We’ve all been there: the cost of a ride share can jump seemingly by the hour. The great deal on airfare you found on Monday is gone by Tuesday. That perfect birthday present you found for your nephew online didn’t look as good when the price suddenly increased.
Price fluctuations may or may not land on your radar but they’re happening all around you, every day. And there’s a name for it.
It’s called dynamic pricing, real-time, variable or surge pricing. Dynamic pricing is when companies change prices based on various factors. It may feel new but businesses have been using this to maximize profits for quite some time.
“Airlines have been doing it since 1978. So it’s not that new, but dynamic pricing definitely became much more prevalent since American Airlines introduced it,” said Senthil Veeraraghavan a professor at The Wharton School of the University of Pennsylvania researching operational implications of consumer reactions to surge pricing.
Companies are using technology and analytics to track demand and change prices at a rapid clip. Some might even be charging you more than another shopper at the same time, whether due to browsing from an app or being logged in, a practice known as differential or personalized pricing.
But there’s a way to make the system work for you.
Here’s a look at some industries that have tried or are investigating this pricing technique, and what you can do to save more.
For years it’s been possible to save money at zoos, theme parks and ski resorts by buying tickets in advance, or by taking advantage of weekday specials. Now some attractions are also adjusting their prices based on anticipated demand. Disneyland, for example, charged a whopping $299 per person to attend the opening day of the new Pixar Pier area at California Adventure, which is nearly three times the regular ticket price.
If you go to the web site of the Indianapolis Zoo to buy a ticket, you’ll see a dial showing predicted attendance for your day of choice, and a price that varies from $8 to $30. The zoo uses software to predict the most popular days based on historical attendance, then raises prices slightly as the date of the ticket approaches.
According to Dennis Woerner, the zoo’s director of marketing and public relations, when the zoo decided to follow the lead of baseball and concert venues to adopt dynamic pricing, it was, first and foremost, as a crowd control method. In 2005, the zoo had debuted a dolphin exhibit that attracted record attendance.
“We had about 20-plus days when we had over 10,000 people in the zoo on a specific day during the summer,” Woerner said. “That wasn’t a good experience.”
When the zoo prepared to open an orangutan exhibit in 2014, they expected a similar attendance boost. Knowing they had to change something, they implemented the dynamic pricing system, offering guests the opportunity to visit for lower prices on less popular days. It worked.
“Using dynamic pricing we were able to shift attendance from weekends to weekdays, and earlier or later in the year. We increased our total attendance by 250,000, yet we only had five days over that 10,000 mark,” Woerner said. “We were able to spread it out.”
The Indianapolis Zoo has also reaped a financial benefit. Woerner estimates that dynamic pricing has increased revenue by 5% to 8%.
How to save: On social media, follow services that spread the word about discounts, like Recreation Connection. If you know the venue you want to visit uses dynamic pricing, plan your trip for a slow day such as a Wednesday, or go during the off season when prices may be lower.
Historically, changes in prices took the form of weekly discounts or clearance markdowns to unload the last of the beach balls or make room for the incoming Halloween decorations. But it was limited: it didn’t make a lot of sense for stores to pay staff to go from shelf to shelf changing prices more than once a week.
Online merchants can change prices easily. And they do. In fact, Amazon changes its prices so frequently that a web site called Cammelcamelcamel exists just to track and monitor them.
Retailers have a powerful incentive to do this: One pricing study found that by keeping their prices elastic, retailers were able to improve their revenue by 10% to 20% in certain product categories.
Kyle James, founder of online deal site Rather-Be-Shopping, first noticed dynamic pricing in retail about a decade ago, and routinely sees it not just on Amazon but also on the online storefronts of Home Depot, Lowe’s and Staples. Not only do retailers vary prices based on demand, they’ll also try to charge different prices to different customers, based on the customer’s profile, James said.
“Dynamic pricing is used by retailers to get you to spend what they think you can afford,” he said.
How to save: Consumer Reports recommends signing up for a price tracking service, which alerts you when the price on an item you’re watching changes. Another strategy is to see if your credit card offers price protection, meaning that if the price of something you bought goes down within a certain time window; you may be able to request a refund for the difference. Or, you can try the “watch and wait” approach.
If you suspect you’re seeing a higher price than other shoppers based on your shopping history, James recommends disabling cookies on your Internet browser and trying again, or checking the price via both your mobile phone and computer to see if there is a difference. Another trick to avoid getting sized up as a high roller, suggested by Consumer Reports, is to try entering various zip codes to see if the price changes.
In the end, experts agree, the important thing is to do your research and know approximately how much you are willing to pay. That way, even if you don’t have time to do a ton of price tracking or comparing, you can buy with confidence.
“If the current price is close enough to the price that you have purchased in the past, buy it,” Veeraraghavan advised.