These slides use concepts from my (Jeff Funk) course entitled analyzing hi-tech opportunities to show how the cost and performance of gas sensors are improving rapidly, making many new applications possible.

1. DYNAMIC PRICING
By ,
VAISHNAVI SUBRAMANIAN (A0136404N)
GAO SHAOHUA (A014 7703H)
FANG QIANG (A0138172H)
WANG BIQING (A0138150N)

2. CONTENTS
 What is Dynamic Pricing?
 Static vs Dynamic Pricing
 Evolution Over the Past
 Current Drivers and Trends
 Future Trends
 Future Applications & Opportunities
 Conclusion

3. WHAT IS DYNAMIC PRICING ?
• ‘Dynamic pricing’ is a flexible pricing
strategy where the businesses set flexible prices
for products or services based on algorithms that
take into account several factors such as :
1. Competitor Pricing
2. Time-based Pricing
3. Supply and Demand
4. Customer Profile
5. External factors in the market

4. STATIC VS DYNAMIC PRICING

5. EVOLUTION OVER THE PAST
• Pioneered by the American Airlines in
the 80’s in the form of revenue
management.
• Pricing was majorly done only based
on supply and demand.
MORE DYNAMIC AND MULTIPLE-STRATEGISED NOW
• TIME-BASED PRICING
• PENETRATION PRICING
• PEAK PRICING
• SEGMENTED PRICING

6. EXAMPLES OF CURRENT USERS IN MARKET : HIGHLIGHTS
Examples of notable retailers using Dynamic Pricing and what they accomplished
with it :
A Top 10 US Retailer
$44 billion in sales in 2013
27% sales increase
Prices change every 10 min
Repriced 25% of products daily
for the holidays in 2012
17% sales increase in eCommerce sales
50,000 price changes monthly
Online sales grew 30% in 2013
Wal-Mart’s growth topped Amazon’s
eCommerce makes up 13% of total sales
Online sales grew 25% in 2013 and 20% in
2014

7. BIG DATA IN DYNAMIC PRICING
With the advent of big data and big data
analytics, business rules for price adjustments
can be made more granular.

8.  BETTER DATA ANALYTICS SOLUTIONS
• Through the support of IT and
database management, vast amounts
of rich sales and transactional data is
available.
• With the advent and development of
several DATA MINING AND ANALYSIS
ALGORITHMS for pricing, this data is
used to produce actionable insights
and for predictive intelligence.
• Firms rely majorly on analytics for the
development of dynamic pricing
solutions.
CURRENT TRENDS & DRIVERS

9. • Relevant, cleaned and structured data along with the aid of
fast and reliable technology does the magic.
• By collecting and analyzing data, it can correlate huge
quantities of information about everything from product
availability to competitor prices on specific products to
information about local economic conditions in order to set
prices.
 BETTER DATA ANALYTICS SOLUTIONS
CURRENT TRENDS & DRIVERS

10.  BETTER DATA ANALYTICS SOLUTIONS
For example , some common data analysis techniques used for ‘Dynamic Pricing’ are :
CURRENT TRENDS & DRIVERS
DEMAND FORECASTING
• Using big-data exploration, a TIME-SERIES
FORECASTING technique is used to predict the
price/demand elasticity of customers.
CLUSTER ANALYSIS FOR CUSTOMER SEGMENTATION :
• Big-data used to perform CLUSTER ANALYSIS to group
customers into segments and price dynamically based
on different customer purchasing activities ,
demographic characteristics, etc.

11.  BETTER DATA ANALYTICS SOLUTIONS
Some examples of adept current day pricing tools and softwares based on big-data analysis
and business intelligence developed by top-notch organizations are given below.
CURRENT TRENDS & DRIVERS

12.  INTERNET ACESSIBILITY & COST
1. Increased Internet Usage
2. Faster Speed
3. Cheaper Access
4. More Customer Profiles
5. Low Barriers To Enter The E-commerce World
CURRENT TRENDS & DRIVERS

13. 1. MORE USERS
• More People book their tours Online, and its over half of orders, superior the
traditional order.
• In the past, people buy tickets from agents or from airline directly, fixed prices
were convenient and easy for management. But now, airline companies can
using dynamic pricing to gain more profit.

14. 2. FASTER SPEED
• With faster Internet speed, the companies can adjust their prices
faster. More adjustments will find more suitable potential customers,
and can gain more revenue.
• Amazon, one of the largest retailers that uses dynamic pricing, adopt a faster
price adjustment from days to every 10 minutes on average, which leads to a
27.2% increase in sales from 2012 to 2013.

15. 3. CHEAPER ACCESS
• Though Internet is a convenient way to adopt dynamic pricing, but the fee for Internet is
a big consideration in the past ($1200/Mbps), which was even more than some small
retailers’ revenue, so few retailers thought about it in the past.
• But now, the Internet price is ‘1/1000 th ’of the price in 1998. Internet fee is no longer a
main consideration for the retailers. More than 29% of retailers are willing to adopt
dynamic pricing in one year.

16. • With the widely-used shopping through Internet, the customers’ profile
data is easier to acquire (when register for a new shopping website or
airline booking websites).
• In the past, asking for personal data was intrusion, but now customers
profile data, shopping history and other personal data is very easy to
get through Internet website databases.
4. MORE CUSTOMERS PROFILE

17. • In the past, the dynamic pricing just changed the prices according to
the supply and demand data.
• But now, with more customers profile, it can also change its strategy
and modify the prices from person to person, and maximally find the
potential buyers.
4. MORE CUSTOMERS PROFILE

18. • Travel websites often offer more expensive
trips to the Apple computer users, compared
to the Windows users.
• B&Q has used a new dynamic pricing system
that changes the price of products depending
on a customer’s profile.
• Loyal customers will be rewarded with discounts
and special offers whilst less-frequent customers
will be offered a different price.
4. MORE CUSTOMERS PROFILE

19. 5. LOW BARRIERS TO ENTER THE E-COMMERCE WORLD
• Ease of access and entry into the e-commerce world
has become very advantageous to small players and
new retailers.
• It is no longer special and a clash of few selected
giant retailers online.
• Such a COMPLICATED and SATURATED marketplace
requires competitive dynamic pricing.

20.  Impacts of smart phones on dynamic pricing
1. Mobile Networks
2. Real-time Physical Location
3. Networking Information
CURRENT TRENDS & DRIVERS

21. Popularity of Smartphone
• More people prefer online shopping through their smart phones. In the past,
people can only compare prices online by sitting in front of a computer,
now they can grasp the lowest cost anytime anywhere with a smart phone.
• The development of ICs reduced smart phone costs, thereby promoted the
popularity of smart phones.

22. Mobile Networks
• With the development of wireless technology, people enjoy superfast
online access. They can scan QR code when they are in physical stores
and immediately compare the price. They can also track the dynamic
pricing during time pockets to buy at best moment.
• 58% of smartphone owners use their phones to compare prices while in-store

23. • For companies, with customers’ permission they can acquire customers’
profile data like the phone type and physical location while they scan
codes, then analyze the data to adjust price to cater potential customers
• Statistics result shows $5 price difference on a $50 product tips the scales in
online shopping’s favor

24. • Besides, every seconds people check price using smart phone, which gives
company loads of real-time data to adjust price based on fast market response
like page views and turnover
• In the past, the intensive market response only happens when people have leisure
time with computers at hand

25. Real-time Physical location
• Smartphone achieved display of personal physical location in real-time, which
creates new business model like Uber
• Uber’s wild success is its data(customers’ and drivers’ real-time locations) and
algorithmically (dynamic pricing) build a platform to match supply and
demand for cars

26. • In new year’s eve or after a big activity when there are relatively more riders than rides, Uber
employs a “surge pricing” to encourage more drivers to go online.
• The surge pricing works by allocating a higher hourly income to driver partners in order to
convince them to work where and when demand is high. It also allocated rides to riders who
value them most

27. • Comparison is the last New Year's Eve in New York Uber had a transient failure on
dynamic pricing system. Results showed the ride a success rate fell to only 25% and
the waiting time is much longer than previous sample
• In the absence of surge pricing, the demand is unusually high but driver partners
don’t want to work because the income is not attractive
An Example of Uber Without Surge

28. • Real-time physical location can also help for building new parking management and profit
model ,which increase revenues and parking efficiency.
• New variable pricing scheme varies prices over the course of the day and different quarter,
based on demand data(the number of drivers want to park nearby). Drivers can check the
neighboring vacancy spots and corresponding price on smartphone to make a
affordability-distance balanced choice

29. Networking information
• Dynamic pricing in a smartphone world is greatly influenced by market demands driven
by networking power. It makes dynamic pricing information propagate faster and
receive faster market responses
• Many price comparison APP have networking functions now. Customers can post local
price as reference and share comparison result on social media websites. Friends can
follow networking channels and make shopping decision by seeing others’ review

30. • Companies can keep an eye on the competition’s prices from price
comparison APP and networking popularity. They can promote
customer demands using the power of social networking and timely
adjust price in response to customer feedback

31. Dynamic Pricing Future Trends
1. Individualized Dynamic Pricing strategies
with Smartphone Data
2. Price Display by Smartphone Device

32. 1. With Smartphone we have access to more detailed data from customer
2. With these data we can extract more customer personalized information
3. With these information we can achieve individualized DP strategies
Shopping History Purchasing Habit Current Location
Individualized Dynamic Pricing Strategy
Prefer Brand

33. Individualized DP Strategy
Dynamic Pricing Overall Demand
Individualized DP Individual Demand
InconsistentTailored Strategy
By Smart Phone

34. Individualized Dynamic Pricing
• For one customer, buying stuff at a
lower price is not saving money. Not
spending unnecessary is saving money.
• Except the current market-based
Dynamic Pricing strategy, customers
should have their own dynamic pricing
strategy, to show their own demand
level for a certain goods. This individual-
oriented DP strategy can be another
price reference for customers.

35. Individualized DP
Individualized Dynamic Pricing ------
Market Dynamic Pricing ------
• For customers, buying decision is
not only depend on the market DP,
but also depend on themselves DP
• When the customer price is higher
than the retailer price
→ BUY
• When the customer price is lower
than the retailer price
→ NOT BUY

36.  1. Optimize profits through
real-time personal pricing
adjustments
 2. Generating more customer
Loyalty
 3. Build enhanced profiles
of customers for the retailers
Advantages of Individualized DP

37. 2. Price Display by Smartphone
1. In the future, smart can replace the traditional paper or
electronic screen price tag and act as the price display tool.
2. Customers can obtain the dynamic price as well as other
information of goods by just tapping the NFC tag or scanning
the QR code.

38. 1. More Flexible, accurate
and Real-time information
2. No need electronic screen,
save the cost of retailers
3. Show more information of
goods
Advantages of Price Display
by Smartphone

39. 1. Smartphone design & manufacturing
with NFC identification function
2. NFC chip manufacturing
3. Mobile Apps to read QR code & NFC tag,
combined with price analysis function
4. Data processing platform that deal
with mass dynamic pricing data analysis
Future Opportunities of Price Display
by smartphone

40.  Could charge different prices depending on the availability of parking spaces in a
neighborhood.
• SMART METERS
FUTURE APPLICATIONS AND OPPORTUNITIES

41.  Earlier purchases charged lower , subsequent price increase with time.
 Will help farmers to sell off their produce as early as possible and overcome the problems
of loss due to damaged produce because of lack of storage facilitates.
• AGRICULTURAL HARVEST PRICING

42.  Prices in Toll Lanes should be controlled by time of day, day of week, special holidays,
weather, congestion, etc.
• TOLL LANES

43. CONCLUSION
• Dynamic Pricing is a good method to provide a star match between the
merchandise or services and its potential customers.
• It can scrutinize the most urgent demands, help the customers to find the
desired products and solutions at the desired price and also offers the
best benefits to the merchants to make optimal profits.
• It guarantees both sides of the deal-makers gain its best benefit often. It
is a win-win game.
• Future development of the technologies will offer more opportunities for
dynamic pricing.

44.  https://en.wikipedia.org/wiki/Dynamic_pricing
 http://www.slideshare.net/BlueYonderAnalytics/what-is-dynamic-pricing
 https://mpk732t22015.wordpress.com/2015/09/03/dynamic-price-strategy-of-the-airline-
industry/
 http://alumnus.caltech.edu/~amir/hotel-dyn-pricing-final.pdf
 https://www.wiser.com/infographic-ready-for-takeoff-why-dynamic-pricing-is-a-must-for-
ecommerce-retailers/
 http://www.slideshare.net/tombacon/dynamic-pricing-48006422
 http://www.datadial.net/blog/the-growth-of-mobile-ecommerce-payments/
 http://www.paymentscardsandmobile.com/banks-hold-key-to-mobile-payment-adoption/
 http://media.ofcom.org.uk/news/2015/cmr-uk-2015/
REFERENCES

45.  http://www.wired.com/2014/11/online-price-discrimination/
 http://www.ibtimes.com/mobile-devices-are-changing-ecommerce-heres-how-1297265
 https://newsroom.uber.com/the-effects-of-ubers-surge-pricing/
 http://www.vox.com/2014/12/18/7415055/parking-dc
 http://web.uvic.ca/~pcourty/IO%20Pricing.pdf
 http://www.pfsweb.com/blog/is-the-qr-code-dead/
 http://www.tinbergen.nl/~moraga/LawEcon5.pdf
 http://web.uvic.ca/~pcourty/IO%20Pricing.pdf
 http://www.progressyourprofits.com/business/buy-now-triangle.html
 https://econsultancy.com/blog/65327-why-dynamic-pricing-is-a-must-for-ecommerce-
retailers/
 http://blog.wiser.com/retailers-ned-know-dynamic-pricing
 https://www.ecommerceresult.com/en/recommendation-engine
REFERENCES

46.  http://multichannelmerchant.com/ecommerce/future-dynamic-pricing-21112015/
 http://www.zdnet.com/article/the-future-of-retail-is-dynamic-pricing-so-why-cant-we-
get-it-right/
 http://www.forbes.com/forbes/welcome/
 http://whatis.techtarget.com/definition/dynamic-pricing
 http://www.blue-yonder.com/en/solutions/dynamic-pricing.html
 http://www.business.com/ecommerce/what-is-dynamic-pricing-and-how-does-it-
affect-ecommerce
REFERENCES