Dynamic pricing: how technology is changing the marketplace Author: PriceCop Thursday April 24th, 2025 • Category: Blog • Updated: Thursday June 12th, 2025 “Dynamic pricing isn’t just a technology. It’s a way to make business smarter, faster, and closer to the customer.” — Harvard Business Review, article “Pricing in the Age of AI” (2022) Imagine this: you add a product to your cart, get ready to check out — and suddenly the price changes. Or you search for a flight, return an hour later, and it’s already more expensive. It feels like the website is “watching” your actions. One more example: you order a taxi during the rain, and the fare suddenly doubles. This is not a coincidence — it’s the result of dynamic pricing. Companies around the world — including in Ukraine — are increasingly moving away from fixed prices. Instead, they implement real-time pricing algorithms that take into account demand, customer behavior, stock levels, and competitor activity. This allows prices to be adjusted on the fly — increasing them during high demand or lowering them to retain the customer. What does this give a business? The ability to earn more, manage demand, and win in competitive markets. But if done incorrectly, this approach can lead to customer distrust and financial losses. This article breaks down in detail what dynamic pricing is, what benefits it offers, and what mistakes companies make when implementing it without a strategy. Contents What is dynamic pricing? Examples of dynamic pricing Why is dynamic pricing becoming a necessity? Mistakes when implementing dynamic pricing How to implement dynamic pricing correctly? Dynamic pricing is the future What is dynamic pricing? Dynamic pricing is an approach where the cost of goods or services changes automatically based on numerous factors. Prices are influenced by demand and seasonality, competitor activity, inventory levels, time of day, and customer behavior on the website — such as adding products to the cart, browsing history, and the number of visits. Unlike traditional fixed pricing, the dynamic model allows businesses to quickly adjust offers based on real-time market conditions. By analyzing data in real time, a company can raise prices during high demand or lower them to accelerate sales of stagnant inventory. Dynamic pricing is widely used in e-commerce, air travel, hospitality, transportation, retail, and even entertainment. For example, ticket prices for concerts or sporting events often change depending on demand. In Ukraine, more and more companies are adopting these technologies. Major online stores, electronics suppliers, fashion retailers, and even grocery chains are using dynamic pricing to manage sales flexibly, increase revenue, and strengthen market position in a competitive environment. Examples of dynamic pricing One of the most well-known examples of dynamic pricing is Amazon. According to Business Insider, the company updates prices up to 2.5 million times per day. Their system analyzes customer behavior, product availability, and competitor pricing to instantly adjust prices. This helps Amazon remain a leader in e-commerce and improve conversion rates through personalized, competitive pricing. Taxi services like Uber and Bolt are also excellent examples. During rush hours, bad weather, or large public events, fares automatically increase. Algorithms assess the number of active users and available drivers to balance supply and demand. As a result, customers who are willing to pay more get rides faster, and drivers are motivated to go online. Similar mechanisms are used in vacation rentals. Platforms like Booking.com and Airbnb dynamically adjust accommodation prices based on season, hotel occupancy, major events in the area, and even time of day. During holidays and weekends, prices can rise by 30–50%, while off-peak times often feature discounts to attract guests. More about how to conduct effective price analysis can be found in a dedicated article. These examples show how dynamic pricing allows businesses not only to respond to the market but also to proactively manage demand and develop more effective sales models. Why is dynamic pricing becoming a necessity? Benefits for suppliers For suppliers, dynamic pricing is a strategic tool for inventory control and profit optimization. When warehouses are overloaded, algorithms can automatically reduce prices for specific SKUs to boost sales — without the need for major discounts. Conversely, during times of limited availability, the system raises prices to increase margin without losing customer interest. This is especially relevant in the B2B segment. Ukrainian suppliers of equipment, auto parts, or electronics are already using dynamic pricing to balance profitability with competitiveness. This helps them maintain large contracts and adapt flexibly to market shifts without getting stuck with dead stock. Benefits for online stores In e-commerce, dynamic pricing enables instant responses to competitor actions. If a rival lowers a product’s price, the system can automatically offer customers a better deal or a bonus without any manual marketing input. Thanks to this flexibility, online stores can maintain high conversion rates, increase purchase frequency, and build long-term customer relationships. In Ukraine’s fast-changing market, companies without a dynamic pricing approach risk falling behind. According to consulting firm McKinsey, smart implementation of dynamic pricing can increase a business’s total profit by 5–15%. The biggest gains come from companies that combine competitor monitoring with demand forecasting based on user behavior. Mistakes when implementing dynamic pricing Despite all its advantages, poorly configured dynamic pricing can lead to lost customers and weaker market positions. Lack of transparency in price changes When prices change too often and without clear reason, it breeds distrust. Customers may feel manipulated or believe that pricing is unfair. This is especially risky when the price increases after a product has been added to the cart. According to PwC, 59% of consumers are willing to abandon a brand after just one trust-breaking experience. That’s why pricing strategy must include clear and explainable changes — such as messages like “Discount valid until 8:00 PM” or “Price depends on stock levels.” Relying solely on discounting Using dynamic pricing only to constantly lower prices can create long-term problems. Customers quickly get used to discounts and stop perceiving value in the product or brand. Eventually, even if costs rise, it becomes difficult to return to previous pricing without losing the audience. In addition, constant price-cutting undermines brand reputation and may turn a business into a “cheap” option — which is especially dangerous in mature, competitive markets. Ignoring competitor analysis Without regular price monitoring of competitors, dynamic pricing becomes ineffective. For instance, lowering your price may be pointless if a competitor offers an even better deal. Ongoing price monitoring allows businesses to develop a smarter pricing strategy that reflects the real market landscape. How to implement dynamic pricing correctly? Automation of processes Manually managing dynamic prices is practically impossible. Effective implementation requires an automated system that collects real-time data on demand, competitor actions, and inventory. Modern platforms not only enable fast price adjustments but also allow for flexible pricing rules and scenarios — saving the team valuable time. Data analytics and insights Dynamic pricing is built on deep data analysis: seasonality, sales history, competitor activity, user behavior on the site. Ongoing data collection and interpretation not only help fine-tune current prices but also forecast future trends. Without solid analytics, the system operates blindly — leading to eventual errors. Setting price change limits To protect brand reputation, it’s important to limit how often and by how much prices change. It’s advisable to cap changes — for example, no more than 10% per day. This helps maintain customer trust and avoids pricing “whiplash” that could scare away buyers. Testing different strategies There’s no one-size-fits-all pricing formula. Different categories and audiences may require different tactics: discounts may work for some, while time-limited offers work better for others. Regular A/B testing helps identify which dynamic pricing strategies deliver the best results for a specific business. Dynamic pricing is the future The market is becoming increasingly fast-paced, and consumer behavior is more unpredictable than ever. In such conditions, the winners are those companies that can quickly adapt and offer the best deal at the right time. Dynamic pricing helps boost profits and build long-term customer relationships through personalized value. Implementing this strategy effectively isn’t just about setting up automated price changes. It requires deep analytics, competitor tracking, hypothesis testing, and a strong focus on customer trust. Want to implement effective dynamic pricing without the risk? Try PriceCop for free and see how modern tools can turn your data into a competitive advantage.