Variable pricing refers to a strategy where a company sets flexible or fluctuating prices that can change based on certain factors rather than remaining fixed over time. The main characteristics include:
- Prices flex up or down dynamically depending on demand-side variables like seasonality, time of day/week, inventory levels, etc.
- Supply-side variables like costs of materials, production or distribution also influence dynamic price adjustments.
- Used commonly with yield management systems to optimize profitability based on constantly evolving supply/demand conditions.
- Allows businesses to practice forms of variable pricing like surge pricing, time-based pricing, location-based pricing or price discrimination.
- Prices may change frequently from hours to hours or days to days based on automated algorithms.
- Provides more responsiveness to market factors compared to static listing of single prices.
The goal is to maximize revenue through flexibility rather than fixed price points that cannot adapt as marketplace conditions shift.