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When Oasis announced their first ever reunion tour with both Gallagher brothers since 2009, there was no doubt demand would be high. In fact, when tickets went live on Saturday 31 October, over 10 million fans from 158 countries queued for the chance to be in the audience.
However, when prices soared as high as £350 (almost twice as much as what was advertised), questions arose about the ticketing site’s use of dynamic pricing. Not only did the Advertising Standards Authority (ASA) receive 450 complaints about Ticketmaster adverts for the Oasis gigs, but the UK Culture Secretary has called for a review into use of dynamic pricing and the European Commission is also investigating the issue.
Given the controversy, we thought it necessary to give an overview of using dynamic pricing strategies.,,
An introduction to dynamic pricing
Dynamic pricing is simply when prices are not fixed, and are adjusted based on specific variables, allowing vendors to adjust prices, incentivise potential customers, and maximise revenue for both the seller and the platform. There are a number of different strategies that can be used for this:
- Real-time demand-based pricing (also referred to as peak pricing)
Prices change in real time based on factors like inventory levels, demand, and competitor pricing. For example, during peak times, or when an item/event is proving particularly popular, prices increase, and when demand is low, prices decrease. This is common in industries like travel and event ticketing (e.g., airlines, hotels, concerts), ride-sharing apps (e.g., surge pricing during busy hours) or even in utility services (e.g., higher rates during peak energy consumption hours).
- Segment-Based Pricing
Different customer segments are charged different prices based on their willingness or ability to pay. This could involve discounts for students, seniors, or loyalty members, or higher prices for premium users or last-minute buyers.
- Competitor-Based Pricing
Prices are adjusted based on the prices set by competitors. If competitors lower their prices, the business may follow suit to stay competitive, or they may raise prices if competitors do.
- Penetration Pricing
Initially, prices are set lower to attract customers and gain market share, then gradually increase as demand grows or as the product/service establishes itself in the market. This can be seen in subscription services or new product launches.
- Geographical Pricing
Pricing changes depending on the geographic location of the customer. This could involve higher prices in certain regions where demand or cost of living is higher, or it could reflect currency differences in global markets.
- Personalised Pricing
Prices are tailored to individual customers based on their browsing behavior, purchase history, or demographics. This is often seen in e-commerce, where users might be shown different prices based on their previous interactions or loyalty status.
Businesses can use a combination of these different strategies, just one, or none at all. Just because you can introduce dynamic pricing, doesn’t mean it’s the best strategy for your business. Creating a strong and profitable pricing strategy requires significant research and market understanding.
Implementing dynamic pricing
Point-of-sale and booking platforms, like Ticketmaster, face added risk when using dynamic pricing, as it is not just their reputation on the line but also the thousands of businesses they are selling on behalf of.
Frequent price changes/hikes can lead to customer frustration or a perception of unfairness, especially if prices increase unpredictably like with the Oasis tour. Often, the dissatisfaction isn’t directed towards the POS system, but the company they are booking with or purchasing from. Many of these businesses are SMEs, making brand reputation and customer loyalty essential in order to meet their revenue and growth targets.
One way to mitigate this risk is by adding upper and lower price limits, as even with real-time demand-based pricing, you can be confident it won’t surpass customers’ expectations.
However, implementing dynamic pricing also requires sophisticated technology, real-time data analysis, and monitoring. This can be costly, time-consuming and extremely complex, particularly for smaller businesses, meaning they have to rely on external technology partners.
TUBR’s predictive platform can integrate directly with existing systems and apply its patent-pending demand modelling to create more effective and personalised strategies. It combines POS/booking data with external datasets to ensure it understands the nuances of the business, industry, and their customers.
To learn more about TUBR’s approach to dynamic pricing, read our latest case study here.