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Dynamic pricing, also referred to as surge pricing, demand pricing, or time-based pricing is a pricing strategy in which businesses set flexible prices for products or services based on current market demands, competitor strategies and other external factors in the market.
Want to learn the concept of dynamic pricing? A practical scenario for the same can be encountered whenever you plan your trip to Goa! Starting with accommodation, the rental prices for Airbnb, OYO, and a host of other options exhibit sharp changes in price that vary with seasons, peak times, location and availability. If accommodation was not enough, you will be astonished to experience the same in parking charges as well (Parking at Baga beach being the costliest while that at Colva beach being free of cost)
Value-based pricing is a strategy of setting prices based on a consumer's perceived value of a product or service and his willingness to pay.
An interesting way of explaining the concept of value-based pricing is by studying the fixed cost businesses, typically the ones in Goa. Take ‘Fish Spa’ as an example, these are businesses where the variable cost per customer is almost negligible. The owners try to engage the customers even if they are not ready to pay the premium price. They will drop the prices based on the customer’s willingness to pay. This helps to attract new customers as well as to ensure that their resources are yielding some output instead of lying idle. So the next time if you are availing such services, make sure you spend good time bargaining!Bundling refers to packaging several products or services together as a single combined unit, often for a lower price than each item separately to facilitate a bigger sale.
Upselling is a sales technique where a seller induces the customer to purchase more expensive items, upgrades or other add-ons in an attempt to make a more profitable sale.
Cross-selling is a sales technique used to get a customer to spend more by purchasing a product that's related to what's being bought already.
A one-shot example to explain all these sales strategies is trying out water sports at Goa! There are individual water sports and activities to attract different types of customers and then there are packaged deals, a typical example of bundling, that offers multiple activities at an attractive price. You may plan to go for Jetski or a Banana ride but the agent will convince you to go for a package deal with 4-5 rides. And how do they do that? Upselling! If you show interest in one of the water sports, they will try to upsell you recommending that the package will give more sports and a better experience at a cheap price. Trust me, they ensure you fall for the trap. If you think, that was all, you are mistaken again. This is where they do cross-selling! Once you have taken the package, and are taking one of the rides, they will stop you in the middle of the ride, only to offer additional rounds for the Banana ride or the driving access for the Jetski for an additional 100-200 bucks, and mind you, there is a good chance you will fall for the trap again.Cross-side network effects refer specifically to the direct increase in value to users on one side of a network by the addition of users to another side. For example, in the case of online gaming, the presence of one user may increase the value for other users.
Goan clubs are a testament to the concept of cross-side network effects and hence their entry charges explain it all. They intend to incentivize or subsidize one side of the customers (ladies) to motivate the other side (stags).The process of distinguishing a process, product or service to make it attractive to command a higher price for it.
The shacks in Goa are well aware of the differentiation concepts taught in B-schools. You will find shacks that differentiate themselves by providing unique propositions. Some are even willing to accommodate pets along with customers. While candle-light dinners are a common offering, certain shacks provide free wifi, volleyball nets, snooker tables, and free resting huts to attract their customers. The phenomenon is not uncommon among beaches either. Certain beaches have provision to rent cycles. (Cycling at beaches – Quite a unique proposition!)