Disney recently announced its adoption of “demand based” pricing at its parks in the U.S.[i] This is a first for Disney where consumers have paid a fixed price since Disneyland first opened in 1955. Is variable pricing here to stay?


Uber has been shaking things up with “surge pricing” which many have hailed as manipulative price gouging, much like pharmaceutical companies have been villlianized (for charging exorbitant pricing for life saving drugs. Perhaps such companies should be subject to some pricing controls (by regulators) but the underlying premise reflects a monumental shift in pricing strategy. I am not defending the practices of these companies (please save your hate mail), only pointing out the flip side. That fact that an Uber driver can command a higher fee during peak times brings him into the market (providing more supply), reducing the wait time for the consumer and allowing him to feed his family. The airlines have been employing this strategy for some time, and on its face, variable (or dynamic pricing as it is sometimes known) is not evil, it is efficient.

The internet and e-commerce has certainly been the driver of commoditization and price pressure in many industries. Thought of another way, online shopping has produced a market that magnifies supply and demand. The internet introduces new capacity that may not otherwise be utilized.  In the hyper-competitive global marketplace, the invisible wand dictates that all capacity must be utilized with optimum efficiency.

Rarely, (especially in B2B business-to-business industries) does the market truly move in lock-step with market conditions. Consider the pricing at your local restaurant. Your order of mahi-mahi is the same on Wednesday as it is on Sunday, even though demand during those periods is entirely different. The restaurant may try to encourage more demand on a Wednesday by offering well drinks and bad calamari at a discount (if you are willing to eat before 6 PM). But ostensibly the pricing is the same whether or not you are consuming the product during peak demand.

B2B providers have a difficult time changing prices in real time with customers, who demand ease of use, and want to know what to expect in advance. Yet such invariability may actually impair the purchaser’s ability to secure the best price, because a supplier must fill the order at the same price regardless of their capacity, which impacts cost.  For example if a supplier must schedule an extra shift to fill orders, the cost of labor (including overtime) may be higher.

In this ever changing environment, look for ways that you can develop a pricing model that ebbs and flows with the market, so that you can provide your customers the best value, while optimizing profitability. In some industries, variable pricing may be the path to competitive advantage.



[i] Variable Pricing may be a new Theme at Disneyland, The L.A. Times October 6, 2015