Dynamic pricing is when the price of a product or service changes depending on various conditions. This time, we will explain the basic mechanism of dynamic pricing and the advantages and disadvantages for companies and users.
We will also introduce specific examples of dynamic pricing used in the J League, professional baseball, hotels, railways, etc.
Dynamic pricing is a variable fee system.
Dynamic pricing is a system that changes prices according to demand for products and services.
Dynamic pricing is used in various sports competitions, such as the J League soccer team, professional baseball teams, and the B League basketball team, as well as in leisure-related industries such as live music, hotels, theme parks, and railway companies.
Dynamic pricing may seem like a new system, but it has actually been used in certain industries for a long time. We are probably most familiar with dynamic pricing for hotel rates and airline tickets.
In the travel industry, there is generally a concept of “season”, and there has long been a price difference between on-season (busy season) and off-season (low season).
In Japan, high seasons include Golden Week from the end of April to the beginning of May, Obon in August, and the period from Christmas to the year-end and New Year holidays, and hotel and air ticket prices are often higher. is.
Reference link:
Case | Dynamic Plus Co., Ltd.
How dynamic pricing works
As mentioned above, the price fluctuation mechanism of dynamic pricing is controlled by the demand for products and services, but in the past, appropriate prices were derived manually from data such as monthly sales and annual customer trends. .
By taking into account annual fixed costs (personnel costs, utility costs, equipment depreciation costs, etc.), variable costs, and profits, calculations were made so that the business could remain viable even if prices fluctuated.
Recently, AI (artificial intelligence) has begun to be introduced to control price calculations and timing of fluctuations. AI executes dynamic pricing at the optimal price and timing based on algorithms based on big data such as customer trends accumulated over many years.
Next, I will explain why companies use dynamic pricing, even at the expense of introducing AI.
Advantages and disadvantages of dynamic pricing (for companies and users)
Below, we will explain the advantages and disadvantages of dynamic pricing from both the company’s and user’s perspectives.
Benefits for companies
The advantage of dynamic pricing for companies is that it can equalize demand during busy and slow seasons. By doing so, there will be no idle periods, and equipment and human resources can be used effectively.
In addition, when demand is high, it is possible to earn profits through high-profit sales prices, and when demand is low, it is possible to lower sales prices and reduce inventory and waste, which
leads to maximization of profits.
Disadvantages for companies
Dynamic pricing requires installation costs for systems (AI, etc.) and costs for changing sales prices.
Excessive dynamic pricing may also cause resentment among users and may cause them to refrain from purchasing.
Benefits for users
If you match the timing of your use,
you can get reasonably priced products through dynamic pricing and receive the same service at a lower price.
Disadvantages for users
If the product or service is essential, you may have no choice but to purchase it even if the selling price is high.
Dynamic pricing case study
Here are some examples of dynamic pricing that companies are actually implementing.
Universal Studios Japan (USJ) admission ticket
USJ introduced dynamic pricing for admission tickets in 2019.
Until then, admission ticket prices had been raised for nine consecutive years, but by creating a difference in ticket prices between busy and off-season periods,
we were able to control the number of visitors and improve customer satisfaction by easing congestion.
It is said that
he did
.
Tokyo Disneyland and DisneySea price volatility tickets
Tokyo Disneyland and DisneySea have introduced dynamic pricing for park admissions starting March 20, 2021. High prices were set during holidays and high seasons, and low prices were set during low seasons.
Tokyo Disneyland and DisneySea say
that by smoothing out the differences in busyness and downtime depending on the season, they will be able to further improve their services
.
Lawson convenience store bento and side dishes
When Lawson conducted a demonstration experiment using electronic tags at experimental stores, it adopted a dynamic pricing system that uses information from the electronic tags to identify products with near expiration dates and notifies customers on their social media accounts.
When a customer purchases a product, they are given SNS points (essentially a discount), and if put into practical use, this system is expected
to help reduce waste loss
.
Tickets for soccer J League teams
Dynamic pricing has also been introduced by each team in the J League soccer league. Let’s look at some examples.
Nagoya Grampus
Nagoya Grampus has introduced dynamic pricing from the 2019 season. We are one of the first clubs in the J League to start this initiative. In other words, Nagoya Grampus is a pioneer in introducing dynamic pricing in the J.League.
Dynamic pricing was officially introduced in the 2019 season, but prior to that, dynamic pricing was introduced on a trial basis during a match against Shonan Bellmare held at Paloma Mizuho Stadium in December 2018.
In 2019, when Nagoya Grampus introduced dynamic pricing, the number of annual visitors increased by approximately 1.5 times.
Shimizu S-Pulse
Starting with the 2020 season, Shimizu S-Pulse has introduced dynamic pricing for all games.
Shimizu S-Pulse has decided to introduce dynamic pricing based on its policy of “selling tickets to fans and supporters at appropriate prices according to demand.”
Shimizu S-Pulse also fully introduced dynamic pricing in the 2020 season, but it was also introduced on a trial basis in the 2019 Meiji Yasuda Life J1 League.
This initiative is said to be expected to help prevent high-priced resale, and is expected from various quarters.
Shonan Bellmare
Like Shimizu S-Pulse, Shonan Bellmare has introduced dynamic pricing for all matches starting in the 2020 season.
Full-scale introduction will begin in the 2020 season, but starting with the 2019 Shonan Bellmare home game against Cerezo Osaka in Round 17, it has been introduced on a trial basis in nine other games.
Vegalta Sendai
Vegalta Sendai has introduced dynamic pricing for home games in the second half of the 2019 season.
Vegalta Sendai has firmly incorporated dynamic pricing into its initiatives related to the recommendations of the Management Review Committee. Dynamic pricing is viewed as part of a so-called “business strategy,” and the benefits of dynamic pricing and “strengthening efforts to increase the number of visitors” in the “improvement of structural causes of deficits” conducted in January 2021 Efforts are underway to verify the disadvantages and consider price revisions.
Matsumoto Yamaga FC
Matsumoto Yamaga FC has introduced dynamic pricing from the final game of the 2019 season.
The purpose of the introduction is to “restore a vibrant Alwyn” and “strengthen the club’s economic base,” and the company says it will sell tickets at reasonable prices to meet the demands of fans and supporters.
At that time, Matsumoto Yamaga FC had sold out tickets for eight games in the 2019 season, promoting the fact that it was a “packed Alwyn”, but due to rampant ticket reselling at high prices, dynamic pricing was introduced on a trial basis. That’s what I decided to do.
After further verification, it was determined that the introduction of dynamic pricing could be expected to have certain effects and solve problems, so it was decided to introduce it in earnest.
Tickets for professional baseball games such as the Chunichi Dragons and Chiba Lotte Marines
Dynamic pricing has been introduced not only in soccer but also in professional baseball teams. Let’s take a look at some of these efforts.
Fukuoka Softbank Hawks
The Fukuoka SoftBank Hawks began implementing dynamic pricing in some games starting in the 2017 season.
The system was introduced on a trial basis in 2016, and efforts have been made to gradually expand the dates, seat types, and number of seats.
In November 2019, we announced on our website that we would fully deploy dynamic pricing starting from the 2020 season.
In the 2019 season, prior to the pre-release of this full-scale rollout, we teamed up with Yahoo! to sell approximately 1,500 AI tickets per game.
Chiba Lotte Marines
Chiba Lotte Marines has introduced dynamic pricing for all games starting with the 2020 season.
However, a comment from Chiba Lotte Marines Co., Ltd.’s BtoC headquarters says that this was a test implementation rather than a full-scale implementation.
In 2021, the coronavirus pandemic forced significant admission restrictions, and the team says that demand for tickets using dynamic pricing has increased.
orix buffaloes
The Orix Buffaloes also introduced dynamic pricing starting in the 2019 season.
The first time it was introduced was on July 16, 2019, at the Kyocera Dome Osaka between the Orix Buffaloes and Rakuten, as a trial. At this time, we conducted a demonstration experiment with and without dynamic pricing, and published data showing that ticket revenue increased by 14% when dynamic pricing was used compared to when it was not used.
Dynamic pricing in 1 yen increments for all seats attracted attention as the first attempt in the Japanese professional baseball world at the time.
Reference link:
Evolution in the increasingly popular professional baseball ticket sales | Sports | Toyo Keizai Online | Economic news that improves society
Chunichi Dragons
The Chunichi Dragons have also introduced dynamic pricing starting with the 2021 season.
We have set up a dynamic pricing area in the popular seats in the rear upper stands behind the back net, and have started selling it on a trial basis under the name “Panorama DP.” Since then, dynamic pricing has been applied to all 71 matches held at Vantelin Dome.
It is said that the number of eligible games will be expanded in the 2023 season as well.
Tokyo Yakult Swallows
Tokyo Yakult Swallows has also introduced dynamic pricing starting from the 2022 season.
The introduction of dynamic pricing is scheduled to begin in 2022, but prior to that, in 2017, we had partnered with Mitsui & Co. to conduct a demonstration experiment assuming the introduction of dynamic pricing.
Although they participated in a dynamic pricing demonstration experiment earlier than other teams, they seemed to be cautious about adopting it.
JR East off-peak commuter pass
JR East has launched an “off-peak commuter pass” that introduces dynamic pricing for commuter pass pricing.
It cannot be used during peak hours on weekday mornings, and can only be used during non-peak hours. Although it cannot be used during peak hours, it can be purchased at a lower price than a regular commuter pass.
JR East says that by having each company introduce off-peak commuter passes, it will help reduce transportation costs for employees.
Summary: Dynamic pricing has advantages and disadvantages for both companies and users.
Dynamic pricing is controlled by fluctuations in demand and benefits both companies and customers. In addition to benefiting companies and customers, they can also contribute to environmental issues.
Dynamic pricing that incorporates AI has recently become mainstream, and the adoption of this technology by companies is likely to accelerate in the future.