OnDemand WTP Pricing Research

Will more customer data mean the end of discounting? | National Retail Federation

“Uber wouldn’t be Uber without dynamic pricing. It’s what makes the service economical when demand is low, and reliable when demand is high,” Van Ryzin said. “That reliability is key to our service, and it’s dynamic pricing that makes that possible.” That’s because surge prices incentivize drivers, increasing the supply when needed so that customers can get a ride when they need one. But that doesn’t make it popular.

“People don’t like surge pricing … but it’s absolutely essential for the Uber service,” Van Ryzin said.

How can the Uber model be applied to retail? Different customers may place different value on an item; retailers use one price, then end up discounting across the board — leading to lost profits. If retailers could customize prices for those who value items more and those who value them less, it creates a win-win: a customer surplus and higher profits.

But in order to understand what value an item has to a customer, retailers need more data about them. A woman wandering into a shop could decide a designer handbag she loved just wasn’t worth the price and then wander out — all without retailers getting any feedback.

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Will more customer data mean the end of discounting? | National Retail Federation.

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