The San Francisco Giants did a test market for dynamic pricing. And what they found is that in these sections, their revenue increased by 20%. It's this notion of cannibalization. People tend to say, oh, well, we lowered the price and we got more people to buy. But what you have to take into account is the fact that some people would have bought at the higher price. So my hunch is that there was a lot of cannibalization going on.
With rapidly changing markets and emerging technologies, setting the right price is harder than ever. But pricing strategy consultant Rafi Mohammed tells HBR IdeaCast host Sarah Green Carmichael that it’s possible to make better decisions about pricing if you understand how pricing and demand interact in your business and you have good market research to guide you.