“It’s also important that Uber’s prices only rise above the base rate and never fall below it, since customers seem to accept dynamic pricing more easily when it’s characterized as a discount.
At the movies, for instance, prime-time tickets aren’t presented as a few dollars more than the normal price—rather, matinees are presented as a few dollars less. When American introduced dynamic pricing, it framed the 21-day advance-purchase requirement as a chance to buy “super-saver” fares. And happy hours at bars are, similarly, framed as a markdown from the regular price.
These framing devices don’t change the underlying economics or price structure, but they can have a big impact on customer reaction. In 1999, for instance, Douglas Ivester, then the CEO of Coca-Cola, suggested that smart vending machines would allow Cokes to be more expensive on hot days, when demand was presumably higher. There was an immediate, intense backlash, and the company quickly backed down, saying Ivester’s comments were purely hypothetical.
Had Ivester instead suggested that Coca-Cola could use dynamic pricing to charge less on cold days (even if it had raised the base price of a can), response would probably have been very different.”
The post On Dynamic Pricing appeared first on Andy McIlwain @ andymci.com.
