Is GenAI-Powered Dynamic Pricing the Future or a PR Nightmare?

Dynamic pricing is a hot topic in retail, but tips on such a strategy for big-box retailers Kroger and Walmart sent shoppers out the door. On one fifth Transparency is the key to why U.S. consumers stay away from retailers that use dynamic pricing.

Walmart It paves the way for electronic shelf labels to replace traditional paper labels by 2026. However, in a misleading take on consumer reaction, both Walmart and Kroger have emphasized that they will not be using this technology for dynamic pricing, but rather to “discount” it. Increase costs and ensure accurate pricing.”

With the right approach and messaging, retailers and grocers can leverage generative AI-powered pricing to build trust. By educating shoppers on how algorithms work, they can address their concerns while optimizing their e-commerce and in-store experiences.

Keeping Price-Sensitive Customers in the Loop

Shoppers don’t like to be left in the dark or feel cheated in any way. According to Capterra research, more than half While 50% of consumers associate dynamic pricing with price gouging, less than a third believe it is beneficial.

There are many ways to notify price-sensitive customers of price adjustments: email marketing, mobile app push notifications, and price comparison tools on your website to name a few. The important thing is that you communicate with them based on the channels they choose and tailor the prompts to their unique profile.

Amazon.com is a great example of this practice. The e-commerce giant offers: price alert app Where users can create a watchlist for Amazon products, set the asking price for each product, and receive automatic price alerts via push notifications and emails. Tools like price history charts also provide a transparent way for consumers to understand how prices fluctuate over time.

Integrating Pricing Strategies with Inventory and Customer Insights

Market forces drive prices to balance supply and demand. Ideally, prices are set to ensure that all goods are sold and all consumers have access. However, if prices remain low during a shortage, some consumers may be left empty-handed. We only have to look back to the pandemic, when people were clearing out milk and toilet paper aisles, to see how quickly people could buy basic supplies.

In the past, consumers experienced significant price fluctuations, often exceeding 50 percent in such cases, due to delayed data updates to moderate spending. Instead, real-time dynamic pricing is adjusted more gradually and frequently, along with inventory and market information. These smaller gradual adjustments benefit consumers and producers because they promote price stability and reduce the impact of sudden market shocks.

Dynamic pricing strategies require consideration of a variety of data, such as inventory, customer behavior, market conditions and competitor pricing. Price intelligence engines use unified data platforms to analyze this data, create pricing recommendations, and validate them against marketing mix models. GenAI offers a significant advantage over traditional rules-based pricing by constantly learning from new data and optimizing prices in real time.

Educating Consumers on Developing Trust and Loyalty

Whether it’s integrating new GenAI-powered dynamic pricing tools internally or optimizing existing tools, change management practices are critical to ensuring the transformation goes smoothly. You need to get those affected on board. Without clear communication with employees and customers, the plan will fail.

This means being open and transparent. Clearly communicate with your team and customers how dynamic pricing works, why it’s used, and how it benefits shoppers. Showing customers what factors influence pricing strategies, such as supply and demand, and how they are not used to arbitrarily manipulate prices can demonstrate fairness. It can help to use real-world examples to demonstrate how dynamic pricing can lead to lower prices.

For example, Marriott, Hilton and IHG Hotels use dynamic pricing to adjust room rates based on demand, time of year, and special events. These changes may reduce prices for guests wishing to travel during off-peak seasons or on weekdays.

Target also does a good job educating shoppers About price changes. The retailer states both the new and original price in its announcement on its website about how it ensures competitiveness in the markets in which it operates.

The Future Is in GenAI Powered Pricing

There’s no doubt that dynamic pricing is here to stay. And now, with pricing intelligence tools powered by GenAI, companies and customers alike can expect more individualized, real-time pricing influenced by both customer and market conditions. With the power of GenAI, maximizing profitability while increasing customer satisfaction and long-term loyalty can be a win-win for companies.

Tina Wung global vice president of marketing at Nisuma technology consulting partner.