From Oasis to AI: Implementing ethical dynamic pricing with AI

As you'll likely know, Oasis made headlines last week. 

However, the buzz wasn't just about the surprising news of their reunion that thrilled fans worldwide. Controversy quickly emerged after ticket sales, highlighting a contentious issue in consumer markets: dynamic pricing.

The band’s ticket prices fluctuated wildly, with some tickets reaching prices several times higher than the original cost advertised. Fans were given mere minutes to decide whether to pay hundreds of pounds more than the original price or risk missing a once-in-a-lifetime event.

This led to hundreds of complaints to the UK’s Advertising Standards Authority and ignited a public debate on the ethics of dynamic pricing.

So, against this backdrop, let's take a closer look at what dynamic pricing is, its benefits, and how your business can leverage AI to implement dynamic pricing ethically.

What is dynamic pricing?

Dynamic pricing is a strategy where prices for goods or services change based on current market conditions, such as demand, supply, or time. For example, airlines have long been known to adjust seat prices based on various factors, such as the timing of the booking, demand, the day of the week, and even the customer’s browsing history. As a result, it's not uncommon that a flight seat could cost twice as much, even if tickets were booked just days apart.

Dynamic pricing is commonly used in the US, including major American companies like Amazon, Google, Uber, Airbnb, Costco, and Nike. However, it remains a relatively new concept in the UK market.

The ability to shift prices based on various data points is becoming increasingly sophisticated, particularly with the use of generative behavioral AI technologies like those developed at Quin AI. 

For example, with Quin AI, companies can gain real-time insights into customer behavior and automatically offer personalized price adjustments to secure sales without deterring customers. This could involve reducing pricing for those likely to abandon their shopping carts or offering tailored discounts to price-sensitive shoppers. 

Our sophisticated algorithms can detect your customers' shopping habits and provide offers and messaging (created by you) that are statistically more likely to resonate with them, leading to more sales.

However, as the age-old saying goes, with great power comes great responsibility. If misused, dynamic pricing can create an environment where consumers feel exploited - like in the case of Oasis’ reunion tickets.

The controversy around Ticketmaster and Oasis

The recent uproar surrounding the Oasis concert tickets is a cautionary tale. Ticketmaster’s use of dynamic pricing resulted in prices surging dramatically within minutes, leaving many fans feeling cornered into paying exorbitant amounts.

This isn’t a new issue - ticketing platforms have faced similar backlash in the past. However, what made this incident particularly controversial was the lack of communication with consumers.

Fans were left with a brief window to decide between overpaying or missing out. In other words, the ethical concern here isn’t just the pricing itself but also the lack of transparency and fairness.

The future of dynamic pricing: Why it's here to stay

Despite its controversy, dynamic pricing isn't going away. In fact, as AI technology becomes more advanced, consumers will increasingly encounter fluctuating prices across various sectors. From groceries to streaming services and eCommerce, we're already seeing this. 

For example:

• In the grocery sector, 45% of major chains in the US and Europe had implemented some form of dynamic pricing by 2023, up from just 15% in 2020
• Netflix has experimented with different pricing tiers and adjusts prices based on factors like viewing habits and regional demand.
• Amazon changes product prices 2.5 million times a day (an average of once every 10 minutes!)

These are just a few of the hundreds of examples out there, but hopefully, you get the point: dynamic pricing is popular.

Why? Because it makes businesses money. In fact, one study found that retailers using dynamic pricing saw up to a 25% increase in profit margins!

But how can businesses implement dynamic pricing in a way that's not only effective but also ethical?

Fortunately, dynamic pricing doesn’t have to be exploitative. Ethical dynamic pricing involves tweaking prices based on transparent and fair parameters so consumers feel respected and protected. By incorporating customer-friendly practices, such as price caps during exceptionally high demand or offering tiered pricing options, businesses ensure their pricing strategies remain ethical and align with consumer expectations.

Quin AI is dedicated to building technology that’s ethical by design. Our audience engine not only enhances digital experiences that drive conversions and profitability but also prioritizes the protection and respect of consumers.

Rather than hiking prices opportunistically, businesses can use Quin AI’s behavioral insights to predict when a discount might be more appropriate for specific customers, ensuring a sale that benefits both the company and the consumer.

By identifying customers who might need a little encouragement, like those at risk of abandoning their cart or who are sensitive to price, we can offer personalized discounts that drive conversions without compromising trust.

At Quin AI, we believe technology should be a force for good, benefiting both businesses and consumers alike.

Practical examples of ethical dynamic pricing with Quin AI

Let's examine how Quin AI’s technology could help major online retailers implement ethical dynamic pricing.

Imagine a customer browsing for a pair of shoes but hesitating at the checkout page.

Using its real-time predictive audience engine, Quin AI identifies that this shopper is likely price-sensitive and at risk of abandoning the purchase.

Rather than offering a blanket discount to all customers, the e-commerce store could reduce the price for this specific customer in real-time to secure the sale.

This method moves away from mass discounting, where everyone benefits from a sale regardless of intent, and towards targeted, bespoke pricing that benefits both the customer and the business.

Customers willing to pay full price continue to do so, while those who need a nudge to complete their purchase receive just enough of a discount to convert.

Ethical dynamic pricing aims to balance consumer protection with business profitability. For example, when demand spikes for an event or product—like tickets to an Oasis concert—companies can limit how much prices can rise to prevent taking advantage of consumers' emotions.

How to implement ethical dynamic pricing Using Quin AI

So, how can businesses use Quin AI to ensure their dynamic pricing strategies are fair and ethical? We’ve hinted at a few of these pointers throughout this blog post, but we thought it would be helpful to consolidate them here:

1. Use predictive audiences to refine discounts: As demonstrated in the above case study, instead of offering mass discounts, you could utilize Quin AI’s predictive capabilities to offer discounts only to those at risk of abandoning their cart or who are price-sensitive. This ensures discounts are targeted and meaningful.
2. Limit price increases during periods of high demand: Businesses can set limits on price increases during peak times. Quin AI then monitors customer behavior in real-time and automatically enforces these pre-set limits, preventing excessive price hikes and avoiding the exploitation of urgency during busy sales periods. 
3. Transparent communication: Businesses should clearly communicate to customers why prices are fluctuating. Transparency fosters trust and makes dynamic pricing less arbitrary, reducing the feeling that customers are being exploited.
4. Customer-focused adjustments: Use insights into your customers’ behavior to adjust prices in favor of the shopper, not just the business. For example, if a customer is price-sensitive, as identified by Quin AI’s algorithm, a small discount may lead to a sale, benefiting both the customer and the business without excessive profit loss.

A balanced future for dynamic pricing

Dynamic pricing is here to stay, but businesses need to be savvy with how they implement it.

Dynamic pricing, when done right, benefits everyone. It’s not about squeezing as much as you can from your customers but understanding their behaviors and offering them the best possible price - fairly and transparently.

At Quin AI, we believe in building technologies that benefit both businesses and consumers. By using our behavioral AI engine, companies can implement personalized, ethical, dynamic pricing strategies that enhance the customer experience while boosting profitability. In fact, every Quin AI client is assigned a dedicated performance strategist who can help ensure their dynamic pricing strategies are profitable and ethical.