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Dynamic Pricing

800px-Onedolar2009seriesOne thing we are accustomed to (used to) when we shop is prices going up and down with sales and seasonal (different time of the year) deals. But what about prices changing frequently, as much as every 10 or 15 minutes?

If you’re like many Americans, you’re doing more and more of your shopping online (on the Internet). Popular websites are now using dynamic pricing to get the best price for their goods (items for sale) and urging (encouraging) you to buy. Dynamic pricing is when a business uses computer programs with complex (not simple) algorithms (math formula; math rules a computer follows in computing) to figure out the best price for a product. This algorithm takes into account (includes in its calculations) things such as inventory levels (how much of a product the seller has), competitor prices (how much other stores are charging), how quickly the item is selling in a given time frame (a certain amount of time), and your buying history (what you have already purchased from that website).

Dynamic pricing is not new. If you’ve purchased an airline ticket in the past 20 years, you know that you may get a different price depending on when you make your reservation (booking before purchasing). In recent years, some sports teams have begun to price their tickets according to how popular a game is predicted (expected) to be and how many tickets have already sold, among other things, to make sure that it sells the most tickets possible. Now, this practice (way of doing things) is being used for all kinds of products.

I noticed dynamic pricing when using a popular online retailer (seller): Amazon. Amazon’s pricing system is so sophisticated that it’s a mystery to most people. However, if you ever put an item in your shopping cart (list of things you’re getting ready to buy) and leave it there for a few days or a few weeks, you’ll see the price changing, perhaps many times over that time period, depending on the factors I mentioned above and more, including what you buy in the meantime. This use of customer information is somewhat (kind of; fairly) controversial because some critics (people who don’t like it) say that it’s an invasion of privacy (viewing and using of personal information without your knowledge or permission). However, it’s being done all of the time, and not just with large retailers like Amazon.

Have you noticed dynamic pricing used in your online shopping? What do you think of this pricing practice?

~ Lucy

Photo Credit: Onedolar2009series from Wikipedia

9 Responses to “Dynamic Pricing”

  1. Peter Says:

    My dear professor Lucy,
    Thanks for the dynamic post you got there about dynomic pricing :)))
    The post is dynamic because it made me think about the entire cyber pricing.
    In fact ,now that mentioned it I realized that you are right. It is hard to predict the change in prices on line
    As a matter of fact ,just recently ,I ,myself,was a victim of the Internet gouging. I call it gauging because to me it is all it is.
    The thing is , The prices on the marketing websites are so fluctuated that makes it almost impossible for customers to zero in the best time in order to get the all time lowest price for a given product.
    U know ,I tried. to connect dots to find a formula or equation for it.
    Alas, I failed . i could not find a logic relation to all the literally by-second price changing going on in today’s cyber marketing websites at large. Frankly ,it is all way over my head ,in other words ,it is hard for me to understand all the trends and equations involved. In simpler words ,I can not make heads and tails of them.
    My ongoing dilemma is that I buy English text books from time to time out of Amazon and I always try to hit the market when it is at all time low. Needless to say ,the system always beats me to it.
    There is no reasoning or logic behind it. It is like it is all a kind of random pricing that follows no rules or principles.
    it makes it even harder to predict the price inflation in the near future.
    It is always a toss-up. There is always a certain amount of uncertainty to it.
    Frankly ,I hate it
    U know ,two weeks ago there was this book on Amazon about writing in English that I had an eye on. Back then ,the price was too steep for my money,budget if you will.
    So I decided to wait out the high price on the text book. And waiting out I did
    I was lurking for almost 10,or 11 days for the best time to ponce on the lowest price,but ,sadly it never happened. One day i woke up ,and i realized , All the inventory got sold out already ,and I ended up having this bitter feelings about the whole shopping experience
    Since then I have been kicking myself that why I didn’t buy the book while I had a chance.
    I mean,it wasn’t where I should have skimmed
    You see my dilemma. I always in the pickle when I wanna buy sth on line
    U know ,the whole recent on line shopping experience left so bad a taste in my mouth that I decided to stop on line shopping altogether.
    It is not for me. I m not wired for these kind of things. I get all sweaty ,my hands get all clammy and I get this knot in my stomach.
    U know I went to indigo and bought the book anyway. The price was relatively higher in the brick and mortar store ,but at least I know what I m getting into
    You know what I mean

    Thanks Lucy ,very interesting post

    Best ,
    Pete

  2. Peter Says:

    Well, if i once happen to be down in LA, my question to the tour guide will be:

    Where is the location of the Starbucks where Dr. Jeff McQuillan gets his ” earl gray moca tea?” :)) I don’t know the name of his neighborhood ,but I do know his neighbor has a vicious dog and his another neighbor’s kids throw tantrum like all the time.
    And ,If I see Lucy down the street, I will chase her down to take a photo of her so I can post it here :))

    Yours
    Pete

  3. Peter Says:

    Guys ,
    I gotta tell u , This learning guid and PDFReader experience is an amazing thing.
    Actually , the combination of the two is one of the kind. I mean , it is a whole another level of eslpod-learning

    Sometimes , it happens for me to loose the train of thoughts as I m listening to Jeff. It happens to every body.one may start day dreaming . One may remember sth he /she must do and so on
    all these take one’s attention off rather away from Jeff’s lectures. But , following along Jeff on PDFReader helps me to stay focused during the entire time.
    I m telling you folks ,learning guid and PDFReader complement each other perfectly and beautifully!!
    As you know , Eslpod people put the lessons on the website a bit earlier,typically one day earlier , than the actual lunching of the lessons . U know , as they put up a new lesson there,I transfer the pertained learning guid to the PDFReader and study the entire 10-11-pages-long learning guid booklet arranged , composed ,organized for said lesson. Let me tell you guys , the ritual has boost my learning experience with eslpod.

    Indeed ,learning guid is the best preface for every single lesson on our one and only eslpod.

    Thanks specially to you Lucy because I firmly believe you are the master mind behind the whole learning guid composition :)))

    Thanks Lucy , for one-of-the kind leaning guid

    Best ,

  4. Dan Says:

    Hello everyone

    My online shopping has increased in recent years.
    One of the website I use the most is Amazon.
    I mostly buy books for the Kindle and recently I bought a couple of games.
    I always find the prices very convenient. Think that with the price of two games I got from Amazon, at the traditional shop I would have gotten just one game.

    Personally, I haven’t noticed this dynamic pricing mentioned above.
    Actually this is the first time I hear about it.

    I have heard something similar used on the stock market.
    These computers that make thousands of transactions in just milliseconds.

    Anyway, if this dynamic pricing makes things cheaper for the online buyers, I welcome these new systems.

    Thanks

  5. Peter Says:

    Well,

    Dynamic pricing is not a new phenomenon. As Lucy pointed out the method has been around for at least two decades in some areas that the demand for some specific services or products varies from one season to another.

    For decades ,all the price dancing was limited to the certain services and businesses whose products target certain customers at a certain period during the year.
    Take ,air line tickets for example. As our dear prof (the abbreviation for professor) Lucy mentioned the price of the airline tickets riding on the time of purchase . For instance , the airline tickets prices go up around holiday seasons and kids summer vacation and drop down in fall and late winter.
    But ,for the past few years with the creation of online marketplaces nearly in every business sector out there , the trend has taken a new turn. It is everywhere and it changes not by season but by second.
    Well, needless to say that some people welcome all these market changes as they become increasingly more dependable on the parallel world in their laptop. Well, they see it as an convenience . They no longer have to circle around for hours to snag a parking spot around a mall, they no longer have to elbow their way among the crowds in holiday seasons ,and they are no longer dependable to the limited business hours. They can go shopping whenever they want even in their pajamas while lying on a coach at home. They can go shopping at all hours of the day and night at any time of the year. So , why bother ?they don’t mind the price instability as it adds an exciting aspect to it.
    Well, some people ,on the other hand ,still go traditional :)). They still want to be a part of the actual experience. They like to go out there and make their way to the actual store ,challenge the crowd ,and buy their purchase at the reasonable hours of the day when they can feel the products and haggle their way to a lower price.

    They still want to be three-dimensional :)

    I ,myself , like the haggle , love the challenge , and still feel three-dimensional :))))

    Yours
    Pete

  6. emiliano Says:

    Dear Lucy,

    By your note it seems to me that I could not be more in agreement with you regarding what
    you said above.

    Yes, that is absolutely true, as surfing by the web as much as I use to do it is the real
    even I could see every day.
    Prices on the web are going down and going up every day.
    If I watch for some kind of gadget like a iPad, Mp3, camera or a kindle book, at the following
    day I could have five or six messages about the kind of objects I have been looking for.

    Now I have the rule of seeing a nice thing in Amazon that I like for me or other, I put it
    on the “wish list”, after some time they could advise me if the thing went down, if there is
    a new dicount, or if the gadget has going up (just in this case they say nothing I could see it by my
    own eyes), and this is also the way some other web sites do but not so frequently as Amazon.

    The last thing I bought in amazon was a blue ray of Adele, her concert in the Royal Albert Hall
    of London, it is incredible good and Adele is amazing…..the Price was absolutely good 9 euros
    when in the shop it could cost more tan 20/25 euros.
    After three days I have the blueray disc at home and we could watched it on the tv screen
    perfectly well.
    Our dear peruvian friend Isabel was with Cuca and me watching the blueray, she is a fan of Adele
    till a point I can´t explain, despite she don´t know anything about the lyrics.
    Isabel wanted also a blueray disc like mine, so lI look for a new one but it cost……17 euros
    instead of 9 euros.
    I told her, and poor Isabel was quite dissapointed, so now I am thinking in giving Adele blueray to
    her, and put a new one in the Wish List awaiting again to see if the blueray price goes down again.

    Real, nearly double price in four days only…..? Why?
    I have seen this even several times along the five years or more I am client of amazon, or other
    web sites.

    Dynamic Pricing without any doubts.

    Thanks so much dear Lucy, it is quite interesting topic to look for prices which ever
    occasión we are thinking in shopping by the web…..I am always doing that, ja, ja,
    may be because I don´t like to be outdoors frequently.

    My best Lucy.

    emiliano (the senior one)

  7. sirjoe777 Says:

    Thank you very much Lucy!!!
    Yes, I already noticed that prices weirdly changed, but now thanks to you I know it’s because of the dynamic pricing!
    In my last purchase I saw the price of the product I was searching for changed two times: the first one it increased
    from £ 21 to £ 28 and than suddenly after one week it went down to £ 19… So I bought it immediatly, but now after reading your post
    I’m aware I wasn’t that smart: on the contrary I’ve been really… silly!
    Ciao.
    Sergio

  8. sutisha Says:

    Dear Lucy,

    How au fait you are!!!

    You always suggest interesting ideas I fail to notice or consider which help keep my English up-to-date week
    by week, and I am so grateful.

    Usually, I buy book online once or twice a year, and the website I trust most is Amazon for it is convenient
    and I do not wait long but just within eight days. I ever used a local book agency service which took me six
    weeks to wait and I had to drive to get the product. And when comparing, the prices were nearly the same.

    I have noticed dynamic pricing on two websites in my hometown – the Tesco and the Big C. These two
    department stores claim to be the cheaper of all their goods. It seems they check each other’s prices all the
    time to become the cheaper. I wonder whether their first prices are exaggerated high … or not…

    Personally, I see dynamic pricing benefit customers and also upset the ones who are late informed and those
    who wait too long for the cheapest price. Like me, the last three months I suffered losing chance to get a new
    printer at special price due to my hesitation.

    Best regards
    sutisha

  9. Betty Says:

    Dear Lucy

    Thanks for this online shopping experience topic.

    Unlike the Americans, I don’t do an aweful lot of shopping online.

    If I buy anything online I will complete the whole process within a few hours and I don’t go back to check the latest prices afterwards. So I will never find out even if the prices changed later.

    In fact, Instant (or near instant) Dynamic Pricing is a dream for every business.

    When we buy some grocery from the market traders, we know that they hold the prices high up in the morning. And then later in the evening if they still have a lot of perishables left, they will reduce the price to next to nothing in order to get rid of the goods.

    In the past, due to lack of technology support, it was very difficult for big companies to achieve Dynamic Pricing. Now that they have the most advanced computer to do all the inventory and supply and demand calculations for them, they should make the most of the market sentiments and make money while they can.

    Like Dan, I would welcome Dynamic Pricing if it enables me to purchase something at a good price.

    Many thanks again, Lucy, good talking topic.

    Best Regards

    Betty :)