Dynamic pricing is a flexible pricing strategy where the price of a product or service changes based on real-time market conditions. Factors influencing dynamic pricing include supply and demand, competitor pricing, time of day, customer segment, inventory levels, and external events. This approach is widely used in industries like airlines, hotels, and ride-sharing, and is increasingly adopted in ecommerce.
In the ecommerce context, dynamic pricing can range from sophisticated algorithmic adjustments that update prices multiple times per day to simpler strategies like promotional pricing during sales events or seasonal markdowns. The goal is to optimize revenue by charging the right price at the right time—capturing maximum value when demand is high while remaining competitive when conditions warrant lower prices.
For DTC brands, dynamic pricing must be balanced with brand perception and customer trust. While airlines and hotels have normalized fluctuating prices, consumer goods brands often face backlash for frequent price changes. Successful implementation typically involves strategic pricing tiers, targeted promotions for specific customer segments, and thoughtful use of compare-at pricing to frame discounts positively.