Finance expert Mike Periu on how a dynamic pricing strategy can backfire for online retailers.
According to pricing strategy consultant Rafi Mohammed, the dynamic pricing model implemented by online retailers this Christmas season is likely to fail in the long-term. Dynamic pricing, which is price changes in real time depending on demand, is what airlines use to set prices for tickets. In that industry, consumers are willing to accept fluctuations in price because they can understand that buying a last minute ticket costs more than buying one months in advance. Demand is very unpredictable and dynamic pricing is warranted. But the same understanding doesn’t hold for retailers. Consumers who pay higher prices for a new phone or appliance will feel cheated as they see prices go down on something they just bought. Apple experienced this backlash with its iPhone when it dropped prices by $200 just a few weeks after launch in 2007. They had to make amends with consumers. Think twice before implementing dynamic pricing at your business.
About Mike Periu
Mike is a seasoned executive with experience in small business finance and management. He is the founder of Proximo, LLC a leading provider of corporate, consumer and small business education and training services with an emphasis on finance and technology.
Mike Periu is also a leading national voice for individual empowerment through financial education and entrepreneurship. He has been interviewed over 500 times in national and international media, including NBC, Univision, CNN en español, Telemundo, HITN, TVE, RTE, SBS, MegaTV and others.
Mike writes regularly for American Express OpenForum, Yahoo! Finanzas and is a Huffington Post contributor.
Mike has degrees in Finance and International Business from Georgetown University. He is on the Board of Directors of the Council for Economic Education and was a Fellow at the Kauffman Foundation’s Labs for Enterprise Creation.
