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Dynamic pricing: The art of the deal

Updated: Jul 9, 2020

In 1999, Coca Cola became one of the first FMCG companies to introduce dynamic pricing of products. The company unveiled vending machines which priced drinks based on temperature at the time of purchase. Prices would increase automatically with the day’s temperature, as would the utility of Coca Cola.

Coke’s blatantly honest messaging of maximizing profits received massive backlash from the market. The company’s stock dove from $37 to $18 in 5 months. PepsiCo fanned the flame by stating, “we are focused on innovations that make it easier for consumers to buy a soft drink, not harder.”

📚Even as modern dynamic pricing models have become more multi-factor and opaque, consumers flock to Amazon and Flipkart’s sales, as they are wrapped in the message of “value buying” i.e. products at prices lower than market rates.

🌀In 2018, Amazon adjusted the prices of products 2.5 million times daily

🌀IRCTC saw a 62% increase in revenue from 2016-19 after implementing dynamic pricing in premium Tatkal bookings

💡Large companies establish pricing power through dynamic pricing, which aids them in eating into consumer surplus.

🔎Has big-business already set this in motion? If so, is it sustainable?

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