HBR IdeaCast Algorithms Won’t Solve All Your Pricing Problems
Oct 19, 2021
Marco Bertini, a marketing professor at Esade Business School and visiting professor at Harvard, shares insights on the pitfalls of pricing algorithms. He warns that frequent price changes can damage brand perception and the customer relationship. Bertini emphasizes the importance of combining AI with an understanding of human psychology. He suggests implementing guardrails and improving communication to mitigate risks. His discussion sheds light on balancing dynamic pricing with customer trust while navigating the complexities of modern monetization strategies.
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Episode notes
Dynamic Pricing's Return
- Fixed pricing was introduced for scalability in department stores.
- Technology enables a return to dynamic pricing while maintaining scale.
Uber Surge Pricing
- Uber's surge pricing during a terrorist attack increased prices fivefold.
- This highlighted the potential downsides of dynamic pricing.
Algorithmic Guardrails
- Businesses using algorithms should consider guardrails and limits.
- They must be aware of potential psychological side effects.
