Dynamic pricing.

This past 4th of July weekend I had the opportunity to experience dynamic pricing first hand. Dynamic pricing has been used by the travel, hospitality and for profit entertainment industries for sometime. A number of non-profit organizations have recently introduced dynamic pricing and there has been lots of discussion of the pros and cons. Check out the Pricing Institute website for discussion and commentary.

What concerns me about dynamic pricing is that it can easily be perceived as exploiting our audiences, undermining the trust we work so hard to build. Trust and loyalty go hand in hand. And although we can create pricing strategies that reward our best customers, I'm not sure its in our best interest to exploit the opportunity to maximize revenues on last minute buyers for the last few precious seats for a near sold out performance. Yes, the seats will likely sell and in the short term the organization may see increased revenues. Yet a number of potential buyers will balk at paying a higher price, like I did when booking a room in a tourist town in Northern Michigan. The room rate tripled from its already seasonally adjusted rate. I did find a room reasonably priced; where do you think I'll go first next time we head to this popular tourist area?

The hotel that inflated its price for the holiday lost me as a customer not only for that date, but for bookings in the off season when they need my patronage the most. No amount of discount is going to make up for what I perceived as exploitation. Now that dynamic pricing is on my radar in a personal way, I will be much more careful how and when I book travel, rooms and entertainment. I'll be much more distrustful, it will be harder to gain my loyalty, I'll be much more willing to look around for alternatives.

Dynamic pricing should be used to build loyalty and trust, not of just our repeat customers but also those customers who join us for the first time. It may be the only chance we get to show we have their best interest at heart (and we do, right?). Dynamic pricing may be here to stay, but I believe it adds another level of complexity to an already complex relationship. I'm not convinced its anyone's best interest. What do you think?