24 January 2013 - 10:18am | posted by | 3 comments

Mindshare predicts dynamic pricing will become more common place as brands take advantage of extreme weather conditions

This Spanish vending machine reduces in price as the temperature risesThis Spanish vending machine reduces in price as the temperature rises

Global media agency Mindshare has predicted that companies will increasingly use dynamic pricing to reap benefits from the likes of extreme weather conditions.

The recent cold snap in the UK has seen the most sophisticated companies adjusting the prices of in-demand products. By using data to identify how best to reach the target market companies can then take advantage of trends such as very hot or cold weather, a practice which is becoming more commonplace in a bid to benefit as and when demand grows or dwindles.

Norm Johnston, global digital leader Mindshare Worldwide, believes dynamic pricing is the result of an “increasingly digital world” which means “companies will have to adapt as real-time sales data and market conditions change”.

One such example of dynamic pricing is temperature sensitive vending machines in Spain where integrated thermometers help decide the price of the soft drinks inside. When the temperature was below 25°C the cans were priced at €2, for temperatures of 29-29°C €1.40, and when the mercury hit over 30°C the price dropped to €1.

The same adaptive marketing idea has also been applied to sports ticketing in the US, with dynamic ticketing company Qcue monitoring social buzz, real time data such as weather and injuries to star players to adjust the ticket prices of the Oakland A’s and St. Louis Cardinals to reflect the anticipated demand.

Johnston adds: “Being flexible on price and identifying where demand is greatest can be the difference between selling units of fast moving consumer goods and seeing them gather dust on store shelves. Things can change very quickly as we’ve seen with the cold weather in the UK and companies who are slow to adapt will miss out.

“Coffee shops promoting hot drinks to warm you up in the cold snap or iced drinks in a heatwave may seem like basic marketing. But using sophisticated data to adjust prices based on the weather, for instance, can have a significant impact on profit and loss, something of increasing importance in this highly competitive world.”

Comments

24 Jan 2013 - 10:48
data_monkey's picture

Surely the pricing model on that vending machine is backwards? Basic supply and demand says you want to increase price when demand goes up, not reduce it! The vending machine will just sell out faster at a lower price if you cut price in response to increased demand.

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25 Jan 2013 - 09:26
themr19839's picture

@data_monkey that's not supply and demand, that's greed. The IKEA pricing model also sugests lowering prices at times of high demand for some products (the most common example in the manual is umbrellas when its raining). It is not just about raking in the dosh, sometimes it's about creating a relationship and building trust - if you hike prices you're nothing more than a charlatan.

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24 Jan 2013 - 16:33
dvard81987's picture

Agree Data Monkey. And if they increased pricing you can imagine the profiteering headlines across the media. This is gibberish. Prices flex according to location and channel anyway.

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