Types of Algorithmic Pricing Strategies

It’s 2025, setting prices isn’t only about adding markup to costs. The progression of pricing algorithms has completely changed this once age-old practice into a game of strategy, automation, and data. Businesses today don’t just set prices, they engineer them, using data science and behavioral research to increase revenue and customer satisfaction. Let’s look at how companies are now changing their pricing strategies in ways never seen before.

The Rise of Dynamic Pricing

Dynamic pricing is like walking into a store where the price tags on the products change throughout the day based on demand, competition, location, or even time of day. While this might sound far-fetched, it’s already becoming a reality across the digital marketplace. Dynamic pricing has been in effect across all industries with almost perfect accuracy.

The airline industry for example has been doing this for a while, you might have noticed an uptick in VPN advertising, this is largely due to an increase in location based pricing algorithms. Airlines are highly sophisticated and have figured out over time that the demand of a flight ticket to or from a specific location is in higher demand in that same location, therefore customers are willing to pay a higher price for that same ticket.

This isn’t just some simple function, it’s a complex algorithm, they analyze millions of data points to maximize both demand and revenue. And it’s not just airlines, rideshare apps, hotels, and ecommerce companies have all embraced dynamic pricing as a secret weapon.

Price Personalization: The Price that Fits You

Think of an expert salesman, such as myself Adam Bauer from Tepia, adjusting his pitch based on each client’s interest. In 2025, you can do this at scale with software and algorithms. These algorithms are able to create personalized strategies that consider almost everything about a person.

Take Amazon for example, they are able to see a large percentage of all online purchases. This can tell Amazon so much about a customer, and what they might pay for a product. Amazon might see that a customer is browsing for a TV, Amazon will then showcase a similar product that they sell at a lower price. This isn’t about just changing the price, it’s about understanding the perceived value and tailoring offerings accordingly.

Location, Location, Location

Just like in real estate, location is king in online retail. Modern pricing strategies have adapted to adjusting pricing based on geographic location.

A fascinating example comes from the video game industry, specifically on Steam where digital items are priced differently across different IPs to reflect regional economics, cultural trends, and competition. A game for instance might cost $60 in the U.S. but just $10 in Brazil, India, or Mexico. This is a strategy designed to optimize revenue wherever possible, and is more drastic and noticeable with digital products and services.

The Algorithmic Price Wars

Welcome to 2025, where you can witness the algorithmic price wars, the competition is fierce and the stakes are high, prices are affected in milliseconds to narrowly beat out the competition, just in time for a customer to make their purchase at a lower price.

Bookstores for example are a bloodbath, if Amazon lowers the price of a best selling book, the competition adjusts their prices within a flash, setting off a battle of prices that goes on 24/7. By the time a customer goes to make a purchase, the price has already been changed multiple times.

The rapid changing pricing arms race isn’t only happening in retail, it’s in everything from electronics to groceries, where companies use machine learning models to track and monitor the competition and adjust their war strategies, I mean price strategies at lightning speed.

What’s Next for Pricing?

As pricing strategies continue to evolve, companies are using a lot of different tools and models, creating 360 degree profiles of their customers and their competitors. I believe that the future could see a huge increase in AI driven pricing, sustainability based pricing, and loyalty based pricing.

It’s clear that pricing has evolved beyond a simple number on a price tag. It is now a living breathing conversation between an organization and its customers. It’s important to remember that at its core price isn’t just about numbers, it’s about value and representing that value properly in the market.