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Variable pricing is the use of data to set fine-grained prices. It's the basis for pricing techniques such as revenue management, dynamic pricing and yield management. The following are common examples of variable pricing.
Price DiscriminationPrice discrimination is any pricing strategy that attempts to sell both to customers who are price sensitive and those who are relatively insensitive to price. For example, a manufacturer of sunglasses may set a low price for unpopular colors. Customers who are price sensitive may be tempted to buy a color that is on sale. Customers who aren't price sensitive will buy the color they prefer.
InventoryLowering a price based on inventory levels to clear items. Alternatively, a price may go up when an item is selling fast and you'll soon run out of stock.CompetitionBasing prices on competitive intelligence. For example, lowering a price when a competitor launches a new product that is a threat to your market position.Setting prices based on supply & demand forecasts. This can be done at a fine-grained level such as a seat on a flight. If you forecast that a particular seat might not sell you might offer it at a low price.
Dynamic pricing is a term for variable pricing that occurs in real time. For example, an ecommerce site that uses algorithms to set prices based on data such as inventory levels.Peak PricingSetting higher prices during peak hours for infrastructure with fixed capacity such as roads.
Pricing can be used by cities and nations to meet sustainability goals such as air quality levels. For example, vehicle registration and license fees based on the emissions of the vehicle.Yield management is the science of pricing inventory that occurs at a point in time such as a seat on a flight or a hotel room. Such inventory is limited in supply and may generate high prices when demand is high. Alternatively, such inventory goes to waste if it is not sold and is often discounted.|
| Type | | | Definition | The use of data to set prices at a low level of granularity. | | Related Concepts | |
Pricing
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