Dynamic pricing has stirred a considerable amount of frustration recently, particularly after its controversial use by Ticketmaster for Oasis’ 2025 reunion. The UK’s Competition and Markets Authority (CMA) is even set to investigate after fans discovered that ticket prices had increased significantly by the time they reached the checkout. Across the Atlantic, Kamala Harris announced a similar investigation in the US following concerns about Kroger’s introduction of Electronic Shelving Labels that dynamically change grocery prices.
As more services move online, allowing detailed tracking and analysis of consumer behaviour, it’s essential to ask: has dynamic pricing crossed the line?
Historically, dynamic pricing has always existed, allowing merchants to balance supply and demand effectively. This model incentivised purchases based on current availability and willingness to pay, often resulting in higher satisfaction for both consumers and sellers. It can lead to a competitive edge, reduce wastage, and optimise revenue for companies that adjust prices dynamically. However, when it comes to peak times or when it prevents access to something desirable, like a concert, the practice is seen by many as unjust.
Dynamic pricing is all around us, often without us realising. Examples like happy hour discounts in bars and early bird specials at restaurants illustrate this perfectly. UK pub group Stonegate even introduced dynamic pricing in some of its venues, charging higher rates during busy periods but offering discounts at less crowded times. Fast-food chain Wendy’s also faced criticism when they announced a dynamic pricing model using digital menu boards, even though it could benefit customers during slower times of the day. The focus, however, quickly shifted to the possibility of higher prices.
Dynamic pricing extends to the transportation sector as well. Services like Uber increase fares during high-demand situations, such as poor weather or major public events, theoretically ensuring that more drivers are available. However, studies have suggested that the higher fares often reduce demand and can even drive drivers away from surge-pricing areas. Airlines, too, have long practised dynamic pricing, with fares rising closer to departure dates, especially targeting business travellers who are less price-sensitive.
In retail, many online platforms adjust prices based on demand, inventory, and consumer patterns. Amazon is known for this approach, though it hasn’t always been without controversy. In the energy sector, dynamic pricing has been employed to adjust electricity costs in response to grid demand. Programmes like Octopus Energy’s Agile offer real-time pricing, with customers sometimes even being paid for energy use during times of surplus. Similar trends have been evident in telecommunications, although to a lesser extent.
The telecommunications industry can take dynamic pricing further by considering not just who uses data, but how and why they use it. Connectivity services can vary in cost without significant financial impact due to their low marginal costs, unlike physical products. This differentiation could help telcos optimise data revenue and better manage network congestion by pricing services variably, depending on user preferences and network availability.
Transparency is crucial for customer acceptance of dynamic pricing. Informing users proactively about price changes is necessary to encourage behavioural adjustments, such as offering time-limited discounts on data boosts. With the rise of AI and advanced data analytics, telecom companies can now adjust prices in real time, balancing demand effectively while also monitoring and responding to shifts in user behaviour.
However, these technological advancements also raise concerns regarding the potential for abuse. Without appropriate regulations, there’s a risk of dynamic pricing evolving into exploitative price gouging, prioritising profits over customer fairness. The infamous example of Coca-Cola’s vending machine that raised prices during hot weather shows how easily pricing mechanisms can be misused.
For telcos to make dynamic pricing work effectively, ethical considerations are essential. Customers generally appreciate fixed pricing, especially for recurring services like internet and mobile plans. To mitigate confusion and frustration, pricing strategies need to be clear, simple, and consistent. Dynamic pricing can be more suitable for non-recurrent purchases, like flight tickets, rather than day-to-day essentials, where consistency is often valued.
For dynamic pricing to be viable in the telecommunications industry, communication is key. Customers need to be well-informed of the benefits, such as reduced costs during off-peak times, to understand how they can make savings. Dynamic pricing could allow telcos to align pricing with user consumption patterns, ensuring that everyone pays fairly based on actual usage rather than subsidising others through blanket fees. Transparency in pricing mechanisms helps build customer trust, making them more open to price fluctuations if they understand the reasons behind them.
While implementing dynamic pricing comes with its challenges, it is likely to grow as a standard business model, reshaping consumer expectations and service consumption in telecommunications. However, it’s essential to remember that dynamic pricing should work in both directions—lowering prices for consumers when appropriate, not just increasing them.
Dynamic pricing can be a powerful tool for balancing demand and optimising services, but its success relies on ethical and transparent implementation. By keeping consumers informed and ensuring fair pricing, telcos can make this approach work for everyone.
Cerillion plc (LON:CER) is a leading provider of billing, charging and customer management systems with more than 20 years’ experience delivering its solutions across a broad range of industries including the telecommunications, finance, utilities and transportation sectors.
