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6 Dynamic Pricing Examples in 2024: Despite Criticism

Dynamic pricing is the practice of tweaking product/service prices according to market trends, customer behavior, and competitor landscape. Today different industries and businesses, such as airlines and e-commerce platforms, leverage dynamic pricing to increase profit and dominate the market.

In this article, we explore examples of businesses and industries that implemented dynamic pricing in their pricing strategies and succeeded, sometimes despite the criticism.

Which industries use dynamic pricing?

Different industries use different types of dynamic pricing (e.g. time-based pricing, bulk pricing) to maximize their profits, including:

  • Airlines
  • Hospitality
  • e-Commerce
  • Car rental
  • Retail
  • Utility (e.g. electricity, water)

What are some examples of companies using dynamic pricing?

Amazon

Amazon is one of the largest e-commerce platforms with more than 300,000,000 active users as of October 2021. Amazon leverages the large amount of data collected about users’ purchase behavior and market trends to change their product prices every 10 minutes. It’s been claimed that Amazon increased its profits by ~25% by leveraging dynamic pricing strategies in 2016.

Price ranging from ~$3,500 to $2,800 within a few months. Source: CamelCamelCamel

Uber

Uber is one of the largest ride-sharing service providers with more than ~93,000,000 active users around the world. Uber’s dynamic pricing algorithm adjusts the ride fares based on:

  • time and distance of your route
  • traffic and peak hours
  • current rider-to-driver demand

Despite the criticism of unfair price surges, Uber stands by their algorithm and claims that it helps the system manage supply and demand issues, and provide drivers with incentives to work in difficult circumstances.

Uber has also been accused that their dynamic pricing algorithm is biased, such that fares tend to be higher for drop-offs in Chicago neighborhoods with high non-white populations. Again, Uber claims that it doesn’t condone discrimination on its platform in any form, whether through algorithms or decisions made by its drivers.

ProTips - How does Dynamic (or Surge) Pricing work? | Uber Blog
Source: Uber

Delta Airlines

Delta Airlines is one of the largest airlines in the US and serves ~200,000,000 people per year in ~50 countries. Some examples of Delta’s dynamic pricing algorithms include:

  • Higher ticket prices when no competition is out there: Based on our research, we found that Delta charges for a trip from Minneapolis-St. Paul (MSP) to Detroit Wayne Country (DTW) airport ~$200 more than a trip from MSP to Lansing (LNS) airport, which are both ~650 miles away from MSP. The reason for this overcharge is that Delta exploits the fact that it is the only airline that flies direct from MSP to DTW, whereas there are several airlines that fly from MSP to LNS.
Source: Delta airlines website
  • Higher prices for frequent fliers: Time Magazine has reported that for a period of three weeks in 2012, Delta has charged frequent flyers $300 more than the economy rate for the exact same flight. Forbes analysts claim that this overcharge is an exploitation of frequent fliers’ necessity to travel more often than others.

Despite the profits, Delta’s vice president for eCommerce stated that these overcharges are a glitch in the system and that very idea goes against the grain of how Delta treats its customers. Three weeks later, the algorithm was claimed to be fixed.

Airbnb

Airbnb is one of the most popular home rental marketplaces with ~150,000,000 active users who use it to book vacation stays or experiences. To determine stay prices for similar properties, Airbnb’s dynamic pricing algorithm inputs variables such as:

  • Seasonality
  • Supply and demand
  • Day of the week
  • Special events and festivals
  • Number of days left to book
  • Historical performance of users’ listings
  • Competitor occupancy and prices
  • Number and quality of property reviews

Airbnb offers its own dynamic pricing tool “Smart Pricing” to hosts to help them automate the pricing of their properties in a more profitable manner. Airbnb claims that when a host selects a price that’s within 5% of their price tip recommendations, those hosts are nearly 4x more likely to get booked, in comparison to hosts whose prices are more than 5% off from Airbnb’s recommendations.

Google leverages dynamic pricing for optimizing the prices of Google Ads. The price for a Google ad changes according to what business competitors are bidding for the keywords, locations, industry, and audiences. For instance, creating an ad targeting competitive keywords or keywords with high bids will cost more than keywords with low competition. However, the potential ROI may also be higher.

Source: Google ads keyword planner

Tampa Electric

Tampa Electric Company provides service to ~800,000 residential and C&I customers over 2,000 square miles of Florida. Their dynamic pricing algorithm uses data from smart thermostats and digital control units (DCUs) to help residential customers automate the control of:

  • central heating and cooling systems
  • electric water heaters
  • pool pumps

This algorithm helps Tampa Electric provide lower rates approximately 87% of the time.

How to collect data to implement dynamic pricing?

The most important metric to a successful implementation of dynamic pricing is data. Businesses need to collect historical and current data about the market, competitors, customers, trends, etc. This data can be obtained by:

  • Buying / Generating intent data: Intent data covers data concerning purchasing behavior of individuals or companies such as product reviews, whitepaper downloads, google searches, subscriptions and registrations, and website visits. Some companies generate intent data using buyer intent data tools, whereas others buy intent data from data providers.
  • Scraping online data: Business can use web crawlers to automate the extraction of data from online resources about the market and competitors, such as product prices, reviews, customer comments, etc.

For more on dynamic pricing

To explore dynamic pricing in more detail, feel free to read our in-depth articles:

And if you believe your business will benefit from a dynamic pricing strategy, let us guide you find the right tools:

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Access Cem's 2 decades of B2B tech experience as a tech consultant, enterprise leader, startup entrepreneur & industry analyst. Leverage insights informing top Fortune 500 every month.
Cem Dilmegani
Principal Analyst
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Cem Dilmegani
Principal Analyst

Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.

Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.

Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.

He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.

Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.

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1 Comments
maria vitoraki
Feb 08, 2022 at 18:19

I wanted your help regarding the accommodation overnight pricing I have at AIRBNB what can I do

Cem Dilmegani
Feb 11, 2022 at 20:17

You are overthinking it

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