What is pricing in real-time?
Businesses immediately change their prices when they notice a change in the market. This is called real-time pricing (RTP). This ensures that the prices of goods and services are always correct and shows how the market is currently doing.
Utilities and energy businesses use RTP to keep the price of electricity changing to match supply and demand at any given time. Because an intelligent meter tracks how much energy is used, the price per kWh changes every hour based on several factors and is calculated in real time.
To instantly find the best price, several factors are taken into account, such as:
What affects supply and demand? How many services or goods are on the market right now? How much do people want it?
The state of the market: What are the latest market trends and economic factors, like interest rates, inflation, GDP growth, and so on?
Price elasticity: How much does the market change when prices do?
Real-time pricing only works in markets where a few big companies control prices and can handle short-term changes. This is because flexibility is such an essential part of the equation.
When new competitors join a market, businesses should find other ways to set competitive prices.
Word for
RTP stands for “real-time pricing,” but the terms often refer to the same thing.
Peak load pricing allows utilities to set prices in real time. During peak hours, when demand is high, prices are higher.
Dynamic Pricing: One type of dynamic pricing is real-time pricing, but real-time changes aren’t always a part of dynamic pricing.
Price Trends in Real Time
Accurate real-time pricing is still pretty new in business, but as technology keeps improving, it’s being used increasingly. According to Gartner, big global retailers will use real-time pricing in shops by 2025 to change prices based on how much people want to buy.
With the growth of the Internet of Things (IoT) and big data tools like AI and machine learning, companies can now get real-time customer information. This lets them change prices based on what customers want and how the market is changing, which lets them come up with even more accurate pricing plans.
Types of Businesses That Use Real-Time Pricing
Prices aren’t always set in real time because of price elasticity and market conditions, so most businesses don’t use them. Plus, most companies don’t have to meet customers’ needs right now, so an average price is easier to use.
But there are some fields where real-time pricing is the rule, such as
Utility companies: Electricity companies change prices in real time based on supply and demand.
Transportation: Real-time pricing is used by many transportation companies, such as planes and ride-sharing services like Uber and Lyft, to ensure they get the most out of their services.
Shops: Some shops use real-time pricing to change prices based on what customers are willing to pay in-store and online.
Ad-supporting platforms: Businesses that make money from ads, like Google, Amazon, and Facebook, use real-time pricing to change the prices of their ads based on how much demand there is in the market right now and how many times that phrase or instance is searched for.
Firms that buy ads and media: Media buying is a real-time deal between buyers and sellers, and prices change based on real-time bids.
Wholesale: The price of some things and services on the wholesale market can change quickly.
As more businesses access the technology needed for accurate real-time pricing, more will use this method of setting prices.
Why real-time pricing is good
Real-time pricing helps businesses in many ways, such as giving them more control over their income and margins.
Some customers were happier with the service because of the personalized prices.
Better market information is obtained by observing how the demand for goods or services changes.
Cost-effectiveness was improved by changing prices based on how the market was doing.
When a company uses a real-time pricing model to respond to customer needs, they don’t have to worry about how their product’s market value or selling price changes. Plus, they can make the most money when desire is high.
There are two types of pricing: real-time and dynamic
Real-time and dynamic pricing are ideas that deal with prices, but they are not the same.
With dynamic pricing, prices change based on what the customer is ready to pay and other factors like market demand and competitors’ prices. Real-time pricing is more accurate because prices must be changed immediately based on constant data.
People usually like dynamic prices because they let them pay less for things when business is slow. Price changes for everyday things in real time would confuse and annoy customers, making it harder to make money.
Pricing constantly changing is called “dynamic pricing,” while “real-time pricing” is more necessary for some businesses, like an electric service.
You can use dynamic rates for almost any business whose demand changes with the seasons. Real-time pricing only works for things that people want a lot of and can’t get any other way, like getting a $100 Uber during rush hour instead of walking.
Software for pricing in real-time
To set up a real-time pricing system, you need to be able to handle data quickly and use advanced analytics. It is possible to do this with software made just for that reason.
Besides a better real-time price algorithm, software should also have tools that let businesses review and change their pricing policies quickly and tools for managing customer data.
ERP
Real-time pricing can improve with enterprise resource planning (ERP) tools. ERP systems aim to give businesses a complete picture of their operations and financial health. This helps them decide on better pricing strategies.
It is beneficial to use ERP software to keep track of customer information, study how price changes affect key performance indicators (KPIs) for sales, and find the best production levels.
Engine for Real-Time Pricing
The process of setting prices for things and services can be done automatically by a pricing engine. It analyzes data, formulas, and advanced analytics and figures out the best pricing strategies in real-time.
For a business to use real-time pricing, the pricing engine needs an optimal real-time pricing algorithm. This formula allows businesses to set flexible and up-to-date prices in real-time.
It’s also becoming more critical to use configure-price-quote (CPQ) options when setting prices. CPQ software helps companies quickly make correct quotes and give customers prices tailored to their needs.
Using real-time data, CPQ solutions let businesses change their prices based on customer choices, product configurations, and other factors.
Billing Platform: A billing platform is a computerized system that helps you keep track of payments, bills, and real-time customer information. Other systems, like ERP and CPQ software, can be connected to the platform so that pricing is done automatically.
Companies that use the RTP model have a more challenging time with billing because they can’t correctly guess how much a transaction will cost. Companies that use real-time pricing need a billing system that can handle deals in real-time and send correct invoices for different hourly rates.
