Flexible pricing is a company strategy in which a product’s last price is open for negotiation. In other words, customers and also sellers deserve to get together and attempt to change the price, i.e., either knock it down or press it up. Flexible pricing does not only apply to the price of items yet services as well. It is, in truth, an extremely widespread strategy in tailor-made services.
You are watching: Why is it important that prices are flexible in our economy?
The term might also refer to adapting one’s prices even more closely to sector forces. Market forces are the forces of supply and demand also. When demand also rises or supply declines, prices go up. Conversely, when demand also declines or supply boosts, prices loss.
Flexible pricing – example
A carpenter, for instance, charges the customer according to the amount of customization the customer requested. The carpenter likewise takes into account how a lot he believes the customer deserve to afford.
Customers subsequently negotiate the price according to their expertise of the sector.
Flexible pricing contrasts with solved pricing. Fixed pricing is prevalent among huge corporations and also retailers. If I go to a major supermarket chain, I cannot negotiate the price of items for sale.
Perhaps, if I uncover a defective product, I can gain a discount at a supersector.
Regarding the definition of functional pricing, mbaskool.com writes:
“It is a pricing strategy in which the final price at which the product or business being marketed is open up for negotiation in between buyers and also sellers.”
“This strategy is common in services which are customized as per customer’s requests.”
Customers like flexible pricing
Most customers choose versatile pricing. When we deserve to affect prices, we deserve to even more conveniently uncover what we are looking for at an affordable price.
Rather than encountering a binary choice, i.e., buy or don’t buy, tright here is another option. The various other alternative is to try to acquire a far better price.
Flexible pricing – sellers
Sellers choose versatile pricing if the strategy leads to greater sales. Tright here are some businesses which benefit enormously from this strategy.
Pricing adaptability can be especially valuable for sellers of perishable goods. Perishable items are products that cannot be on sale for long because they either degeneration, come to be unsafe, or disshow up.Last-minute flights
Vacant airline seats for a flight that takes off in two hours, for example, are perishable goods. After the trip takes off, you cannot offer them.
See more: Why Did Taylor Caniffs Mom Go To Jail Time Is Hard Time, Taylor Caniff
If airline employees can negotiate through consumers straight, the agency is more likely to sell those vacant seats. In other words, a versatile pricing strategy helps offer last-minute tickets.
Regarding the benefits of being functional on prices, Living Economics says:
“Flexible pricing makes the potential of an extra effective marketlocation all of a sudden realizable.”
“When prices can vary constantly with alters in supply and also demand also at little bit cost, buyers can even more quickly uncover the price at which they are willing and able to buy.”