We have two very interesting readings for this week - dynamic pricing and the cr
ID: 354125 • Letter: W
Question
We have two very interesting readings for this week - dynamic pricing and the creation of product addicts. Uber is an example of a company that adopts dynamic pricing (there are many others). Seemingly contradictory, we understand from the Gordon article that value is critical to creating product addicts (thereby gaining pricing leverage) and the role of "free" or freemiums in pricing. Discuss this apparent contradiction and whether they really are incongruent. Research examples and discuss your learning within the context of these experiences. Interestingly, Uber claims to have moved away from dynamic pricing? Why would they decide to do so? Do you think they have? O replies Replies needed! Add ReplyExplanation / Answer
Most Airline firms use subscription centred offers to propel consumer loyalty & secure revenue flow in the future . The typical state of affairs is that an airline firm sells a subscription, for instance two checked bags/ annum, with a discount founded on a particular presumed usage of the subscription. This propels both revenue flow & loyalty as the consumer is basically locked in to utilizing that airline & leveraging the investment they have made in the subscription.
The issue is that consumers usually over estimate their use of such subscriptions & there is a quite some churn as they buy a subscription once but fail to see the worth in renewing it again.
A noteworthy lesson from the realm of Theatre Ticketing is that a similar churn & discontent was observed with their subscription items till they executed dynamic pricing on the base ticket pricing. The subsequent price uncertainty propelled much higher consumer contentment & renewal charges for their subscription , as the price certainty of buying a subscription became an added value propeller for the subscription & for its value proposition.
Nowadays, Uber is testing a different version of its app which renders surge pricing almost invisible to consumers. In its place, customers who enter their destinations will be shown an upfront fare. The logic is that consumers would prefer to know how much they would be giving for their tour , instead of being faced with an abstract multiplier which needs them to do some speedy calculations in their mind before deciding on whether to avail a ride
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