Dynamic Pricing
Definition: Dynamic pricing involves
adjusting prices in real-time based on
various factors such as demand,
competition, or other market conditions.
Type: It's a flexible pricing strategy that
responds to market dynamics and
changes.
Focus: The primary focus is on adapting
prices to maximize revenue based on
immediate market conditions.
Function: Uses algorithms and data
analysis to change prices quickly in
response to factors like demand spikes,
inventory levels, or competitor pricing.
Advantages:
Maximizes revenue by capitalizing on
high demand periods.
Can optimize prices for different
customer segments.
Disadvantages:
 Potential customer backlash if
pricing changes are perceived
as unfair.
 Complexity in managing pricing
algorithms and strategies.
Example: Airlines often use dynamic
pricing, adjusting ticket prices based on
factors like seat availability, time to
departure, and even browsing history.
Niranjan Sharma (PC-09) Division-A
Pricing Strategy (Minor Assignment)
What is the difference between Dynamic Pricing, Penetration Pricing and Value Based
Pricing Strategies?
Penetration Pricing Value-Based Pricing
Definition: Penetration pricing sets a low
initial price for a product to quickly gain
market share and attract customers.
Type: It's a strategy aimed at gaining
market entry and capturing market share
rapidly.
Focus: Primarily concentrates on
capturing market attention and acquiring
a customer base quickly.
Function: Helps in swiftly penetrating the
market by offering an attractive price
that undercuts competitors.
Advantages:
Rapid market entry and customer
acquisition.
Builds brand awareness and loyalty from
the start.
Disadvantages:
 Might lead to lower profit
margins initially.
 Customers may perceive
quality issues if the low price
seems too good to be true.
Example: New mobile phone companies
might introduce their latest models at a
lower price than established brands to
quickly attract buyers.
Definition: Value-based pricing focuses
on setting prices based on the perceived
value of the product or service to the
customer.
Type: This strategy anchors pricing to the
perceived worth of the product or
service.
Focus: Concentrates on aligning pricing
with the value customers place on the
product or service.
Function: Involves understanding
customer preferences, needs, and
perceptions to set prices accordingly.
Advantages:
Allows for higher profit margins by
capturing the value perceived by
customers.
Can create a competitive advantage
based on unique value propositions.
Disadvantages:
 Requires in-depth market
research and understanding of
customer perceptions.
 Pricing might not always align
with production costs,
impacting profitability.
Example: Luxury brands like Rolex price
their watches based on the prestige and
exclusivity associated with the brand
rather than just the cost of
manufacturing.