Commerce Glossary

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What is Dynamic Pricing?

noun
a pricing strategy, also known as surge or demand pricing, that refers to the way a company vary its products or services prices based on the current requirements of the market. This strategy reflects changing market conditions, and drives up prices when demand increases, and vice-versa, directly and immediately impacting the business performance and revenue obtained.

Dynamic pricing can also mean that a business is adjusting prices for different market segments, which implies discrimination practices, and is not recommended for various reasons including legal and ethical ones. Dynamic pricing strategy based on time is another option businesses can adopt, but they must aim to find the right balance in order to keep customers satisfied and coming back. Companies need to optimize prices based on how much customers are willing to pay for a product or service at a specific time, how competitors are pricing their items, and the current market requirements.

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