Defining Variable vs Dynamic Pricing in 2024

Pricing is critical for competitiveness of a business. Today’s rich and publicly available web data helps companies adopt more robust and data driven pricing strategies, however it also confuses businesses whether a new pricing solutions coated with technology buzz words is really different from what they have been already doing or not. This especially happens when it comes to differentiating variable vs dynamic pricing. In this article, we will summarize the two strategies with an emphasis on web scraping as a key technology that differentiates the two.

What is Variable Pricing?

Demand and supply of a product can impact its price directly, which we are all used to. This concept in general is called variable pricing, which simply stands for the price change of a good or service based on external variables. With online businesses and plethora of data, a new concept called dynamic pricing has emerged, which we will explain in a second. Today, since technology enables price changes in real time, variable pricing is commonly used to refer to pricing that is determined before the sales starts and stays the same or changes less frequently than real time such as seasonal or quarterly.

This strategy is often preferred by B2B companies, since they do not observe price fluctuation or high number of transactions as in B2C. Moreover, businesses that have a mix of online and offline channels or regulated by law also prefer variable pricing. For example, we are used to flight tickets going up or down even hourly while it is not as common in ground transportation and definitely not the case in public transportation. For ground transportation, last minute ticket sales at the office and stable prices are a way to attract customers not to prefer other options such as owning their own car while flights are often the only way to travel. For public transportation, even if the operation is provided by a private company, the prices that riders see are regulated and fixed by governmental offices since it is a public service.

What is Dynamic Pricing?

Imagine yourself in an auction. Someone has just raised the bid for an artifact you are willing to buy. After a few rounds, the artifact is sold for double the original price. This used to be the most frequent variable pricing example back in time. Now, internet data enables online businesses to change their pricing strategy even faster than an auction.

Dynamic pricing is the ability of changing the price of a good or service anytime, as frequently as needed, based on data-driven insights. At the macro level, it takes into account the availability of the product in the market, overall demand and seasonality. At the micro level, it takes into account the willingness of the customer to buy your product and how much it is sold for by the competitors at that moment. It helps companies to continuously optimize the price and the demand and therefore, maximize the profit.

This strategy is more and more adopted by B2C companies that operate mainly online. The most common example we also used while explaining variable pricing is the airline industry. Airlines use a very extensive data source such as competitors’ prices, flight searches and availability of seats and constantly aim to strike a balance between revenue per ticket and number of tickets sold. A newer technology that adopted dynamic pricing is ride sharing apps such as Uber. These examples could help you guess what considerations a customer may have when they face dynamic pricing. Is it a good strategy that customers will get used to over time or would it disappoint customers to see constantly changing prices and switch from your company? For pros and cons of different dynamic pricing applications, you can read our detailed post about 6 dynamic pricing success stories.

Of course, dynamic pricing needs a constant and granular data flow, which is only possible with the automation of data collection. One of the key enablers of dynamic pricing is web scraping. Web scraping tools enable businesses to collect publicly available data from other websites such as the prices of a product in other platforms or availability of the competition products. Given how data intensive the process is, it is beneficial for companies to test dynamic pricing before adapting it fully and building a technical data infrastructure to support dynamic pricing within the company.

Variable and Dynamic Pricing in a Snapshot

If you believe that your business may benefit from a web scraping solution, check our list of web crawlers to find the best vendor for you. Also, don’t forget to check out our sortable/filterable list of pricing optimization.

Recommended Reading:

• 6 Dynamic Pricing Examples: Success Stories Despite Criticism
• Dynamic Pricing in e-Commerce: Implementation & Examples

For guidance to choose the right tool, reach out to us:

This article was drafted by former AIMultiple industry analyst Bengüsu Özcan.