Principles of Marketing: Dynamic and Fixed Pricing Dynamic pricing are defined as adjusting prices which are enhanced to meet the needs and characteristic of individual customers and the prevailing situation. In contrast the fixed pricing strategy is usually used by traditional mass marketer. Fixed pricing means one price for everyone and everywhere. This type of pricing was first introduced in the nineteen century with the development of mass markets and retail stores which became popular among the national consumers. Prior to the nineteenth century all pricing were local and dynamic, and prices could be derived through negotiation between the consumers and merchants.
The main success factor of dynamic pricing is the development and contribution of computers and the internet. The main difference between fixed price and dynamic price is that with the help of internet, dynamic pricing can be conducted globally with a very low cost and in an effective way. The internet has created a market where the value of merchandise fluctuates continuously and the buyers as well as the sellers wield every possible tool available in the struggle to prevail over one another.
This concept is very much different from the concept of walking into the stores or marketplace, viewing the prices of each product and making a decision whether to purchase or not at the posted price. Thus consumers often tend to take the fixed pricing strategy for granted especially in case of retail. But the concept of fixed pricing is very new and very western. In the US fixed pricing has completed only 125 years of its operation and it was because of Aaron Montgomery Ward and Frank Woolworth who popularized the practice of mass marketing.
In countries like Turkey, India and Indonesia the posted price usually marks the starting point of negotiation (Kotler, 2008, p. 296). The development of communication and transportation has adversely affected the pricing schemes. It was because of the growing network of railways which made the distribution of mass goods feasible and the scheme of fixed pricing plausible. The prices of retail good remained fixed and products such as wheat, coal became the commodities which were dynamically priced because the information about the current prices of the products was relayed from the newspapers.
Therefore the marketing gurus expect that dynamic pricing to become more prevalent than fixed price. It has been assumed that once the price is set all the buyers would pay the same price. This has been a case in US; all cars have been practicing the fixed pricing strategy. But the internet has played a major role in making the dynamic pricing popular. This pricing technique includes hotel rooms, cars, airline tickets etc. Although dynamic pricing is relatively new in the consumer market, it has been regarded as a staple of the business market.
Dynamic pricing provides many advantages for the marketers such as Amazon. com which can easily mine the database to find out a specific shoppers needs and demands. Many top companies use dynamic pricing such as Dell, e-Bay, Amazon. com and other internet based companies. Reference Kotler, P. (2008). Principles of Marketing. Pearson Education India.