The potential negative impacts on your customer/ consumer base due to dynamic pricing!

The potential negative impacts on your customer/ consumer base due to dynamic pricing! You read it correctly, is not just positives, like reducing the overall consumer surplus and maxime revenue based on demand, but there is also negatives on the trustability and psychology of your customer base relation. Pricing stopped being a pure economic domain (homo economicus) to a hybrid where behavioral dynamic is also very relevant. Based on Marco Bertini, from ESADE Business School, the main negatives from dynamic pricing are: Can create resentment on the customer, when the prices change in specially occasions. Can destroy the customer trust built on the other 3 P’s, as pricing are moving fast and randomly disconnecting significantly from the previous conveyed message - creates an unintended wedge between company and consumer. How should one address/manage such potential downsides: Should think beyond the pure standard economic benefit of the transaction and maximize the customer value (recurring transactions…) Introduce guardrails having the aforementioned in mind, thus maximize the client/customer function instead of the transaction function. Use the algorithm to manage the user experience (yield management cases) Understand and be aware the behavioral impacts of your dynamic pricing to your customer. The algorithm should be faithful to your value proposition. Disclose the benefits of dynamic pricing to your consumer / customers. A worthwhile podcast (less 30min normal speed) https://podcasts.apple.com/es/podcast/hbr-on-strategy/id1683845677?i=1000665248732

- Pedro

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