Innovations in Price Management

Price management has been a field of sporadic innovation. Auctions, nonlinear pricing, and bundling precede our current era. Innovations in pricing used to be rare and slow to spread, but we have seen rapid, widespread pricing innovations, thanks in large part to the Internet. Measurement technology (allowing precise price metrics), more powerful computers (enabling the analysis of Big Data), and creative business models all contribute to price management innovations. The Internet simplifies price comparisons, which results in higher price transparency. Over the long run, however, the increase in “value transparency” may prove to be more important. Innovations such as flat rates, freemium, name-your-own-price, and pay-what-you-want enable companies to tap more profit potential. Companies should be careful when opting for a new pricing model. Each tactic carries considerable risks when not used properly. Two-sided price systems, allowing companies to generate revenue from two sources, are becoming more common. Perhaps for the first time, we observe negative prices in some markets. Marginal costs of zero and the sharing economy are influencing price decisions and disrupting established business models. New payment systems and new forms of money such as bitcoin may have hitherto unknown effects on price management.