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Dynamic pricing - pros and cons

With more and more companies adopting dynamic pricing, Xenia Taliotis explores the benefits and pitfalls of the strategy, plus the sectors it is affecting.

Though people may not know it by name, or even realise they know it, most will have experienced dynamic pricing in one way or another – whether in a pub at happy hour, a florist on Valentine’s Day or trying to book a taxi on New Year’s Eve. 

Welcome to the up, down, turnaround world of fluctuating pricing, a strategy that is becoming more pervasive and accepted. Robert Crandall – former chairman of American Airlines – pioneered dynamic pricing (also called yield management) in the 1980s through the introduction of super-saver fares and ticket prices that changed according to availability, demand and how far in advance the reservation was made. It  soon became widespread within the hotel, travel and utilities industries. More recently, though, it has gained ground in many other sectors, including retail, tourist attractions, and even restaurants. 

This is an extract from the Business & Management Magazine, Issue 262, March 2018.

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