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Optimize your pricing strategy with demand-based, time-based, competitor-based, and segment-based pricing models. Maximize revenue and profit with data-driven pricing decisions.
Price Sensitivity
Medium
Elasticity: -2
Moderate price sensitivity
Dynamic pricing is a flexible pricing strategy where businesses adjust prices in real-time based on market conditions, demand levels, competitor actions, time of day, and customer segments. Used by industries ranging from airlines to e-commerce, dynamic pricing helps maximize revenue by finding the optimal price point that balances demand and profitability.
Price elasticity of demand measures how sensitive customers are to price changes. A price elasticity of -2 means a 1% price increase results in a 2% decrease in demand. Understanding your elasticity is crucial for making profitable pricing decisions.
Dynamically adjust prices during limited-time promotions based on inventory levels and demand.
Adjust room rates based on occupancy, day of week, local events, and competitor rates.
Optimize pricing tiers to maximize revenue across different customer segments.
Real-time seat pricing based on booking window, flight load, and route demand.
| Industry | Benchmark | Description |
|---|---|---|
| E-commerce | -1.5 to -3.0 | Typical price elasticity range |
| SaaS | -0.8 to -1.5 | Lower elasticity due to switching costs |
| Luxury Goods | -0.5 to -1.0 | Inelastic demand, premium positioning |
| Commodities | -3.0 to -5.0 | Highly elastic, price-sensitive market |
| Airlines | -1.0 to -2.5 | Varies by route and booking window |
| Hotels | -1.2 to -2.0 | Location and season dependent |
A/B test small price changes (5-10%) before making larger adjustments to validate elasticity assumptions.
Set up automated alerts for competitor price changes to respond quickly to market shifts.
Prices ending in .99 or .95 can increase conversions. Test $99 vs $100 to see the impact.
Different customer groups have different price sensitivities. Use segment-based pricing to maximize revenue.
Sometimes lower prices that attract loyal customers generate more long-term revenue than short-term profit maximization.
Calculate profit margins and markup
Calculate total product costs
Compare product profitability
Calculate selling price from cost
Calculate discounts and final prices
Calculate return on investment