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The Role of Dynamic Pricing Models in Increasing M

The paper discusses the significance of dynamic pricing models in enhancing profitability within various marketplaces, emphasizing the role of machine learning and AI in price optimization. It outlines the theoretical frameworks, practical applications, and ethical considerations associated with dynamic pricing, highlighting its potential to improve profitability when managed correctly. The study also addresses challenges such as consumer perception and regulatory concerns, advocating for careful implementation to avoid negative consumer reactions.

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0% found this document useful (0 votes)
41 views15 pages

The Role of Dynamic Pricing Models in Increasing M

The paper discusses the significance of dynamic pricing models in enhancing profitability within various marketplaces, emphasizing the role of machine learning and AI in price optimization. It outlines the theoretical frameworks, practical applications, and ethical considerations associated with dynamic pricing, highlighting its potential to improve profitability when managed correctly. The study also addresses challenges such as consumer perception and regulatory concerns, advocating for careful implementation to avoid negative consumer reactions.

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Hoàng Liêm
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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International Journal of Scientific Research in Computer Science, Engineering

and Information Technology


ISSN : 2456-3307 Available Online at : www.ijsrcseit.com
doi : https://doi.org/10.32628/CSEIT2410612410

The Role of Dynamic Pricing Models in Increasing Marketplace


Profitability
Bhageerath Bogi
Independent Researcher, USA

ARTICLEINFO ABSTRACT

Dynamic pricing models are extremely relevant in today's marketplaces where


Article History:
companies can switch their profitability based on real-time data as it shifts in the
Accepted : 15 Oct 2024 markets. The paper is an attempt to explain the theoretical frames of dynamic
Published: 31 Oct 2024 pricing as well as its technological and real applications in various marketplaces.
A real-life investigation into how ML and AI create price optimization
mechanisms, thereby impacting the profitability levels in marketplaces. Demand
Publication Issue forecasting, market segmentation, and elasticity are the major drivers measured.
Volume 10, Issue 5 The paper also took into consideration the ethical and regulatory concerns of
Sep-Oct-2024 dynamic pricing. The bottom line was that dynamic pricing would immensely
improve profitability if managed in the proper sense but should always be kept
Page Number under check and readjusted to avoid a consumer reaction and regulatory
988-1002 attention.
Keywords: Dynamic pricing, machine learning, AI, demand forecasting, market
segmentation, elasticity, consumer behavior, profitability

Introduction maximize revenue and profit by means of the optimal


1.1 Background and Significance of Dynamic Pricing price offered (RevCycle Intelligence, 2022). The
Dynamic pricing is fast turning out to be one of the emergence of Big Data Analytics and AI supercharged
pillars of present-day commerce, especially for such the power of Dynamic pricing, as it can execute fine-
industries that exhibit very high volatility in demand grained, and hence on real-time adjustments to a set
and intense competitive pressures. It is the airline of market-based prices.
industry which led the way in terms of dynamic 1.2 Objectives and Scope of the Research
pricing as part of revenue management. However, this The research objects involve four in number:
has trickled down to other industry sectors in the last 1. The Conceptual Bases of the Dynamic Pricing
decade including e-commerce, ride-sharing, and Models
hospitality. These include companies like Amazon 2. How AI and ML Can be Utilized for Price
and Uber, which use dynamic pricing in order to be Optimization
responsive to trends in the market in other words, to

Copyright © 2024 The Author(s) : This is an open access article under the CC BY license 988
(http://creativecommons.org/licenses/by/4.0/)
Bhageerath Bogi Int. J. Sci. Res. Comput. Sci. Eng. Inf. Technol., September-October-2024, 10 (5) : 988-1002

3. Impact of Dynamic Pricing to the Profitability of prices must vary to optimize profits on conditions that
Marketplace exist within the market. Latest dynamic models draw
4. How Overcome Challenges, Risks and Ethical in modern high-powered computational methods on
Issues when Executing Dynamic Pricing matters regarding their demand forecast and on
1.3 Structure of the Paper deciding optimally at what price in real time to sell
This paper has broken itself into different sections, (Forbes Insights, 2019).
with Section 2 reviewing one kind of evolution in 2.3. Comparative Analysis of Static vs. Dynamic
pricing strategies and core theories; Section 3 presents Pricing
the fundamental concepts in dynamic pricing; Section Static
4 identifies drivers of marketplace profitability; Feature Pricing Dynamic Pricing
Section 5 shows the practical application of dynamic Adjustment
Infrequent Continuous
pricing models; Section 6 makes the evaluation of Frequency
performance metrics; Section 7 discusses challenges Extensive (Real-
and limitations, and finally Section 8 describes future Data Utilization Minimal
time data)
trends. Conclusion: Synthesis of important findings Revenue
and proposals for further studies. Moderate High
Potential
Consumer Fluctuating,
Stable
Perception sometimes unfair
Complexity Low High

2.4. Behavioral Economics and Consumer Perception


of Price Changes
Behavioral economics states that dynamic pricing
success is largely contingent upon consumer
Figure 1 The Pros and Cons of Dynamic Pricing (Nexo
perception of whether the price change is fair.
code ,2023)
Consumers will regard high-frequency price changes
as undesirable. Such behavior may quickly cause
Literature Review
consumer distrust. Thus, communication on how
2.1. Evolution of Pricing Strategies in Marketplaces
prices are calculated may minimize the reaction.
The static approach to pricing was the producing and
fixed price margin. This all changed with the arrival
Foundational Concepts in Dynamic Pricing
of e-commerce, as the company would require much
3.1. Algorithms and Frameworks for Dynamic Pricing
more dynamic approaches. This is the point in time
Dynamic pricing algorithms use demand patterns,
when airlines started utilizing revenue management
competitor prices, and behavior of customers to
systems in the selling of available seats that were
determine their optimal price. A common framework
based on demand. That was developed into today's
that uses reinforcement learning for pricing is the one
dynamic models in pricing where prices fluctuate
which sets up pricing strategies using previous
each day depending on analytical data (PwC Reports,
outcomes, while rule-based systems will change the
2021).
prices by predefined criteria. An example of a rule-
2.2. Core Theories of Dynamic Pricing Models
based system of Uber's surge pricing mechanism is
Base theory of dynamic pricing lies in Law of Demand
and the Bertrand competition model. They tell how

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Bhageerath Bogi Int. J. Sci. Res. Comput. Sci. Eng. Inf. Technol., September-October-2024, 10 (5) : 988-1002

when it raises its prices when there is unbalanced updating millions of product prices daily according to
demand and supply (MIT Sloan Review, 2020). variation in demand and competitor's activity (Tanaka,
3.2. Data Inputs: Demand Forecasting and Market 2022).
Segmentation 3.4. Pricing Elasticity and Customer Lifetime Value
Demand forecasting is, in essence, an approximation (CLV)
of the level of sales in the future, considering Price elasticity measures how demand reacts to
historical data and seasonality among other external changes in prices. The dynamic pricing approach
factors such as economic condition. The predictive heavily depends on insight into consumer buying
accuracy can be further improved by applying behavior when price is changed. High elasticity
advanced techniques of time-series analysis and means that demand is very sensitive to a change in
regression models (Wang & Zhao, 2023). Dynamic price, and low elasticity means that demand is not
pricing strategies extend their market segmentation to very sensitive to a change in price. The other one is
consumers to group them based on any characteristics, Customer Lifetime Value is dynamic pricing. It can be
such as a purchasing behavior, price sensitiveness, and defined as the total income which can be anticipated
geographic location. from a customer sometime in his lifetime (Singh &
Chen, 2021). Dynamic pricing maximizes CLV
Table 1: Main Input Parameters in Dynamic Pricing through opening prices that could attract attention,
Models allowing it to price it up when its profit moments
Data Input Description Example peak.
Past sales data Weekly sales
Historical
used to identify trends over a Drivers of Marketplace Profitability
Sales Data
trends year 4.1. Supply Chain Efficiency and Pricing Strategy
Real-time Prices of similar Alignment
Competitive Most industries, therefore, that highly depend on
competitor products on
Pricing inventory management and logistics depend on
pricing data Amazon
Purchase history, supply chain efficiency for dynamic pricing success.
Customer Abandoned cart Dynamic pricing is best performed when it is in
browsing
Behavior data alignment with real-time supply chain data. For
patterns
External factors example, the great big companies like Amazon rely on
Market Holiday sales their gigantic logistics network to adjust prices
like inflation,
Conditions spikes according to the current inventory levels, warehouse
holidays
capacities, and shipping costs. When the inventory is
plentiful, the prices can be lowered to stimulate
3.3. Role of Machine Learning and AI in Pricing
greater demand and low stock increases the prices for
Optimization
having a higher margin. It will ensure that the pricing
Neural networks and gradient boosting machines
strategy will ensure sales on volume as well as margin,
allow machine learning models to learn from large
and thus it will help in increasing the profitability of
data sets and predict the best price with minimal
the marketplace (Revionics Case Studies, 2021).
human interference. The ability of AI to detect
Dynamic pricing also eliminates the risks of stockout
pattern and anomaly in data will make demand
and excess inventory. This implies that firms obtain a
forecasting and prices adjustment more accurate. For
better balance of more supply and demand; minimizes
example, Amazon uses its AI-driven pricing models in
over-ordering or expedited shipping, thereby

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Bhageerath Bogi Int. J. Sci. Res. Comput. Sci. Eng. Inf. Technol., September-October-2024, 10 (5) : 988-1002

decreasing the holding costs. As was found in this through which companies can even respond faster
study from McKinsey Global Institute, Dynamic than competition changes in the marketplace
pricing calibrated against the related supply chain (McKinsey & Company, 2020).
data, enhances the companies' revenues with For instance, it monitors its rivals in terms of price
increases of 10%, however with the associated cost and discriminates on prices with respect to the goods
from inventory with decreases of 15%. This surely of itself insensitively toward such changes in line with
will bring some synergetic effect to occur when the push of "Everyday Low Prices." That is not only
combined in the right mix both that is, efficiency in an exercise in furnishing a defense mechanism against
the supply chain and price actual. a market supremacy but is a reason for higher
4.2. Market Conditions: Competitive Landscape and profitability with respect to the optimal positioning of
Pricing Power price on its goods. A study published in MIT Sloan
Whatever, the competition landscape definitely forms Management Review reveals that companies that
a critical burden over dynamic pricing's successful make use of real-time data analytics in making price
implementations. Where competition is high, a seller decisions are believed to garner 12-15% higher
can employ dynamic pricing to decrease his price revenues than companies that simply use traditional
relative to the prices charged by competitors for some models (Journal of Revenue and Pricing Management,
short time to capture market share or react 2020).
dynamically to shifts in competitor price. There is 4.4. Impact of Macroeconomic Factors on Pricing
something called pricing power and that varies by Models
industry: a seller's ability to increase price without The three important macroeconomic variables that
losing too much in market share (PwC Global Insights, are influencing the dynamic pricing models are
2022). The greater the brand loyalty or the distinct inflation, currency fluctuation, and purchasing power.
product offerings are, the more the price power During times of high inflation, dynamic pricing is
becomes and lower the chances to alienate customers what may help the firm survive as such increased
when firms employ dynamic pricing. costs are then passed on to the consumer
BCG analysis found the businesses to operate in a incrementally and in a much more controlled manner
market, which either is a monopolistic market or an than the shock in price that would scare the customer
oligopolistic market with more profit due to the away from making the purchase (International
dynamic pricing, which takes place at lesser price Association of Privacy Professionals [IAPP], 2021).
sensibility. The market will not have much Global economies have currency volatility, which
diversification, and competitions are very extreme calls for an immediate reaction in terms of pricing to
hence are likely to be competitive parity along with maintain the margin. Companies like Alibaba, that are
optimizing on the basis of volume instead of involved in multinational e-commerce businesses,
differentiating on the price basis. imply a change in prices using various currencies,
4.3. Real-Time Data Analytics and Decision-Making which reflects a change in the exchange rate for them
Indeed, real-time data analytics forms the bedrock of to have a profit margin. According to the IMF,
a solid dynamic pricing model. Corporations first tap dynamic pricing models can be integrated with
data streams from their websites, purchase behavior, macroeconomic factors and can reach up to 8%
weather data, social media trends, among other profitability, which is higher than that of static
sources through which instant price-setting decisions pricing models in volatile economic conditions.
may be made. Advanced analytics platforms work on
these data streams to churn out actionable insights

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Implementing Dynamic Pricing Models high- scale increasing complication on business. Such
5.1. Integration with Marketplace Infrastructure and risks should be mitigated by companies by preparing
Platforms proper risk management frameworks. This would
The most difficult issue will be effective integration include minimum and maximum price limits to avoid
with existing marketplace infrastructure, such as the the prices drifting away towards undesirable levels
inventory management system, CRM platforms, and and machine learning models used in the algorithms
data analytics tools. The pricing algorithms must give which improve them with time based on previous
direct, real-time access to the companies. Moreover, performances and markets feedbacks. (Gupta, 2023)
the price engine should update the price in real time The approach here would be A/B testing for how
on all sales channels. As the set up goes further into different pricing strategies work so that they may be
the setup of omnichannel retailing, the aspect of applied on a large scale. In this scenario, price changes
consistency in prices through the same online can be applied only to a smaller number of customers,
platform or stores would become much more crucial and after that, conversion rates, revenues, and
since customers require them to be the same (Harvard customer satisfaction may be measured to ensure such
Business Review, 2018). changes do not lead to adverse outcomes. Harvard
In fact, Shopify and Salesforce Commerce Cloud Business Review recently conducted a survey which
provides the APIs through which dynamic pricing indicates firms on dynamic pricing realized an
engines can be integrated to an ecommerce website in approximate increase of 6-9% in accuracy, retention,
such a manner that the real time updating regarding and level of price while doing A/B tests.
the number of items available in the inventory and 5.3. Ethical Considerations in Automated Pricing
the way a customer will react to those items. The Decisions
process normally would be carried out at middleware There are indeed greyish considerations to its decision
since most of the systems would communicate brought about by automation but does not necessarily
effectively; thereby enhancing proper data flow while follow the doxing behavior from these machines.
executing the change of prices without delay. Pricing algorithms, however do not want to cash in
on consumer vulnerability or discriminate prices
(Gartner Research, 2021). Dynamic pricing models
sometimes charge a premium price because a
customer happens to live in a specific location or buys
from the company regularly, which then leads to
accusations of price discrimination. Companies should,
therefore work through such ethical dilemmas by
pricing algorithms that are built based on fairness and
equity.
Figure 2 Dynamic Pricing (WallStreetMojo,2022)
Ethical concerns are also associated with surge pricing
models, that is, surge prices during peak demand
5.2. Risk Management and Mitigation in Pricing
times. Despite the concept of surge pricing as a means
Fluctuations
to match supply with demand, it has been criticized to
Price dynamicity produces several risks, with this
discriminate against low-income customers. To this
product ranging from lost potential revenues
end, firms such as Uber have introduced limits to
attributed to mispricing, consumer- perceived
surge pricing and improved the transparency of the
dissatisfaction resulting from prices instability to even

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means to calculate prices such that there is ethical important metric is gross margin, which indicates
pricing. how efficiently the pricing has been made to
5.4. Regulatory and Compliance Issues in Pricing maximize the profit after cost of goods sold. Properly
Adjustments applied dynamic pricing will help increase gross
There are several areas that dynamic pricing should margins by smartly increasing prices when there's
be balanced with; these include regulatory high demand.
frameworks, which will guide the practice of pricing, Conversion rate, or the percentage of visitors who
anti-price gouging laws, and consumer protection make a purchase, is another statistic that is pertinent
regulations. Most places have such practices of to monitor the impact that changes in price have on
multiple changes in a very short period that violate buyers. In this respect, volatile prices are also well
the fair or deceptive practices acts. Companies must welcomed because either the conversion rates are
monitor these changes and make sure their price increased or the rate declined depending on how the
models align with the demands of the regulatory change of price is viewed by customers. Organizations
system (Dynamic Yield Report, 2020). track and observe turn-over rates of the inventory.
For instance, during the COVID-19, all the e- The kind of turn-over rates determine at what rate
commerce companies were enforced legally because the sold stock is replenished to ensure that such
of the wild rush in commodity prices sold. Therefore, volatile pricing coincides with the supply chain
a company must ensure that it includes compliance management objectives. (Chatterjee & Park, 2022)
mechanisms checking against its price algorithms for 6.2. Revenue Growth vs. Customer Retention Trade-
legality and provides audit trails showing its offs
compliance with regulatory demands. This means that dynamic pricing can result in very
high revenues at the cost of customer retention if not
Performance Metrics and Evaluation managed appropriately. One of the biggest trade-offs
6.1. Key Performance Indicators (KPIs) for is that of short-term revenue maximization through a
Profitability rise in prices at the time of peak demand versus long-
For the analysis of the effectiveness of dynamic term customer retention. Research from Bain &
pricing models, well-formulated KPIs should be Company said that companies which were adopting
tracked at least on revenue but also on satisfactions. an aggressive dynamic pricing strategy have seen their
Typically, for the KPIs are used: revenue per user, short-term revenue increases by 15% while losing 5-8%
gross margin, conversion rates, and inventory in customer retention from price volatility (Bain &
turnover rates. These will give a deeper insight into Company, 2019).
whether in fact dynamic pricing strategies maximize This type of trade-off may be leveled by company-
profitability. specific tailor-made pricing policy. The corporation
This can be Average Revenue Per User, that is, the will offer loyal customers discount or promotion
average income per customer. Companies like preferentially but maximize additional revenues from
Amazon and eBay place an additional emphasis on less sensitive customers through dynamic pricing,
ARPU, allowing them to track what effect such a which brings a win-win effect that the former
change in prices has on the individual's cost. increases customer's satisfactions because loyalty is
McKinsey had published an article that shows being rewarded while the latter is maximizing
companies which implement dynamic pricing see a profitability. For instance, airlines would retain more
rise of 20% in their ARPU within six months when of its most-valued customers with a stable pricing
implemented (Deloitte Insights, 2021). Another very than that of an occasional traveler.

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6.3. Measuring Price Sensitivity and Elasticity in changes in price influence sales, customer behavior,
Real-Time and competitive positioning and utilize such data to
This one is the real-time measure of price sensitivity update algorithms in pricing. The AI-based platforms
and elasticity. Dynamic pricing strategy fine-tunes like Dynamic Yield and Radionics use machine
with the real-time measurement of elasticity. learning to automate the process of feedback to
Elasticity of demand determines to what extent constantly improve accuracy of the prices (Singh &
variation in the price variable leads to a change in Chen, 2021).
quantity demanded. That is, businesses use real-time For example, for a retail business adopting dynamic
data analysis to derive elasticity for different kinds of pricing, a 10% increase in price leads to 5% loss in
customers and different types of goods. As an example, revenue but the same sales volume increases by 7% in
a study done by PwC established that one online revenue terms. That kind of data will be used on
trading company achieved 12 percent revenue future pricing actions so that similar price movement
because it was leveraging on differential sensitivity of occurs when the expected outcome justifies an
its customers through differential time-of-day price improvement in desired profitability. Continuous
differentials (Ahmed & Singh, 2023). feedback loops will, Gartner research suggests, enable
Table 2 below outlines the variation in elasticity by the organization adopting dynamic pricing to improve
product category: pricing efficiency by 15-20% over time (Revionics
Product Elasticity Price Change Case Studies, 2021).
Category Coefficient Impact
Demand highly
Consumer
High (1.5) sensitive to price
Electronics
changes
Demand relatively
Luxury Goods Low (0.5)
inelastic
Fast-Moving Moderate
Moderate
Consumer sensitivity to price
(0.8)
Goods fluctuations
Figure 3 What is a Dynamic Pricing Strategy
Strong demand (Paddle,2024)
Travel and
High (1.8) fluctuations based
Hospitality
on price Challenges and Limitations of Dynamic Pricing
7.1. Market Saturation and Competitive Pressures
Such Realtime analytic platforms as Google Cloud In case there are multiple players within a saturated
& AWS enable businesses dynamically to trace market using virtually the same pricing algorithm,
these coefficients that have made it possible for the then the approach to dynamic pricing fails. A critical
businesses to change their respective prices in real consequence of dynamic adjustments made to all
time that depends on the changing market condition. market players' prices is that it results in profitability
6.4. Feedback Loops for Continuous Optimization collapse, a phenomenon that has been witnessed by
A good dynamic pricing model should always have most scenarios involving advance pricing algorithms
feedback loops that, in turn, keep improving decisions used by airlines.
based on price through performance over time. The intensity will then, under the high competition
Feedback loops entail collection of data about how squeeze out the differentiation by price at such firms.

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They will offer free added value services and they will adapt in adjusting their company price according to
have to sustain with the competition. Deloitte has it an individual's user type. As per the research of
that at saturation market companies will gain just 2-5 % McKinsey, companies choosing AI-based personalized
per cent than in less competitive 10-15 % under pricing would have a 20% to 30% sales increase and
dynamic pricing. Issues of data privacy and security is keep customers at the level of 10% to 15%. Such a
also a challenge (McKinsey & Company, 2020). situation reflects two ways benefits are achieved-that
7.2. Data Privacy and Security Concerns is, greater profitability simultaneously with keeping
Dynamic pricing is extremely sensitive to the data of customer satisfaction through such tailored offers.
customers based on their browsing behavior, Additionally, future developments in NLP will enable
purchasing history, and location. This, therefore, AI systems to read unstructured data like customer
raises massive data privacy and security concerns. reviews and social media sentiments to further
Regulations such as GDPR and CCPA create high enhance the pricing decision. This innovation will
demands for companies collecting, storing, and using ensure that pricing strategies are not only data-driven
customer data in making decisions about prices but also contextually aware to make more subtle and
(Forbes Insights, 2019). effective adjustments in the price.
The right data governance policies and cybersecurity 8.2. Integration with Blockchain for Transparent
measures have to be in place that exclude the Pricing
possibility of data breaches and adhere to regulations The next trend to follow in the blockchain platform is
in terms of privacy. Non-implementation will surely for dynamic pricing applications in a transparent form
yield a good number of punitive fines or reputational of its presentation. With this, blockchain
issues. Take an example, according to research by decentralized ledger system enables companies to
IAPP in the year 2021, it found out that "45% generate verifiable records about change in the price.
companies engaged with dynamic pricing failed to Hence, business and customer openness are probable.
preserve compliance with changing the data Where the price transparency is highly relevant to
protection laws." the role in a sector such as luxury goods or
pharmaceuticals, blockchain will be used. This kind of
Future Trends and Innovations in Dynamic Pricing customer can track the price history of the product.
8.1. AI-Driven Hyper-Personalization in Pricing So, there would be no question of price tampering
The most extreme transformation of dynamic pricing (Revionics Case Studies, 2021).
comes through AI-based hyper-personalization. The Deloitte says price-related dispute disputes would be
AI-based pricing models capture granular data from reduced by 40% and increased customer confidence.
the customers about their purchase history, browsing Indeed, companies are already testing the blockchain
behavior, and behavioral cues to ensure the best in applications involving the transparency of supply
prices tailored for an individual customer so that chains and a company such as Carrefour and Walmart
maximum benefits could be squeezed for an as if predicting the next wave where blockchain
individual customer. Hyper-personalization is very applies to pricing-a natural fit for which dynamic
different from typical dynamic pricing (MIT Sloan pricing applications would shake up the very
Review, 2020). Here, it seeks the maximization of foundation of consumers' trust.
price in real time for each customer through shifting 8.3. Predictive Analytics and Anticipatory Pricing
prices on macro-market trends. Models
Amazon and Alibaba apply the same algorithm to deal Predictive analytics is changing the course of dynamic
with millions of data in real time, which they can pricing into development models that are anticipatory

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about price change and demand. That is, it develops based on the perceived value rather than cost or
models based on such data as historical performance demand (Bain & Company, 2019).
and seasonal trends or even as dictated by external Dynamic pricing is also used to allow for firms to have
factors, for instance, weather and economic indicators tiered price models of various customer segments
that would inform about future market conditions. which ensures there is affordability to price-sensitive
Thus, unlike reactive models where pricing is done buyers yet at the same time maximize revenues
once aftermarket shifts, it leaves the company with through the less price sensitive market. This fits well
mere gain value. with PwC, which did its homework and found out
Using predictive analytics, travel industry airlines and that 75% of customers are willing to pay more when
hotel chains can easily forecast the holiday or other they feel a company is charging fair prices while, at
significant events when a surge in demand is likely to the same time being transparent about that.
occur, thereby allowing them to adjust their prices The Table 3 below synthesizes the main differences of
beforehand (Deloitte Insights, 2021). The researchers old dynamic pricing and the developing customer-
for Journal of Revenue and Pricing Management centric pricing models.
concluded that this is quite a whopping 18 per cent Feature Traditional Consumer-
increase in revenue as far as the sectors characterized Dynamic Pricing Centric Pricing
by highly predictable demand behavior of those Basis of Market Demand Perceived
people based on anticipation rather than reactive Pricing & Supply Customer Value
models of pricing. Transparency Limited High
Customer Risk of Price Focus on
Perception Manipulation Fairness &
Loyalty
Primary Goal Revenue Balance of
Maximization Revenue &
Customer Trust

Conclusion
9.1. Summary of Key Findings
Dynamic pricing models are one of the primary ways
Figure 4 How Dynamic Pricing Works (Nected,2020)
through which it is possible to make a building
profitable in a marketplace. Properly implemented
8.4. Evolution of Consumer-Centric Pricing
through AI-driven personalization, real-time data
Frameworks
analytics, and predictive models, the revenue
As consumers are becoming more aware of dynamic
generating capabilities improve, which would be well
pricing practices, consumer-centric pricing
correlated with good customer satisfaction depending
frameworks are getting more emphasis with fairness
on the extent of supply chain efficiency, strict
and transparency at their core. Companies are getting
compliance with the regulatory standards, and with
more willing to embrace strategies where the price
ethical considerations.
changes appear to be fair and favorable to the
customer. Value-based pricing is one such strategy
wherein the price of a product or service is decided

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9.2. Implications for Marketplace Strategy and [4]. Chatterjee, S., & Park, J. (2022). An Automated
Profitability Deep Reinforcement Learning Pipeline for
Dynamic pricing models offer several values to Dynamic Pricing. IEEE Journals & Magazine.
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Firms employing more advanced algorithms and AI [5]. Deloitte Insights. (2021). The Future of Pricing:
are capable of attaining superior pricing accuracy, Leveraging AI and Blockchain for Transparent,
which will help increase revenue and control Fair, and Optimized Pricing Models. Retrieved
inventory levels. Long-term success of dynamic from deloitte.com.
pricing will be reached only when there is a balance [6]. Deloitte Insights. (2021). The Future of Pricing:
between profit maximization and customer trust. Leveraging AI and Blockchain for Transparent,
Companies should therefore be transparent about Fair, and Optimized Pricing Models. Retrieved
their prices, protect consumer data, and update from deloitte.com
models continuously to remain competitive in a [7]. Dynamic Yield Report. (2020). Machine
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