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Highlights
A solid, consistent everyday pricing strategy is the cornerstone of long-term success and retail profitability. If you’re still relying solely on Promotions, Markdowns, and Clearance strategies to drive profits, it’s time to rethink your approach.
What is The Best Approach for Setting Everyday Prices?
Let’s dive in!
In today’s rapidly changing retail environment, Dynamic Pricing has become a buzzword. Driven by AI advancements and the explosive growth of e-commerce, Dynamic Pricing allows businesses to adjust prices in real-time based on fluctuations in demand, competitor pricing, and market conditions. While it’s been widely adopted in some industries, it’s not the one-size-fits-all solution many think it is.
Not all AI-based pricing solutions are dynamic, and not all businesses need Dynamic Pricing. For large retailers with physical stores, Dynamic Pricing could cause more harm than good. Customers expect price stability, and frequent price fluctuations can lead to confusion, erode trust, and disrupt the overall customer experience.
That’s where Traditional Pricing comes in.
Let’s compare Dynamic Pricing and Traditional Pricing and explore which approach best suits your business. Understanding where each approach shines — and where it falls short — could be the key to ensuring your everyday pricing strategy drives sustainable growth, not just short-term sales increases.
Traditional Pricing vs. Dynamic Pricing – What’s the Difference?
The answer depends on your business model and industry.
Though both Traditional Pricing and Dynamic Pricing focus on adjusting prices according to demand, the key difference lies in the timing and frequency of those adjustments.
Many people assume that AI-based solutions are inherently “dynamic” or “automated” without fully understanding that AI can be applied in various ways.
While AI is indeed the engine behind Dynamic Pricing models, it can also be the foundation of Traditional Pricing solutions that focus on stable, periodic updates rather than real-time adjustments. AI can analyze historical data, forecast demand, and help businesses adjust prices periodically — all without the need for constant fluctuations.
Which Pricing Model is Better?
The best pricing strategy depends on your industry, product lifecycle, and business goals. Let’s break it down.
1. When is Traditional Pricing Better?
- For businesses that need pricing stability: If your customers expect consistent pricing (e.g., grocery stores, retail chains, or luxury brands), frequent price changes can damage trust.
- For companies that don’t want to rely on deep discounts: A well-optimized regular price reduces the need for excessive markdowns.
- For long-term profitability and brand positioning: Setting the right base price ensures steady margins without unpredictable fluctuations.
- For businesses with supply chain dependencies: Avoids major disruptions caused by sudden demand shifts.
Best for:
- Retail stores (clothing, electronics, grocery, etc.)
- Consumer goods and manufacturing
- Brands focused on long-term pricing strategies
- Companies with set catalog pricing
2. When Dynamic Pricing is Better
- For industries with highly variable demand: If demand changes rapidly (airline seats, hotel rooms, ridesharing services), adjusting prices in real time maximizes revenue.
- For businesses that need to react to competitors quickly: E-commerce platforms and marketplaces benefit from adjusting pricing based on competitor movements.
- For perishable inventory: If products expire or lose value fast (hotel rooms, airline tickets, seasonal items), Dynamic Pricing helps sell at the best price before expiration.
- For AI-driven pricing experimentation: If your business benefits from constant testing and real-time adjustments, Dynamic Pricing is more effective.
Best for:
- Airlines, hotels, ridesharing
- E-commerce giants
- Event ticketing platforms
- Businesses with high seasonality and fluctuating demand
Is Dynamic Pricing Applicable for Large Retailers?
Dynamic Pricing is applicable for large retailers, but its effectiveness depends on how it’s implemented. Major retailers use dynamic pricing selectively rather than across their entire inventory.
Challenges of Dynamic Pricing for Large Retailers
✔ Customer Perception Issues: Frequent price changes can create confusion and erode trust.
✔ Operational Complexity: Managing real-time price changes across thousands of physical stores is much harder than online.
✔ Competitor Response: In a highly competitive retail environment, aggressive Dynamic Pricing could trigger price wars.
How Churchill’s Regular Pricing Uses AI Without Being “Dynamic”
At Churchill, we offer a demand-based traditional pricing solution that optimizes baseline prices. Churchill’s Regular Price Elasticity Module™ (RPE) uses AI to provide stable, predictable pricing while still allowing for necessary adjustments based on demand trends and market insights.
Our AI solution analyzes historical demand and price elasticity to set optimal prices. The price recommendations are updated on a periodic basis, such as weekly, rather than fluctuating constantly. This ensures your pricing remains competitive and aligned with customer expectations, while avoiding the potential confusion caused by frequent price changes.
How Churchill’s Regular Pricing Supports Your Pricing Strategy
With Churchill’s Regular Pricing, retailers can:
- Optimize baseline prices to make markdowns and promotions more strategic, rather than relying on deep discounts.
- Adjust prices periodically based on demand trends and market conditions without the volatility of real-time pricing.
- Increase stability and customer trust by avoiding excessive price fluctuations, while still using AI-driven insights for pricing improvements over time.
Churchill’s Regular Pricing Solution helps retailers build long-term customer loyalty and profitability. With our proprietary software, promotions become tools to drive strategic revenue growth, not survival tactics.
How an Optimized Regular Price Strengthens Promotions
✔ If the regular price is too high: Discounts must be steeper to attract buyers, cutting into profit margins and leading to excessive markdowns.
✔ If the regular price is too low: Promotions lose their impact, as customers don’t perceive enough value in the discount.
✔ If the regular price is optimized: Promotions feel strategic and valuable, helping drive demand while protecting profit margins.
With Churchill’s AI-driven pricing insights, retailers can:
- Use promotions as revenue boosters rather than a survival tactic.
- Reduce markdown dependency while still moving inventory efficiently.
- Align promotions with demand trends to maximize their impact.
- Ensure a cohesive pricing strategy across all product categories.
By setting the right regular price, retailers gain full control over their end-to-end pricing strategy, ensuring that price adjustments enhance profitability rather than diminish it.
Final Verdict: Which One is Better?
- If you want predictable, long-term pricing that supports profitability, Traditional Pricing is better.
- If your business operates in a fast-moving environment where demand and competition change rapidly, Dynamic Pricing is better.
- If you want a hybrid model: Some companies use a combination, setting stable demand-based pricing but applying dynamic adjustments during peak seasons or special events.
Conclusion: The Best Approach for Your Business
Both Traditional Pricing and Dynamic Pricing have advantages depending on your industry and strategy. While Dynamic Pricing offers real-time flexibility, Traditional Pricing ensures stability, customer trust, and optimized long-term profitability.
The best strategy? One that aligns with your business goals, customer expectations, and operational capabilities.
Reach out to a Churchill representative today and find out how AI can make a difference in your overall price management strategy.