USE OF DYNAMIC PRICING METHOD IN CAR PRICING

The use of Dynamic Pricing (DP) method is becoming popular in industries as it gives the ability to change product price dynamically to maximize profit. Earlier, DP was mostly used in airlines and hotel business but now it is being adopted in other business sectors like automobiles, electronic goods, apparel etc. as well as in different service providing sectors like mobile and internet service providers. DP is the concept which states that price of an item can vary depending upon different parameters like demand of customers, supply of goods, price change of the competitor’s business, change of time etc. Dynamic Pricing is being used in different new sectors because it can help to maximize profit and the technologies required to implement it becoming affordable. It has become easier for companies to collect demand data and customer-centric data by using modern technologies like IT, internet etc. to set the competitive price of products.

There is fundamental difference between dynamic price and fixed price. In case of fixed pricing of a product, the price of it remains same for some months after it enters the market. Then the price of it is lowered to clear its stock. Currently, this model is being used in different sectors like apparel sector where the price is initially fixed for a new product line for some months and then it is lowered to clear the stock. New car models are kept in showroom for some months for a fixed price and then the price of the unsold model is lowered to sell it off quickly. But in case of dynamic pricing of a product, the price can be changed from the first day the product enters the market using different parameters like time, demand of the product etc.

USE OF DYNAMIC PRICING METHOD IN CAR PRICING

The use of DP method in industries like manufacturing, retail can significantly improve the competency of supply chain. The functions of supply chain like price, production etc. can be integrated for maximum profit and can result in other significant benefits for smoothly running the business.

Example of DP use in automobile industry. One of the big automobile companies of the USA, Ford, used DP in 2003 to maintain their profit margin by feeding sales data into computer models to find the best incentive plan for earning more revenue. They used different incentive plans for different car models. A slow-selling car was being offered in more discounted price than a fast-selling one and the price of car was changing frequently in different regions. General Motors is also using data collected from a dedicated website to implement dynamic pricing method for earning more revenue. In automobile selling websites like Autobyte1.com, the method of dynamic pricing is being used where potential customers can bid for their chosen cars.