A pricing strategy where the price of a product or service is determined primarily by the level of consumer desire and willingness to pay. This approach acknowledges that perceived value can fluctuate based on factors such as scarcity, seasonality, or even time of day. For instance, a hotel room may command a higher rate during peak tourist season compared to the off-season, reflecting the increased desire for lodging at that time.
This dynamic method offers the potential to maximize revenue by capitalizing on periods of high interest and adjusting prices accordingly. Its effectiveness stems from recognizing that the worth attributed to an item is not fixed but rather shifts depending on market conditions and consumer behavior. Historically, businesses have intuitively adjusted prices based on perceived demand; however, modern data analytics and technology enable more sophisticated and real-time applications of this principle, allowing for greater precision and responsiveness.