What is dynamic pricing?

Dynamic pricing is defined as a pricing model that utilizes artificial intelligence and data analytics to adjust prices in real-time based on various factors such as demand, competition, and market conditions. This approach allows businesses to optimize their pricing strategies by responding quickly to changes in consumer behavior or market dynamics.

For example, an e-commerce platform might increase prices during peak shopping hours when demand is high and decrease them during off-peak times to attract more customers. This flexibility not only maximizes revenue but also enhances customer satisfaction by offering competitive pricing based on the current market landscape.

In contrast, the other choices describe different pricing strategies that lack the real-time adaptability and data-driven approach inherent to dynamic pricing. A fixed pricing strategy is static and does not change based on demand. Promotional pricing for seasonal products is typically set in advance and does not adjust in response to real-time market factors. Similarly, reducing prices during sales events is also a controlled and planned strategy, not one that responds dynamically to changing conditions.