Price Surge: Raise prices at key times to increase profit

Price Surge: Raise prices at key times to increase profit

09/20/2022 - Pricing strategy

Price Surge is a price increase strategy that aims to maximise revenue by taking advantage of peak demand for a given product, thus avoiding stockouts. This practice dates back to the 1950s and provides a solution which alleviates the effects of peaks of demand, ensuring consistent product stock quantities. These days price-raising strategies tend to be more closely linked with maximising profits while maintaining a competitive price. This increased profit is possible, especially when making the most of solutions provided by specialised online price adjustment tools.

Origins of surge pricing

Surge pricing as a sales strategy emerged around 1950. Since the dawn of trade, this has been the transaction model par excellence. Traditionally, until the invention of the price label at the end of the 19th century, two parties negotiated a product’s price based on factors such as demand, stock, or the time of day. While these practices have worked historically, today, this type of price change is potentially very risky for the company, as consumers may view it negatively.

Price Surge: Pros and cons

As mentioned above, consumers can perceive seemingly random price changes as exploitation by the company. This can damage brand trust and loyalty. Therefore, it is vital that a price increase strategy is based on data about the customer and competitors, so that from the outside, fluctuations appear justifiable.

As for the positive side of price surges, the main advantage is the ability to adjust prices in a market-appropriate manner to maximise profits. For example, if a competitor raises the price of a particular product, it will prove beneficial to raise the price consistently but ensure that it falls below the reference price. This leads to an increase in sales and profit margin, having a higher price but being more competitive than the competition. At the same time, the overall brand image is protected.

From price surge to dynamic pricing

From price surge to dynamic pricing

Surge pricing has dramatically evolved thanks to new technologies. This concept now seems old-fashioned compared to all the options offered by new online pricing tools. There is also a need for a more advanced system with the invention of dynamic pricing. It could be described as a price management strategy based on market fluctuations and consumer behaviour.

The options offered by today’s dynamic pricing tools make it easy to:

  • Monitor the market. Because of the highly competitive and fluctuating nature of prices, these tools can determine optimal prices, resulting in increased profit and customer satisfaction.
  • Respond automatically in real-time. The functions offered by this software allow you to adjust prices instantly, based on real-time market information.
  • Always have the optimal price. One of the greatest advantages of these tools is the ability to create price adjustment strategies based on variables other than pricing, such as stock, positioning, or conversions.

The ability to maintain competitiveness while increasing corporate profits might have seemed like a pipe dream just a few years ago. Fortunately, software like Reactev now offers dynamic price management tools that can help any company stand out and start generating more revenue today.

Category: Pricing strategy

Tags: elasticity, pricing

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Maria Jose Guerrero
Content Manager

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