Fixed pricing is out the window and dynamic pricing is in as e-commerce businesses have begun to take advantage of the new opportunities technology has presented. Dynamic pricing is a strategy where businesses change the price of their good depending on the level of demand, type of customer or their competitor’s pricing. By using IT systems, businesses are able to collect real-time information about consumer behavior and preferences like their “click stream”, past purchases and previous product views. This information is then used to determine pricing strategies and whether a business can possibly raise price for a certain segment or time period and thereby maximize its profit.

How do consumers feel about this? Some consumers could be charged more than others; which is exactly what happened with Amazon.ca’s DVD pricing. As soon as consumers got wind of this pricing discrepancy they complained and Amazon.ca had to refund these customers, losing $21,366.60. Therefore, although dynamic pricing provides an opportunity for businesses to quickly adjust pricing strategies in order to have a competitive advantage and maximize profits, they have to be cautious. The benefits of this strategy could be outweighed by the costs from consumer reactions to these changes and privacy concerns.

Read these articles for more info:

Stacey Smith, “The brave new world of dynamic pricing,” MarketPlace, December 19, 2012, accessed November 11, 2013, http://www.marketplace.org/topics/business/brave-new-world-dynamic-pricing.

Michael Martinez, “Amazon Error May End ‘Dynamic Pricing,’ ABC News, September 29, 2013, accessed November 11, 2013, http://abcnews.go.com/Technology/story?id=119399.

Image from: “Choosing the best dynamic pricing techniques for your online business” Angel Investment, accessed November 11, 2013, http://www.angelinvestmentnetwork.net/2013-01/choosing-the-best-dynamic-pricing-techniques-for-your-online-business