Next PostEmbracing the Future: Our perspective on the Dynamic World of Food Delivery by Paco López Rodríguez

DYNAMIC PRICING: Optimise revenue, stock and demand in real-time


In the ever-evolving world of e-commerce, where convenience meets consumer demand, businesses are constantly seeking innovative ways to stay competitive. The digital marketplace has witnessed a phenomenal surge in recent years, with consumers embracing online shopping like never before. As e-commerce becomes increasingly sophisticated, businesses are turning to different strategies in order to stay ahead in the game; one of them being - and one very important for you to keep your eye on - dynamic pricing strategies. 

In a study conducted by Statista, e-commerce companies were asked if they were planning on implementing a dynamic pricing strategy. Overall, only 21% answered that they already implemented it,  32% will not implement it, while 27% is still evaluating dynamic pricing and 15% is going to. For you, as a business owner, this means that if you implement a dynamic pricing strategy now, there is still a big chance to be a frontrunner/price setter*.

*What is or who is a Price Setter: the one with the influence, market power, and differentiation which allows to set the price for the whole market, hence charging more while still being able to drive substantial sales without losing market shares.


Pricing is a delicate dance for businesses, a balance between optimal revenue and market competitiveness. In the digital age, where information flows in real-time, businesses are leveraging dynamic pricing to navigate this delicate equilibrium successfully. From retail giants to small businesses, everyone is ‘fighting’ for a piece of the digital pie. The convenience of browsing through an extensive list of products, making purchases with a click, and having items delivered right to the doorstep has become the new normal.

In this blog post, as we explore this fascinating world, we will draw connections between dynamic pricing and the challenges and opportunities within the delivery platforms market; and how dynamic pricing strategies are reshaping the competitive landscape. 

From the complexities of real-time pricing adjustments to the evolving world of delivery platforms, businesses must navigate this ever-changing territory to meet the expectations of the modern consumer. 


… but why is dynamic pricing so relevant, especially for restaurants working with delivery platforms? 


In the vast landscape of online orders, the potential pool of customers seems limitless, yet it's crucial to recognise that the competition is equally boundless. For online customers it is easier to compare prices from different sellers simultaneously. Although price isn't the sole determining factor, it undeniably wields significant influence over a customer's decision to make a purchase. Consequently, pricing stands as a pivotal element, often being the differentiator between selling out or having wasted stock.  Overall, the use of dynamic pricing for restaurant delivery menus can be a powerful tool to optimise revenue and respond to market conditions, but it should be used carefully and ethically to maintain customer trust and satisfaction.



How dynamic pricing works and how you can implement


Seth Moore, former executive, in an interview with McKinsey shared that he defines dynamic pricing “as the automation of pricing intelligence, allowing companies to rapidly make nuanced decisions in a scalable way.”


Using algorithms and data analysis, dynamic pricing establishes pricing structures based on market demand. These algorithms analises different data sources, past historical sales data, current market trends, competitor pricing, and meteorological data, to find the most advantageous price for a given product or service.

The main goal is to adapt pricing dynamically to market fluctuations, ensuring a strategic alignment with consumer demand and maximising overall revenue potential. In times of heightened demand, prices are adjusted upwards, and conversely, during periods of reduced demand, prices are lowered. These demands can change based on specific factors mentioned below or just related to consumers’ ever-changing needs. For example, if you sell swimsuits or pool supplies, you can charge more for them during the summer. You can also charge more for popular gifts during the holiday season.

Furthermore, dynamic pricing on a restaurant's menu for delivery platforms, is a strategy to optimise revenue and balance supply and demand in real-time. Here's how it typically works:



🚀 Demand-Based Pricing: When demand is high, prices go up, and when demand is low, prices go down. This is often seen during peak dining times, holidays, or bad weather when more people are ordering in.


Time of Day: Prices can vary depending on the time of day. For example, dinner prices may be higher than lunch prices.


📆 Day of the Week: Weekends, when more people are likely to order delivery, could see higher prices.


🎅🏻 Special Events: Prices may rise during special events, like, holidays, or local festivals when there is an increased demand for restaurant delivery.


📍Location: If a restaurant is further away, it might charge higher prices to cover delivery costs or offer discounts to local customers. Businesses can also adjust prices based on a customer's location, considering factors like average income, local competition, and cost of living. 


📲 Menu Items: Some platforms allow restaurants to automatically adjust prices for specific menu items based on popularity or cost, like UberEats and Deliveroo. For example, items with high demand could have stable or slightly higher prices, while discounts or promotions can be applied to boost sales of less popular items.


🗂 Stock Inventory: Restaurants can adjust prices based on real-time inventory to minimise overstocking or running out of ingredients.


🌶 Competitive Pricing: Prices can be adjusted to compete with other nearby restaurants offering similar dishes. Also, The more competition there is for customers, the less likely it is for prices to rise.


✨ Feedback and Reviews: Actively monitor customer feedback and reviews. Positive reviews may justify maintaining or slightly increasing prices, while negative feedback may signal a need for strategic discounts or promotions to regain customer satisfaction.


It's important to note that while dynamic pricing can benefit restaurants and delivery platforms by maximising revenue and managing demand, it can also be controversial. 

Customers may feel that they are being charged unfairly, especially during peak times, and this could lead to a negative perception of the restaurant or the delivery platform. Transparency is crucial in managing customer expectations, and it's important to communicate the dynamic pricing strategy clearly.


Key benefits for Restaurants

Pricing is tricky for any business owner. If you’ve ever tried to order from UberEats during a storm and have watched the price double or even triple, you’ve seen dynamic pricing in action. 


Source: AIMultiple



Greater Control Over Pricing Strategy: Contrary to common misconceptions, dynamic pricing improves and drives control by providing real-time insights into market trends, competitor pricing, and supply-demand dynamics.


Flexibility Without Brand Compromise: Retailers can establish a price floor that aligns with brand identity while still capitalising on pricing opportunities. Seasonal promotions and marketing strategies become more effective, contributing to sustained profitability.


Cost Savings: By leveraging real-time data, dynamic pricing reduces the need for manual intervention and administrative tasks. This efficiency translates into long-term cost savings, enhancing overall profitability.


Effective Management with Software: The complexity of monitoring numerous products and real-time trends needs advanced software solutions. Leading e-commerce platforms and dynamic pricing tools automate the process, ensuring accurate data for optimal pricing decisions.


We also have to talk about possible Low-lights

As mentioned before, if not careful, customers may feel that they are being charged unfairly, but that’s not all. Many restaurant owners fall into the misconception that dynamic pricing revolves solely around the speed of price adjustments. That’s a common mistake. Before making any final decision, you should ask yourself (or a specialist): ”How often should I change the prices from my menu?”. 

The answer should be “as often as you have enough data to make a better decision than you did the last time you made a price change.

Focusing solely on the velocity of price changes oversimplifies the intricacies of effective dynamic pricing, potentially leading to misguided strategies and missed opportunities for optimisation. It's crucial to consider potential drawbacks:



⚠️ Customer Backlash and Distrust: Implementing dynamic pricing without transparency can lead to customer backlash, as witnessed in cases like dynamic ticket pricing for a plane ticket - where a customer browsing for a plane ticket on an iPhone encounters a different price than his friend using an Android device, despite simultaneously checking the same flight. 


⚠️ Risk of Reduced Customer Loyalty: Fluctuating prices may confuse customers, leading to a decrease in loyalty. 


⚠️ Changes in Customer Behaviour: Awareness of price fluctuations may prompt customers to change their buying behaviour, potentially impacting profitability. Strategic planning is necessary to avoid such effects.


⚠️ Impact of Poor Data Sources: Dynamic pricing relies heavily on accurate real-time data. Poor data quality can adversely affect pricing decisions, emphasising the importance of ensuring current and accurate information. 


All in all, it’s safe to say that a Dynamic Pricing Strategy applied to Restaurants working  Delivery Platforms boosts profitability 

Implementing dynamic pricing involves adjusting prices based on various factors to optimise revenue and adapt to changing market conditions. Dynamic pricing is a strategy that allows restaurants present on delivery platforms to flexibly adjust their product prices based on real-time market demands, customer behaviour, and other relevant variables to optimise sales and maintain competitiveness. For example, a restaurant can offer discounts or special promotions during certain times of the day or week to encourage customers to order during typically slower periods.

In conclusion, successful implementation of dynamic pricing involves a strategic blend of market analysis, customer understanding, and flexibility in response to changing business conditions. It allows businesses to optimise revenue, enhance competitiveness, and cater to the diverse needs of their customer base.


Next PostEmbracing the Future: Our perspective on the Dynamic World of Food Delivery by Paco López Rodríguez