04 Feb 2017

Why Dynamic Pricing Is an Advantage for Air Cargo

Why do restaurants hold happy hours and late-night deals? Why does Uber surge? Why can the same airline trip vary by hundreds of dollars depending on when you book it? It all boils down to dynamic pricing, or changing prices based on market demand and contributing factors.

Dynamic pricing helps airlines maximize revenue. Cheaper seats are available to the customer willing to book way ahead of time (or willing to take the center seat in the last row). And now, air cargo carriers are looking at and adopting dynamic pricing methodologies. So let’s take a closer look at dynamic pricing techniques and benefits.

Dynamic Pricing: Good for the Buyer and Seller

Critics of dynamic pricing attack sellers, claiming they take advantage of the customer’s lack of pricing knowledge. Price gouging and monopolies, for example, can result in sellers setting higher prices than expected.

However, dynamic pricing can also benefit the customer. Standard shipping rates are lower than rush rates, resulting in cheaper prices for the customer who doesn’t mind waiting an extra few days for delivery. The key is for air cargo companies to clearly lay out their pricing to customers. If customers understand how the final price tag is calculated, they’re more likely to cooperate. That way, the customer has a choice.

What Influences Dynamic Pricing?

Dynamic pricing gives air cargo companies the flexibility needed to adjust their rates according to a variety of factors, including:

  • Buying Power of the Targeted Segment: When demand from the carrier’s customer base rises, the carrier can charge higher prices.
  • Market Trends: Overall fluctuations in the air cargo industry will influence pricing. For example, surging demand will drive prices up across all companies.
  • Seasonal Variations: Fluctuations in demand, such as around the holidays, can drive up prices as air cargo space becomes limited.
  • Historic Demand: Forecasting algorithms rely in part on historical data to determine current prices.

To go one step further, the factors above influence dynamic pricing because they themselves are influenced by variable costs. Unlike fixed costs, variable costs will fluctuate depending on the air cargo carrier’s shipping volume.

Full Article:

Full Article: Mercator News Room

Source : Mercator News Room

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