What is dynamic pricing? | Algolia | Algolia

Dynamic pricing, also known as demand pricing or surge pricing, is a strategy that adjusts the price of products based on market demand and other external factors. It uses machine-learning algorithms to analyze real-time data and change prices accordingly. This approach can be found in various industries such as airline tickets, ride-sharing services, hotels, retail shopping, and entertainment. Amazon changes its product prices an average of 2.5 million times daily. Companies implement dynamic pricing strategies differently depending on their use case, but the goal is to maximize profit by adjusting prices based on demand, competition, and seasonality. However, this strategy can raise ethical concerns among consumers who may feel that it prioritizes profits over customer loyalty. An alternative approach called dynamic discovery uses consumer data to present relevant products, deals, and discounts while maintaining the same item pricing for everyone. This method helps businesses build stronger relationships with customers and maintain a more ethical reputation.