Dynamic pricing: Definition, implications for managers, and future research directions

Dynamic pricing has evolved with technology from earlier price negotiations. To maximize revenue and provide specialized shopping experiences, businesses today use algorithms and data analysis to adapt prices. We define dynamic pricing as price changes that are prompted by changes or differences in four key underlying market demand drivers: (1) People (i.e., individual consumers or consumer segments), (2) Product configurations, (3) Periods (i.e., time), and (4) Places (i.e., locations). The transition from static pricing (uniform prices) to dynamic pricing (changing prices) is evident from different examples, such as online retailers personalizing offers based on customer behavior, and algorithms using facial recognition for personalized pricing in physical stores.