What is flexible pricing?
Flexible Pricing: Businesses can change their prices when demand changes, other market factors change, or buyers and sellers agree. This is called flexible pricing. Businesses can make the most money possible and avoid losing when demand is low by setting prices this way.
Companies that can change their prices in response to changes in the prices of their competitors can also fight better.
Firms can use flexible prices in several ways. Because of changes in the market, some businesses may decide to run sales or deals. Others may change prices based on how much people want their goods or services. Companies can use this pricing strategy to make more money thanks to digital pricing strategies and technology development.
Synonyms
- dynamic pricing
- market-based pricing
- differential pricing
- negotiable pricing
- intelligent pricing
- price optimization
Types of Prices That Can Change
There are four main types of flexible pricing methods. These are demand-based, supply-based, usage-based, and flexible.
- Prices change constantly in dynamic pricing to reflect the current state of the market. When demand changes a lot, like in airline and hotel businesses, prices constantly change.
- A market-based price is one where the market determines what costs are acceptable. Prices like this are usual in commodity markets, where prices change based on supply and demand.
- Prices for a good or service are based on how much it is used. This is called usage-based pricing. Utilities like water and power often use this pricing method because each customer’s use differs.
- Prices that can be negotiated are called “negotiable.” When two businesses buy or sell something, they often use this type of pricing because they can negotiate the price.
There are four main types of flexible prices, but there are many other types. For example, some businesses use multiple flexible pricing plans to find the one that works best for them.
And as technology improves, new kinds of flexible pricing models will exist. But the goal of any business, no matter what kind of flexible pricing plan it uses, is to make the most money possible by responding to changes in the market right away. Flexible prices can benefit any business if they have the right plan.
Examples of Flexible Pricing
Companies can charge various prices for the same goods or services based on things like time, place, or customer with flexible pricing.
A business might, for instance, charge more or less during busy times for people who book ahead of time.
Offering different prices can help you make more money and still give people what they want.
When you offer discounts for buying in bulk, when you charge different prices for different types of customers (like individuals vs. businesses), when you offer discounts for loyalty or repeat business, when you charge more in the summer, and when you offer discounts for paying in cash, these are all examples of flexible pricing.
Pros of Being Able to Change Prices
Many good things come from having flexible prices, which is why businesses are using them increasingly. Businesses can better match their prices to what the market will pay when they don’t have to stick to a set price.
This can help you make the most money and sales possible while giving people great value. Businesses can also react quickly to changes in the market, like rapid rises or falls in demand, by setting flexible prices. This can help you keep your bottom line in good shape and ensure your customers can always get the necessary goods and services.
Let us look at the pros and cons of this pricing approach for buyers and sellers.
Good things for sellers
Intelligent pricing built into an ERP or CRM tool has many benefits.
- For starters, it lets companies quickly adapt to changes in demand or the market.
- Second, it helps increase demand by keeping the price low.
- Third, a pricing strategy that is easy to change can help companies better control their inventory and make the most money possible.
- Finally, a flexible pricing plan can help grow customer loyalty by allowing people to buy things at a lower price if they can wait a certain amount of time.
Good things for customers
Customers who care about price will like this method most because it maximizes value by cutting costs or letting customers pay for only what they use. Additionally, flexible price models often come with extra benefits like discounts or freebies, making the deal even better for customers.
Cons of Being Able to Change Prices
Bad things for sellers
There are a lot of reasons why flexible pricing methods can hurt sellers.
- First, it can be hard to guess the end selling price, making it hard to make accurate budgets and revenue predictions.
- Second, sellers can get into price wars, which lower profits, when pricing models are less rigid.
- Third, people might not want to buy from a seller with a flexible pricing plan because they think the seller isn’t committed to a set price.
- Finally, if businesses change their prices all the time, it might be hard for them to keep track of their cash flow.
Bad things for customers
Customers may not like flexible pricing plans for several reasons.
- First, if prices change constantly, it can be hard to plan or budget.
- If a customer buys something when the price is high and soon after it drops, they might feel like they were ripped off.
- Finally, people do not want to buy if prices change too often. Businesses may benefit from flexible pricing in some ways, like adapting to market demand or capitalizing on short-term interest jumps. However, ultimately, it is up to the customer to decide if the cons are more significant than the pros.
Technology that will let prices be changed
A new approach called “flexible pricing” uses technology to make prices change instantly in response to changes in the market. This can be done in or very close to real-time, making it a perfect way to set competitive prices and bring in the most money.
Businesses can set flexible prices using technologies like demand forecasting, price optimization, competitive price tracking, and dynamic pricing algorithms. CRM and CPQ also help businesses change prices and make accurate quotes based on complicated pricing models. As long as businesses use these technologies well, they can stay ahead of the competition and take advantage of new market chances.
