What does "dynamic pricing" involve?

Dynamic pricing involves adjusting prices in real time based on supply and demand conditions. This approach allows businesses to optimize their pricing strategy by responding swiftly to market fluctuations. For instance, during peak demand times, prices may be increased to maximize revenue, while during slow periods, prices may be lowered to stimulate sales.

This strategy is particularly effective in industries where demand can change rapidly, such as hospitality or travel. By leveraging data analytics and market trends, businesses can implement dynamic pricing to enhance profitability and improve inventory management.

In contrast to the other options, dynamic pricing is not solely reliant on historical data, fixed pricing, or customer feedback, but rather focuses on creating a responsive pricing model that reflects current market dynamics.