This chapter explores the historical shift in pricing methods from traditional bargaining to modern fixed and dynamic pricing models. It highlights the role of social norms and customer perception in the acceptance of variable pricing, as well as the potential risks of excessive fluctuations in prices.
More and more companies are turning to pricing algorithms to maximize profits. But many are unaware of a big downside.
Marco Bertini, a marketing professor at Esade Business School in Barcelona, says constant price shifts can actually hurt the perception of your brand and its products. He warns that employing AI and machine learning without considering human psychology can damage your relationship with customers.
In this episode, he outlines steps you can take to avoid these pitfalls, including some basic guardrails, overrides, and communication tactics. He also shares real-world examples of companies that are using dynamic pricing to smooth demand and provide better customer experiences.
Key episode topics include: strategy, pricing strategy, algorithms, psychology, customer experience, communication, dynamic pricing, brand, AI, machine learning, profits.
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· Listen to the full HBR IdeaCast episode: Algorithms Won’t Solve All Your Pricing Problems (2021)
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