Flexible pricing is the practice of pricing a product or service by negotiations between buyers and sellers, within a certain range. It is one of many different pricing strategies used by management to stimulate demand. When done correctly – companies are able to sell their products with a higher price than originally. A flexible price policy is a standard practice within most Revenue Management strategies.
This strategy is more common in services which are customised as per the customer’s requests.
For example a customer requests a service from a hotel, that is normally not supplied – therefore no price is set making it open for negotiations. In this case hotels can operate with a flexible price policy allowing customers to purchase off the menu items for an additional charge. The customer will hereby evaluate the price according to him known other prices for such products or services.
Flexible pricing strategies are often used by companies, which aims to gain a competitive advantage. Flexible pricing enables price segmentation – by offering different segments different rates – companies are able to offer similar product at rates appropriate to each buyer. A flexible pricing policy allows a business to quickly adjust pricing as necessary to accommodate a changing business climate or to overcome competitive challenges.