A Guide to Dynamic Pricing Algorithms

Price setting is an essential thing in any retail business because any minor error can result in profit or loss. Traditional pricing management never achieved optimal results as they were designed for old methods and environments. As technology has evolved is has found a way to benefit every sector of society. The same is the case with the e-commerce industry. Where dynamic pricing software proves pivotal in enhancing sales of businesses with significant profits.

Highlighting Key Functions of Dynamic Pricing Software 

A dynamic pricing software is an auto-pilot with Intelligence Node’s Al Driven that can enable your retail business with some amazing data driven pricing. This also authorizes merchandising strategy that will have direct positive influence on the revenue and growth.

It can help you in reviewing, optimizing and managing ecommerce prices in a real time. You can conveniently win the customers with dynamic pricing software. 10-second refresh rates for quick response time, bundling pricing, SERP ranking, image analytics, price elasticity, liquidation target, sales velocity, product visibility, promotions and holistic pricing are the features that make the best AI-based pricing engine ever.

What is A Dynamic Pricing Algorithm and How it Works?

Dynamic pricing is a pricing strategy in which businesses set flexible prices for products or services based on current market demands. Whereas, data plays a huge role in making dynamic pricing possible. Algorithms are used to turn data into pricing decisions based on the objectives set by the businesses. Many factors can guide us towards dynamic pricing such as

  1. Time of day or night
  2. Customer location
  3. Day of the week
  4. Level of demand
  5. Competitor’s pricing
  6. Stage of purchase

One thing that should be kept in mind that the role of dynamic pricing software is to earn maximum revenue to the business.

Dynamic pricing algorithms help in maintaining the quality of pricing in e-commerce environments by their ability to change and adjust prices according to real-time data. This allows a company to respond effectively to their changes in demand, future forecasts and automate pricing catalogs for millions of products.

Use of Dynamic Pricing Software in Various Industries

Today many industries and markets are making use of dynamic pricing software such as Hotels, transportation services, and in modern days taxi sharing software, i-e, Uber. Dynamic pricing software calculates real-time data and helps buyers in making decisions.

Let us take the example of an online airline website to understand how the dynamic pricing algorithm works in the airline industry. The main thing you will find on an airline website is the fare forecasting feature. What this thing does is predict prices using a machine learning algorithm. Airlines have hundreds of flights operating per day and what you observe is that the price of the same service class, on the same flight is changing multiple times within several days. The fare remains the same for months before a departure and then it starts growing in multiple, distinct steps. These steps are caused by advance purchase discount requirements. For example, there are fifty economy class seats on the aircraft for a given flight.

Carriers divide these fifty seats into multiple fare groups. For instance, there will only be five seats available at the lowest fare and once these five seats are sold the fare bucket is closed. And there will be 45 seats left which will be sold at relatively higher prices than each other. But if these 45 seats are not filled accordingly then the machine algorithm system readjusts the seats to as lowest fare by giving five seats again to the lowest price and this cycle continues until all seats are filled.

Summing up

The e-commerce industry is growing day by day and dynamic pricing software is benefitting businesses by use of real data more efficiently than ever before.


Shanto is a professional blogger. He love to write about all latest topics. He is working as an seo expert from last 8 years.

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