Dynamic pricing is setting a price for a product or service based on current market conditions. A part of the overall revenue management strategy, such real-time price adjustments aim at increasing revenue opportunities.
The most common price-setting methods are cost-based, competitor-based, and demand-based.
In terms of software architecture, there are two types of dynamic pricing solutions.
- Rule-based systems operate on databases of preset conditions that have to be followed by certain actions (“if-then” statements). They are built using domain expert knowledge and respond to the changes or events in the environment in a predefined way.
- Machine learning-based systems include an ML model that processes large amounts of data from multiple sources and makes pricing changes based on analysis results.