every facet of an organisation’s et al., 2023). This new environment breeds new (heightened) customer
operations to fundamentally improve performance, enhance decision- expectations, new competition, new regulation, and new technologies
making, and innovate business processes (Grover et al., 2018; Someh (Someh et al., 2023). The tools and techniques such as machine learning
et al., 2023; Wixom and Ross, 2017). In the context of grocery retail, make the data assets a key unit of organizational learning, adaptation,
DD-DT offers a crucial perspective for understanding the implementa- and value creation (Gregory et al., 2021). The digital technologies allow
tion of dynamic pricing models. By prioritising data as a strategic asset, organizations to implement data-driven solutions in a manner that was
DD-DT allows to explore how grocery retailers harness real-time insights not possible in the past (Gölzer and Fritzsche, 2017; Zhu and Li, 2023).
and predictive analytics to tailor pricing strategies that respond to im- In the digital economy, the lines between production and consumption
mediate market demands and consumer behaviours. Specifically, we become blur and consumers may consume and produce simultaneously.
investigate the following research question. Furthermore, the value of the product increases manifold for the user as
the organization learns from the data it gathers from its users (Gregory
RQ. How data-driven digital transformation can be implemented for a
et al., 2021). Finally, effective implementation of DD-DT is related to
dynamic pricing model in the retail sector?
positive performance outcomes for the organizations (Bag et al., 2023;
This research contributes significantly to the development in the Chaudhuri et al., 2023; Papanagnou et al., 2022).
field of DD-DT in two key respects. Firstly, we advance the operation-
alization of DD-DT as a potential lens for examining the complexities of
integrating digital technologies in the retail sector. Our study system-
Table 1
atically outlines the components of DD-DT and connects them with the
Theoretical development in data-driven digital transformation.
operational challenges and opportunities of dynamic pricing, contrib-
uting to a more nuanced understanding of digital transformations in Study Findings
retail. Second, this study contributes to the development of a strategic Abbasi et al. (2016) Organizational decision-making has evolved from
framework that can be used by grocery retailers to assess their readiness relying on expert experience to leveraging data-
driven insights, marking a paradigm shift in
for digital transformation and to strategize the implementation of dy-
foundations for strategic choices.
namic pricing models. This framework helps bridge the gap between Wixom and Ross (2017) Data is more than information—it’s a strategic asset
theoretical digital strategies and practical applications and offers valu- shaping decisions and fostering innovation.
able practical insights into how grocery retailers can leverage DD-DT to Monetizing it directly or indirectly unlocks economic
implement dynamic pricing effectively. Our findings outline three value, driving success in the digital era.
Nambisan et al. (2017) Data and digital technologies help strengthening
distinct phases: initiation, facilitation, and strategic adaptation,
competencies in gathering information, reshaping
providing vital insights for practitioners navigating the complexities of resources, integrating, and fostering new avenues for
implementation. This, in turn, promises to sustainable advantages of generating value.
waste reduction, operational efficiency and customer satisfaction, Gregory et al. (2018) and The widespread use of digital technologies in daily
fostering a more competitive and dynamic retail environment. Gabriel et al. (2015) life generates an overflow of data.
Peppard (2020) IT in organizations have transformed from a
functional entity to an integral part of intra and inter-
2. Literature review organizational networks, marking a profound shift in
its role and significance.
2.1. Data-driven digital transformation Gregory et al. (2021) The product’s value to individual users amplifies as it
learns from the data it gathers. This symbiotic
relationship underscores the growing significance of
In the 21st century, data has emerged as the paramount organiza- user data in enhancing product utility.
tional asset, serving as the fuel to information economy (Gregory et al., Hanelt et al. (2021) Digital transformation in the organizations gives rise
2021; Varian, 2014). The digitization of business and society combined to data-driven, virtual, and automated business
processes.
with increased digital data availability has allowed firms to embark
Clough and Wu (2022) Decentralized structures impact value capture
upon embedding data-driven initiatives to maximize the outcomes of through data-driven learning. AI can increase an
their digital data assets (Grover et al., 2018; Someh et al., 2023; Wixom entity’s value share, affecting user perception.
and Ross, 2017). Data enables digital transformation through modifi- Internal data dynamics differ from user base
cations in operations, products, and the entire business model of the dynamics, influencing strategic considerations for
multi-faceted entities.
organizations, aligning with shifting market dynamics (Frau et al., 2022;

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2.2. Data-driven digital transformation (DD-DT) for dynamic pricing in practice and uncover the nuanced processes, challenges, and successes
grocery retail associated with these implementations. This approach will not only
enrich the existing academic discourse but also provide practical in-
Pricing is one of the most effective tools to regulate demand in the sights for retailers looking to embark on or optimize their digital
short run (Feng, 2019). Failure to sell perishable products prior to the transformation journeys with DD-DT.
expiry hurts the profitability of grocery retailers while contributing to
food waste. Dynamic pricing is an effective tool to control such waste. It 3. Methodology
is a revenue management technique that enables firms to increase rev-
enue by matching supply with demand while responding to shifting We implemented an exploratory research approach as the theories
demand patterns, and segmenting customers (Chen and Chen, 2015). develop through the methodical creation and conceptualization of data.
Foundations for dynamic pricing are laid out in the economic theory An exploratory case study of three UK grocery supermarkets was un-
which suggests that a seller can capture greater value from customers dertaken, supplemented by the interviews with one consultancy firm
when the seller can discriminate in prices based on customer’s willing- that offer technical services to implement data-driven dynamic pricing
ness to pay (Clough and Wu, 2022). in supermarkets and online grocery stores. Section 3.1 describes the
If a seller charges the same price to all customers, those with higher research context, followed by Section 3.2 that justifies the choice of
willingness to pay accrue a greater consumer surplus from the purchase. method. Finally, Section 3.3 outlines the data collection and analysis
Charging different prices based on individual willingness to pay though procedure.
is often difficult, as accurately distinguishing customers is challenging
(Clough and Wu, 2022). However, firms like Amazon and Uber have 3.1. Contextual setting
shown that precise demand data, coupled with sophisticated data pro-
cessing technologies, can unlock the potential for dynamic pricing (Li UK grocery retail continues to record the strongest growth and a
et al., 2023). Amazon fresh for example changes food prices on an sharp rise in competitive forces driven by modern grocery retailers. By
average every 10 min to improve its margins (Keskin et al., 2022). We 2023, the total value of the UK grocery sector is projected to grow 14.8
argue that given the availability of data and digital technologies such as percent to $273 billion (£213 billion) with an expected increase of 52
artificial intelligence (AI), data can derive digital transformation for the percent online grocery shopping (Hellerstein et al., 2019). In super-
application of dynamic pricing. markets, food waste is frequently caused by the spoilage of perishable
A number of studies explore the optimization of data-driven dynamic foods, with excessive inventories, that must be discarded once the
pricing in a grocery retail environment. For example, in a simulation- “sell-by-date” has passed (Wang and Li, 2012). The Waste and Resources
based study, Yang et al. (2022) proposed an automated system-based Action Programme (WRAP) reported that UK retailers wasted 277,000
cloud that integrates AI, customer communication, and sensor data tonnes of food in 2018 (WRAP, 2020). UK supermarkets face reputa-
leading to a quality-based pricing strategy resulting in lower prices, tional and legal pressures to improve waste-reduction mechanisms
increased demand, and lower food waste. Keskin et al. (2022) developed following the United Nation’s sustainable development goal (12.3) to
a data-driven dynamic pricing framework for retailers selling perishable “halve per capita global food waste”, including waste in retail sector
products showing significant improvement over previous studies. Scholz (UNEP, 2024). In recent years, many UK supermarkets have imple-
and Kulko (2022) investigated the relationship between freshness and mented or test-tried data-driven DT to reduce food waste and offer
consumer ‘willingness to pay’. Their model based on static and dynamic competitive pricing, provide a compelling context to investigate our
pricing strategies suggested that freshness is a significant factor affecting research questions.
the consumer’s disposition to pay and consumer sensitivity towards the
price. They also observed a food waste reduction of up to 53.6% and a 3.2. Multiple case study approach
revenue increase of 10% after the implementation of a data-driven dy-
namic pricing strategy. Kayikci et al. (2022) developed a dynamic The infancy of research on data-driven DT calls for an exploratory
pricing model using real-time IoT sensor data. The results of their study study and studies (George and Bennett, 2005; Yin, 2009) suggest that
showed that optimal decisions about the price, discount rates, freshness exploratory research through the case study method is the appropriate
scores, and replenishment boost both sales and profitability while approach when a phenomenon is at the developmental stage and its
simultaneously reducing waste. These studies highlight the potential of variables have not been properly identified. Case studies allow for a
data-driven digital technologies to improve grocery retailers’ profit- thorough analysis of a phenomenon in a real-life situation and can
ability and food waste. Recent advancements in digital technologies, provide in-depth insight (Yin, 2009). They enable the elicitation of rich
such as AI, have brought forth novel applications of data applications in data through a variety of techniques, including interviews, observations,
all spheres of life. and document analysis, allowing for cross-validation (George and Ben-
Despite the growing body of literature exploring the optimization of nett, 2005).
data-driven dynamic pricing in grocery retail environments, there re- A dominant trend in IS research is adopting a single case study
mains a substantial gap in our understanding of how data can drive approach. Notwithstanding the wealth of insights in a single case design,
digital transformation specifically for implementing dynamic pricing multiple case approaches enable to verify that the findings are not
strategies effectively. The practical application and operationalization merely the result of idiosyncrasies of the research setting (Cavaye,
of these strategies in the complex, real-world settings of grocery retail 1996). A multi-case research can augment external validity, aids trian-
are not thoroughly addressed. The presence of data and digital tech- gulation, and can help create more robust and testable theories than
nologies does not guarantee successful digital transformation. There are those based on single cases (Eisenhardt, 1989; Yin, 2009). We adopt a
numerous challenges associated with integrating advanced data ana- multi-case study approach based and identified three UK grocery su-
lytics and AI into existing retail systems, including issues related to data permarkets that have implemented data-driven dynamic pricing and one
quality, system interoperability, and the continuous updating of algo- consultancy firm that offer technical services to implement. The three
rithms to adapt to market changes (Meena et al., 2024). Moreover, the case firms involved in the study met the following criteria: (i) repre-
organisational readiness to embrace such transformative technologies sented grocery retail sector; (ii) physical/online presence in UK market;
and the ability to sustain these changes strategically are also critical and (iii) implemented data-driven pricing approach. Table 2 provides an
factors that require deeper investigation. Therefore, we investigate overview of the respondent firms. We also interviewed two respondents
multiple case studies within the UK grocery sector to examine how from a consultancy firm that specializes in data-driven digital trans-
different grocery retailers implement dynamic pricing strategies in formation and dynamic pricing models for retailers. The inclusion of a

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Table 2 Table 3
Characteristics of firms. Data collection overview.
Cases Firm profile Data Description

Firm Established chain in urban areas, premium products, online platform. In Interviews Position of Profile of Interviewees Representative
A business for 102 years, 450,000 employees, £64.76 billion revenue, 6900 Interviewees firm
stores in the UK.
Systems and 10 years in system Firm A
Firm B Nationwide, cost-effective, in-house brands. 72 years in business, 165,000
Operations management and
employees, £22.9 billion revenue, 633 stores in the UK.
Manager operations, expertise in
Firm C Locally sourced, sustainable products, community focused. 153 years,
optimizing business
189,000 employees, £32.4 billion revenue, 1424 stores in the UK.
workflows and
Firm UK-based Consultancy specializes in data-driven digital transformation and
implementing system
D dynamic pricing models for retailers. 12 years in business and has over 250
upgrades.
employees. Expertise in data science, digital strategy, and retail to optimize
IT Executive 8 years of experience in IT, Firm A
pricing through AI and machine learning.
skilled in network
management, data security,
and technical support
consulting company as a key informant is justified by its unique vantage services.
point in observing cross-industry trends and best practices, which can Business Support 5 years in business support Firm A
enrich the understanding of digital transformation in retail contexts. Officer role, adept in
This approach was taken to gain a comprehensive 360-degree perspec- administrative tasks, client
relations, and internal
tive, as the consulting firm would have an aggregate view across mul-
coordination.
tiple clients. This methodology aligns with the approaches used by Teach Lead Senior engineer with 12 Firm B
Sarker et al. (2012), Tong et al. (2022), and Pattanayak et al. (2024). Engineer years in tech industry,
specialized in software
development and project
3.3. Data collection management.
Stores and 7 years in retail Firm B
Procurement management and
We collected data from multiple sources that were concurrently Officer procurement, expertise in
underway as well as retrospective data that reflected the evolution of inventory control, vendor
past activities. Our data collection spanned four months and drew upon negotiations, and supply
two data collection methods. First, we conducted semi-structured in- chain logistics.
Digital 3 years of experience with a Firm B
terviews with 11 senior managers and leaders who had an active role in
Operations and focus on digital strategy,
data-driven digital transformation initiative. Our key informants Data Analyst data analysis, and
included senior managers from IT, operations, and procurement and optimizing operational
sales areas of expertise. To gain access to our key respondents, we efficiencies through
technology.
engaged with three senior managers through LinkedIn, a professional
Operations Lead Operations leader with 9 Firm C
networking platform. Following this initial contact, a snowball sampling years of experience, skilled
method was employed, wherein these contacts provided referrals that in process optimization, and
enabled us to engage with additional respondents, thereby ensuring a strategic planning.
rich and relevant pool of participants for our study. Some of our in- Data Science 7 years of industry Firm C
Team Lead experience, involved in
formants represented teams who oversaw developing business analytics
several AI initiatives in the
(e.g., Power BI/Tableau analytics for inventory manager) and imple- financial industry, and data
mented data-driven dynamic pricing integration in superstores. Inter- analytics solutions applied
view questions probed specific initiatives that were established as a part to dynamic pricing projects.
Automation 9 years of experience in Firm C
of the company’s data-driven transformation effort? Regarding the
Coordinator automation projects, AI
specific initiative, understanding the main considerations for imple- algorithms development
mentation of data-driven dynamic pricing of perishable foods? What and implementation,
were the key enablers and barriers in this initiative? Discussing the past developing customized
and current state of data derived in this initiative. What underlies these solution for several
industries in manufacturing
changes? and understanding the implications of the data-driven dy-
and service sectors.
namic pricing initiatives. Digital 15 years of industry Firm D
Second, we collected artifacts, such as reports, official announce- Optimization experience. Actively
ments, corporate messages, presentation decks, and company project- Lead engaged in data-driven
value creation projects,
related articles. Overall, the supporting evidence shaped documents
experience of AI in
from case firms that contained information about organizational struc- automation, experience in
ture, roles, strategy and planning activities, advancements in data and selecting algorithms, data
algorithms, employee outreach, goals, metrics, and reported outcomes. dependency requirement
The artifacts also provided insight into the knowledge and skills of analysis, and understanding
problems.
groups and change management practices. We particularly investigated
Manager AI and 6 years of automation Firm D
the information related to the implementation of data-driven trans- Data Science experience, wide variety of
formation and the data analytics tools deployment. Table 3 presents an projects including dynamic
overview of our data collection efforts. pricing, experience on large
scale AI deployments.
Secondary Credible reports published related to the implementation and
4. Data analysis and findings data consequences of DD-DT in retail operations.

4.1. Data analysis and theorizing approach

To ensure multiple evidence, we conducted (1) content analysis of

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the interviews, (2) review of the supermarket’s reports, official an- Following the comparative case results, Table 4 identifies different
nouncements, internal dynamic pricing-related documents, and (3) levels of implementation approaches our case firms.
comparison of these data sources. Interview transcripts were coded and
analyzed using QSR NVivo10©, which helped to systematically orga- 4.2.1. Initiation of data-driven DT execution
nize, analyze, and synthesize the data. The initiation of data-driven DT execution theme emphasizes the
We conducted qualitative data analysis using a systematic approach actions and decisions that start the digital transformation process. It
(Miles and Huberman, 1994) and engaged in a dynamic, iterative pro- includes identifying key drivers for transformation, setting initial goals,
cess that combined categorizing, coding, and synthesizing data. Our first and mobilizing resources. This theme underscores the importance of a
step involved open coding, where we carefully dissected the interview strong start, laying the groundwork for successful implementation.
transcripts, allowing us to form initial categories. These categories were Embracing data-driven value in supermarkets is explained by our
grounded directly in the language used by participants, ensuring to data in terms of three critical factors. The first factor is defining data
preserve the intended meaning and perspectives. During this phase, we assets, which is defined as the identification and recognition of data
identified patterns based on the frequency of comments, the common- assets across different parts of supermarkets to gain access to valuable
alities and nuances within responses, and any notable differences. These data. To create business value from data collected, valuable data assets
patterns were instrumental in informing our continuous refinement of have to be identified and defined.
themes and sub-themes. We adopted a comparative method throughout
“There are lots of variables that affect dynamic pricing, like think about
our analysis, aligning new data with existing codes to iteratively refine
seasons, and calendar, holidays, even the time of the day. We need to
our thematic framework. To ensure the reliability of our coding, we
identify and use these data points to make an effective decision-making” –
engaged independent coders who categorised interview quotations into
Systems and Operations Manager (Firm A).
the pre-established themes and sub-themes. This process yielded an
inter-coder reliability rate of 87.82%, reflecting a high level of agree- The data owned and managed by different units in superstores
ment. To address any discrepancies, the authors conducted a series of require to be collated, breaking down functional boundaries for data
discussions, resulting in the unanimous resolution of differences and the access and sharing. For instance, shared data customer preferences and
strengthening of our thematic interpretations. shopping behaviour data from the stores, inventory and procurement
Subsequent to the initial coding, we developed second-order themes. data from the operations, and product related information will be
These were more abstract and conceptually driven, crafted to encapsu- required to pave the way for an effective pricing model that aligns with
late initial categories while reaching for broader theoretical signifi- changing customer behaviours and expectations.
cance. The synthesis of these second-order themes into aggregate
“[For implementing data driven dynamic pricing model] we integrate
dimensions followed the methodological guidance of Gioia et al. (2013),
data from all parts of our store, such as product shelf life, stocks … and
ensuring that our final conceptual framework was both robust and
also data from market such as competitor pricing and demand patterns” –
reflective of the underlying data.
Digital Operations and Data Analyst (Firm B).
The use of secondary data played a complementary role in our
analysis to substantiate interview transcripts. We integrated data such as “Ethnographies, in terms of people and place, do really have an impact on
internal reports, market analyses, and digital transformation documents people’s buying habits and is a factor in deciding prices. You’d want to
from each case firm to construct comprehensive case profiles. These know the price of the food, the volume sold, the days from expiry … but
documents served a useful resource for the individual case analysis,
providing context and additional depth to the primary data collected
from interviews. For instance, to clarify the role of specific data assets, Table 4
such as customer databases or inventory management systems, and Summary of case-wise comparisons.
engagement metrics like customer interaction tracking or sales conver- Themes Levels of data-driven DT approach
sion rates, we used secondary data to verify and expand upon the in-
Lower level of data- Medium level of High level of data-
formation provided by interview participants to understand how the driven DT data-driven DT driven DT
data-driven insights integrated into their operational practices. The implementation implementation implementation
triangulation of interview data with these secondary data sources Initiation of Basic definition of Developing Advanced
enabled us to confirm the validity of our thematic analysis and to enrich data- data assets, initial engagement integrated system
the narrative of each case. driven DT data collection metrics, infrastructure,
Upon finalising the individual case studies, we performed a cross- strategies, intermediate data comprehensive data
establishing basic integration, asset management,
case analysis to draw comparative insights. This step was pivotal in
data infrastructure enhancing data strategic data
identifying common practices, shared challenges, and distinguishing quality and utilization for
characteristics between the case firms (Miles and Huberman 1994). By accessibility decision making
aligning our thematic findings with evidence from both the interviews Facilitation Basic economic Enhanced data Established
and the secondary data, we were able to ensure that our cross-case of data- analysis and legal stewardship and economic viability
driven DT awareness, initial compliance and advanced
analysis was both substantiated and robust. We created data structures compliance management, technical
(presented in next sections) to connect our data, the emerging measures, economic viability proficiency, robust
second-order themes, and the new aggregate dimensions, thus fundamental data assessment, compliance and
re-validating that the final concepts reflected our underlying data. governance developing legal governance,
technical mature data
proficiencies stewardship
4.2. Findings practices
Strategic Initial steps in Progressive Comprehensive
The analysis revealed several consistent themes in implementing adaptation strategic innovation strategic adaptation
of data- integration, early processes, with continuous
data-driven dynamic pricing cases, suggesting theoretical saturation
driven DT stage innovation integration of new improvement,
(Glaser and Strauss, 1967). Adopting a multiple-case-study approach efforts, preliminary technologies, advanced
allowed us to perform cross-case comparisons (Stake, 2006). We looked alignment with intermediate innovation systems,
for established practices across cases, and evidence of challenges, and business goals strategic alignment full alignment with
compared all cases to develop a comparative understanding of the and process long-term business
optimization strategies
implementing and manging data-driven dynamic pricing strategies.

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T.A. Syed et al. International Journal of Production Economics 277 (2024) 109405

also additional data like the time of year” – Digital Optimization Lead factors.
(Firm D).
4.2.2. Facilitation of data-driven DT processes
Our data identifies establishing engagement metrics as the second factor
The facilitation of data-driven DT processes theme focuses on the
and is defined as the setting to manage the price dynamics and defining
mechanisms and practices that smooth the progression of digital trans-
key performance indicators of data driven systems. The availability of
formation. It covers aspects like process optimization, overcoming
novel data sources and analytics methods, i.e., visualizations, allow
implementation challenges, and providing ongoing support. The
supermarkets to establish metrics for setting discount boundaries and
emphasis here is on creating an environment conducive to change,
performance management. Superstore retailers have to make decision to
ensuring that each step in the transformation is as efficient and effective
set and manage the price dynamics and the margins of price discounts.
as possible. Table 6 provides an overview of codes in this theme.
“For the data driven dynamic pricing model to make sense of associations The data highlights four broad factors which is a testament of the
amongst the data inputs, the model would require objectives to work to- unique experiences of individual participants, and the AI developments
wards” – Automation Coordinator (Firm C). they have worked on. The first facilitating factor identified through the
data is explicating the economic viability which is defined as the ability of
“Your objective is to reduce waste, but you want to be consumer-first … it
the AI implementation to generate enough returns for supermarkets to
might be to make sure a product is available to sell at all times … or could
justify the costs incurred. Additionally, the participating supermarkets
be a compromise and that’s something supermarkets will have to decide”
must be fully aware of the value that the data driven pricing model can
– Stores and Procurement Officer (Firm B).
add. Participants highlighted that it is difficult to convince the stake-
Supermarkets may realize that they could no longer rely on the holders of the potential advantages.
traditional metrics, such as number of products sold, revenue, or profit,
“Getting supermarkets on board in the first place, getting a proof of
and needed new metrics to gauge product performance, customer
concept is the hardest step” – Operations Lead (Firm C).
engagement and forecast growth. “You’d have to agree performance
measures with the supermarket …” – Manager AI and Data Science (Firm “The decision whether supermarkets would accept it or not, that depends
D). Respondents felt the frequency of discounts would need to depend on the cost-benefit analysis” – Automation Coordinator (Firm C).
upon business or store requirements, rather than simply an output of the
This is consistent with the findings in literature that technology
data-driven model. Likewise, a retailer would be heavily involved in the
related investments can be difficult to implement because of the delay
deployment plans for a national roll-out of the data-driven models.
between investment and the tangible benefits (Lee and Shin, 2020).
“Retailers need to decide what level of granularity to go into … price once “What will the technology cost to put in place? And what is the differential
every few hours or maybe just at the end of the day” – Business Support between what they sell it for today, and what they could sell it for …” –
Officer (Firm A). Systems and Operations Manager (Firm A).
The second factor identified by the data is compliance and legal
“Run a pilot across 10 stores … and then make a model that’s distributed
governance defined as the legal and regulatory boundaries under which
to all different sites, but you just need the supermarkets to be on board” –
the dynamic pricing model operates to ensure lawful and ethical man-
Digital Optimization Lead (Firm D).
agement of digital operations. Interviewees described how the law, or
Finally, our data shows integrated system infrastructure, defined as the contractual agreements with specific vendors, would prevent certain
process of aligning and integrating systems for constant connectivity and price fluctuations. “If price increases from when a customer picks up their
data capture, as the third implementation factor for data-driven dy- carrots … that’s illegal” – Systems and Operations Manager (Firm A).
namic pricing model. An integrated system with constantly connected Some prices of produce are regulated by the government so that also
data points help understanding changing customer behaviours and ex- adds to the complexity of the pricing model.
pectations better for price decisions. “New and old [software/hardware]
“… unless the pricing structures are also created with a particular vendor
systems working in alignment is essential to capture the real-time data
or producer. There might be rules about how a product can’t be sold for
changes and adjusting prices” – IT Executive (Firm A). Supermarkets
more than £1.30” – Digital Operations and Data Analyst (Firm B).
combine data from multiple sources to build interactive visualizations,
predictive and prescriptive models that help to generate new knowledge A common concern with the development of any AI model is the
for informed decisions. With increasing degrees of digitalization of privacy and confidentiality of data. Dynamic pricing model is no
processes, the execution of a larger proportion of organizational tasks different and according to the interviewees all stakeholders need to
became data-driven, i.e., automated inventory scheduling and product work together to address this concern. “[This involves] having the right
ordering. regulatory frameworks so that firms don’t abuse data in an unethical or
unlawful way” – Automation Coordinator (Firm C). The ethical and
“This [data driven transformation] included integration with existing
privacy concerns can arise during any stage of the lifecycle of the AI
systems in supermarket stores and tools to enable the dynamic pricing
implementation, from data collection to the actual application. Mahine
model and it is not limit to pricing only but overall supermarket opera-
learning algorithms are susceptible to bias depending on any latent
tions, such as integrating suppliers to schedule our stocks, inbound and
biases in the training data.
outbound logistics …” – Operations Lead (Firm C).
“[Another issue is the] bias in the data collection, and that could cause
Analysis of the participants’ responses also identified complemen-
problems quite early on … I think the temptation is to just get easy data …
tary technologies, i.e., electronic price displays, that aid robust
is it going to penalise?” – Operations Lead (Firm C).
communication of the data-driven pricing. Handheld scanners and mo-
bile apps were also suggested to provide a personalised pricing experi- The third factor identified by the participants was data stewardship
ence that could improve customer experience. which is defined as the effective management and utilization of data,
emphasizing the importance of data accuracy, security, and governance
“To provide a smarter shopping experience, we used better displays ….
in driving digital initiatives. Due to the large product portfolio and
small displaying screens, scanners, smart shopping trolleys maybe … in
customer flow in supermarkets, making sure of high quality of data for
the trolly and it showed the price of contents” – Digital Operations and
dynamic pricing model is vital. Contributors mentioned apprehensions
Data Analyst (Firm B).
around the volume of data that would have to be collected, how it would
Table 5 presents the data structure diagram for implementation be collected, and the state of the data found. They also emphasized that

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T.A. Syed et al. International Journal of Production Economics 277 (2024) 109405

Table 5
Overview of data structure for the initiation of data-driven DT.

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T.A. Syed et al. International Journal of Production Economics 277 (2024) 109405

Table 6 “Extreme events, like COVID lead to unpredictable demand. Anything

Overview of data structure for the facilitation of data-driven DT. where future demand doesn’t look like history could cause huge prob-
lems” – Technical Lead Engineer (Firm B).
The final factor identified was the capability enhancement defined as
developing and nurturing the necessary skills and competencies within
the organization to support and sustain digital transformation efforts,
acknowledging the critical role of human capital in leveraging digital
technologies. Data scientists are in huge demand and therefore recruit-
ing and retaining them becomes a challenge. Participants referred to a
skills gap for data scientists, and how this could impact such a large-
scale project.
“Have you got enough people to implement such a big project? … There
are not many people who know how AI works” – Systems and Opera-
tions Manager (Firm A).
“You need the data scientists who can create the algorithms …” – Busi-
ness Support Officer (Firm A).

4.2.3. Strategic adaptation of data-driven DT approach

This theme explains how data-driven DT approach is comprehen-
sively adopted, ensuring that it is strategically aligned, operationally
integrated, technologically advanced, and continually evolving to meet
the dynamic needs of the business. It involves aligning digital initiatives
with business strategies, ensuring that technology adoption is not just a
standalone effort but is intrinsically linked to the organization’s broader
goals and objectives. This theme underscores the need for a continuous
improvement that binds the DT to the organization’s long-term vision
and mission. Table 7 provides an overview of codes in this theme.
The importance of creating a strategic fit in supermarkets is high-
lighted in the data in the form of two factors. The first factor is strategic
integration which is defined as the coordination and alignment of DT
initiatives with the overall business objectives and strategy. DT initia-
tives in the supermarkets create operational synergies in terms of cross-
functional collaborations, information sharing, resource optimization
and improving flexibility.
“The communication from top management has to be clear so that
everyone is on the same page.” – Automation Coordinator (Firm C).
“[DT initiatives] transform existing processes into a more responsive and
efficient organization.” – Digital Optimization Lead (Consultancy Firm
1).
The second factor highlighted through interviews is the innovation
and continuous improvement which is defined as fostering an environ-
ment that encourages innovation and supports digital upgrades and
enhancements. In the supermarkets this translates to dealing with DT
initiatives as evolutionary processes that aligns the technological inno-
vation with the mission and vision of organization. This was also
exhibited in the responses of the interviewees. “The skills required for
assessing performance, identifying training and development requirements,
and planning need to be thoroughly defined with a strong commitment to
values and vision.” – Digital Operations and Data Lead (Firm B).
the data might have to be restructured before it could be used.
“[A big challenge is] the volume of data. You are dealing with huge
4.3. DD-DT framework
datasets. And the data might not be clean, it’ll need to be transformed …”
– Business Support Officer (Firm A).
We integrated our identified themes to provide a holistic under-
“Data storage and data transfer … you need fast data transfer” – standing of various aspects of a DD-DT strategy in Fig. 1. At its core, it
Technical Lead Engineer (Firm B). ensures that any transformation is economically justifiable, balancing
potential revenue gains against the costs involved. A key element is the
Timely evaluation and structuring of the data is critical to the success
identification and classification of data assets, which is crucial for
of the dynamic pricing model. This involves incorporating quality con-
developing effective strategies. These data assets include various types
trol tools to manage changes in the data and maintain model accuracy.
of information gathered from stores, products, customers, and the
“If the data changes, the demand pattern changes, then data used to train environment. The data serves as the foundation for developing pricing
the model will need to be updated …” – IT Executive (Firm A) strategies and enhancing user interactions, ensuring that the organiza-
tion remains competitive and customer centric. Metrics to gauge user

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T.A. Syed et al. International Journal of Production Economics 277 (2024) 109405

Table 7 4.4. Robustness test

Overview of data structure for the strategic adaptation of data-driven DT.
Triangulation of data was used to improve the rigour of the study, by
enhancing the range of data used (Flick, 1992). This method involved
cross-verifying data from various sources, including credible published
reports, to substantiate claims and provide strong arguments for the
themes identified. The use of secondary data was motivated by the need
to validate our primary data findings and to present a comprehensive
understanding of DD-DT in supermarkets. Artifacts such as industry
reports and press releases provide context and external validation for
themes identified through interviews. This approach helps to ensure that
our conclusions are grounded in broader industry trends and not just
limited to the perspectives of our interview participants.
To compare and validate our interview findings, we conducted a
thorough review to identify credible reports on the implementation and
consequences of DD-DT in retail operations. The search strategy
involved using specific key terms to ensure the relevance and compre-
hensiveness of the sources. We used terms such as “dynamic pricing in
retail,” “AI impact on retail,” “data-driven transformation in super-
markets,” “retail digital technology implementation,” “data usage in
retail,” and “retail efficiency through AI.” We began our search by
accessing industry-specific repositories, including Statista, IBISWorld,
Gartner, Euromonitor International, McKinsey Insights, and MarketRes
earch.com. The objective was to locate detailed reports that provide
insights into the practical implementation and outcomes of DD-DT
projects in the retail sector. 178 reports and articles were initially
identified through database and manual searches. 58 duplicate records
were removed, and 104 reports were excluded for not meeting the
criteria of relevance or credibility. 16 full-text were assessed in detail
and 13 articles were excluded due to insufficient data on DD-DT
implementation, lack of comprehensive analysis, or irrelevance to
retail operations. 3 comprehensive and credible reports were selected
for inclusion. These reports were the McKinsey Global Institute (2017),
the KPMG (2020), and the Wasteless.com. (2019).
Once these reports were shortlisted, we started the process of vali-
dating interview themes in our findings. We extracted key insights and
data points from the reports relevant to our research themes. These
included details on dynamic pricing inputs, AI and data driven effi-
ciencies, and benefits of dynamic pricing in waste management. This
enabled a systematic comparison between the secondary data and our
interview findings. We looked for alignment or discrepancies between
the data sources and highlighted instances where the secondary data
corroborated our interview findings. For example, when interviewees
mentioned the variety of data inputs necessary for dynamic pricing, we
referenced the McKinsey Global Institute report (2017), which high-
lighted similar inputs, such as competitor pricing and weather condi-
tions. Similarly, the KPMG study (2020) quantified the impact of AI on
engagement and performance are established to track the success and retail operations, noting that 85% of retailers acknowledged AI’s po-
impact of the implemented strategies. This measurement helps in tential to enhance efficiencies and profit margins. This quantitative
refining approaches and ensuring that the organization’s objectives are evidence resonated with the sentiments expressed by our interview
met. Technical expertise is recognized as an indispensable pillar, participants regarding the transformative impact of data-driven tech-
requiring ongoing development in data analytics skills and a competent nologies. A press release published by Wasteless.com (2019) was also
understanding of the digital tools and infrastructure in use. This profi- analyzed to compare perceived benefits with the improvements the firm
ciency ensures that the system integration is seamless and that there is claims to deliver. The document described waste management as
effective tracking of user interactions. expensive and logistically challenging for an Italian retailer, with the
The framework also emphasizes the strategic integration of these firm claiming that their DD-DT in dynamic pricing strategy increased
efforts with the business’s overall goals and the operational synergy profits and reduced waste. The alignment between our primary data and
between different business units. This alignment ensures that all efforts these reports findings strengthened the credibility of our research
contribute to the overarching objectives of the organization. Lastly, the conclusions.
approach encourages ongoing innovation and continuous improvement,
leveraging digital platforms and ecosystems, and making digital en- 5. Discussions and conclusions
hancements that keep the organization agile and responsive to change.
This iterative process ensures that the digital transformation journey is This research examines the implementation of AI-based dynamic
sustained and evolves with the emerging technologies and market pricing models within the grocery retail sector through the lens of DD-
demands. DT. Despite generating over $28 trillion in 2023 (Retail Global Market
Report, 2024) and projections to surpass $30 trillion by 2024

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T.A. Syed et al. International Journal of Production Economics 277 (2024) 109405

Fig. 1. Framework of data-driven DT implementation.

(Sabanoglu, 2023), the retail industry faces narrow profit margins, 5.1. Implications for theory
significantly impacted by food waste due to perishable goods. Dynamic
pricing presents as a crucial strategy for mitigating waste and boosting One of the key contributions of this study lies in clarifying the
profitability. Our study advances the understanding of DD-DT by map- structured path that organizations may adopt for successful imple-
ping out its application in dynamic pricing, focusing on the challenges mentation of DD-DT. While the Gartner (2020) report highlights that 90
and opportunities it presents in real-world settings. percent of organizations increase their investment in data sourcing
Prior research has explored the role of data and digital trans- during digital transformation initiatives, our research builds on their
formation in operations management (Gölzer et al., 2017), supply-chain findings, using DD-DT as a theoretical lens to specifically examine the
resilience (Papanagnou et al., 2022; Belhadi et al., 2024), and the role of implementation of dynamic pricing models in supermarkets dealing
various factors in achieving DD-DT such as resource orchestration and with perishable products. Dynamic pricing is identified as a crucial
organizational agility (Zhu and Li, 2023). However, the literature on element in retail, demanding a robust mechanism that is integral to
DD-DT lacks an understanding of the process how DD-DT unfolds. While digital transformation. However, digital transformation encompasses
many firms globally are aiming to digitalise, yet metamorphosis of more than just the technological aspects; it involves a comprehensive
digital transformation remain scant (Baiyere et al., 2024). Our findings, understanding of organisational metamorphosis (Chaudhuri et al., 2023;
therefore, provide a deep insight into each phase of DD-DT to stream- Warner and Wäger, 2019), moving beyond perceived and generated
lines this process by highlighting areas firms can focus upon during this value to include cultural shifts, data asset utilization, and strategic value
complex process. creation (Kane, 2019; Wessel et al., 2021). Our study contributes to the
In answering our research question, we propose a the three-phased existing literature by identifying and detailing the metamorphosis of
approach to DD-DT, initiation, facilitation, and strategic adaptation, data-driven dynamic pricing, providing in-depth insights into how each
that can aid firms in streamlining their digital transformation goals. In phase of AI-enhanced DD-DT contributes to a comprehensive, successful
the initiation phase, organizations establish the foundation for digital digital transformation strategy in the retail sector. This structured
transformation by identifying key objectives, defining critical data as- approach not only highlights the technological integration but also
sets, and setting required metrics. This phase involves a thorough emphasizes the organisational changes necessary for realising the full
assessment of existing data infrastructure and digital maturity to create potential of dynamic pricing.
a clear transformation roadmap, with data as the driving force. The This study provides a comprehensive framework of the process of
facilitation phase focuses on ensuring economic viability, legal compli- DD-DT, thus highlighting the three phases in this process i.e., initiation,
ance, and governance. It includes effective data management, quality facilitation, and the strategic adaption in data-driven dynamic pricing.
assurance, and capability enhancement. This phase ensures the neces- According to Fischer et al. (2023), transformation starting points for a
sary infrastructure is in place for seamless data utilization across de- data-driven organisation may be asset-driven, workforce-driven, or use-
partments, echoing practices outlined by Chaudhuri et al. (2023). case driven (both exploitative and explorative). Our findings align with
Finally, the strategic adaptation phase involves ongoing refinement of the the asset-driven approach, highlighting the critical focus of retail firms
digital transformation strategy based on real-time data and feedback. on asset quality and availability during the initial phase. The initiation
This iterative process, as suggested by Gökalp and Martinez (2021), phase fundamentally involves defining and developing a data collection
allows organizations to stay agile and aligned with market trends, strategy and establishing the basic infrastructure required for DD-DT.
ensuring sustainable growth and innovation. By adopting this This phase is essential for firms seeking enhanced internal and
three-phased approach, organizations can systematically manage digital external insights through data, setting a foundation for further trans-
transformation, leveraging data-driven insights to achieve strategic formation. In facilitation phase, the importance of legal compliance and
goals and improve overall performance. data governance is emphasized, which are crucial for all stakeholders.
Given the overestimation of AI initiative maturity by 55% of firms (BCG,
2021) and potential risks associated with AI in retail, such as data

10
T.A. Syed et al. International Journal of Production Economics 277 (2024) 109405

protection and AI-bias (Goldstein, 2022), our study underscores the Additionally, the qualitative nature of this study, while offering deep
necessity for robust compliance measures. The European Union’s Arti- insights into the experiences and strategies of participants, lacks the
ficial Intelligence Act of 2021, which regulates AI usage and provides statistical robustness typical of quantitative methods. This approach
data guidelines, is particularly relevant here. Our findings show that might limit the ability to generalize the findings more broadly or to
developing technology and data capabilities, such as skills in AI and IoT establish cause-and-effect relationships with the same level of certainty
and data science expertise, are critical for sustained DD-DT facilitation that quantitative analysis would allow.
(Brock and Von Wangenheim, 2019). The final, strategic adaptation, Given these limitations, future research should aim to broaden the
phase involves integrating the insights and infrastructures developed in geographical scope to include multiple countries or regions, enhancing
earlier phases into the broader strategic objectives of the organisation. the applicability and relevance of the findings across different market
Our study highlights how retail firms can adapt these technologies and conditions. Further studies could also benefit from incorporating a more
processes to drive innovation and competitive advantage, ultimately diverse selection of supermarkets and other retail formats to capture a
achieving a transformative impact on business operations and customer wider array of perspectives and experiences with dynamic pricing.
engagement. This provides further credence to the arguments of (Brock Additionally, integrating quantitative methods could complement this
and Von Wangenheim, 2019) that technology capabilities (skills in new study’s qualitative insights, providing a more robust statistical founda-
technologies such as AI and IoT) and data capabilities (data science tion to the conclusions and enabling a broader generalization of the
skills) are the key for a successful digital transformation facilitation. results. Exploring the impact of dynamic pricing across various in-
Relatedly, our findings contribute to the existing literature by chal- dustries beyond supermarkets, such as electronics or fashion retail,
lenging the technology centric view of DD-DT that predominates in both could also provide valuable insights into the versatility and challenges of
scholarly and practical areas. Our findings show that DD-DT in the implementing data-driven digital transformations in different contexts.
context of dynamic pricing in supermarkets is not merely a technological Finally, future research could delve into the organizational changes
upgrade but a comprehensive change at all levels of the operational required to support DD-DT, examining how different stakeholders,
processes (Legner et al., 2017; Vial, 2021). It involves the reconceptu- including employees, customers, and regulators, perceive and are
alization of business processes, the realignment of strategic objectives, impacted by these transformations. This would offer a more compre-
and the reconfiguration of organizational structures to support hensive understanding of the challenges and opportunities associated
data-driven initiatives. This broadens the scope of DD-DT to include a set with data-driven approaches in retail and beyond.
of coordinated changes across the organizational operations and not just
within its IT departments. CRediT authorship contribution statement

5.2. Implications for practice Tahir Abbas Syed: Writing – review & editing, Writing – original
draft, Supervision, Resources, Project administration. Haris Aslam:
From a practical viewpoint, this study suggests important managerial Writing – review & editing, Writing – original draft, Project adminis-
insights. First, managers should prioritise investments in robust data tration, Conceptualization. Zeeshan Ahmed Bhatti: Methodology,
collection and analytics infrastructure. This forms the backbone of DD- Formal analysis, Data curation, Conceptualization. Fahad Mehmood:
DT and is crucial during the initiation phase. By ensuring high-quality Writing – original draft, Methodology, Formal analysis, Data curation.
and accessible data assets, managers can better respond to market de- Aseem Pahuja: Supervision, Formal analysis, Data curation,
mands and optimize pricing strategies dynamically. Second, as the Conceptualization.
facilitation phase underscores, developing technological and data ca-
pabilities is essential. Managers should invest in comprehensive training Data availability
programs to enhance their team’s skills in AI, IoT, and data science. This
will not only aid in the effective use of dynamic pricing tools but also The data that has been used is confidential.
ensure that the workforce is prepared to handle new technologies as
they emerge. Third, moving beyond technology, DD-DT requires a shift References
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