What is Variable Price Policy?
Variable price policy (VPP) is a pricing strategy that allows companies to adjust their prices in response to changing market conditions. This type of pricing strategy is often used in industries where demand fluctuates significantly, such as the airline industry. With VPP, companies can adjust their prices to better match the current demand and maximize their profits.
Benefits of Variable Price Policy
Variable price policy has several advantages for companies. It allows them to capitalize on periods of high demand by charging higher prices, and it also helps them to stay competitive during periods of low demand by reducing prices. VPP also allows companies to better manage their inventory and ensure that goods don’t go to waste. Finally, VPP can help companies differentiate their products and services from competitors, by offering different prices for different customers.
Examples of Variable Price Policy
One example of a company using VPP is the airline industry. Airlines use a dynamic pricing model to adjust their prices based on the current demand. During periods of high demand, they will increase their prices, and during periods of low demand, they will reduce their prices. Another example is the hotel industry. Hotels use VPP to adjust their room rates based on the current demand. During peak periods, they will increase their rates, and during slow periods, they will reduce their rates.
Conclusion
Variable price policy is a useful pricing strategy that allows companies to adjust their prices in response to changing market conditions. It has several benefits, such as helping companies capitalize on periods of high demand, manage their inventory, and differentiate their products and services from competitors. Examples of companies using VPP include the airline and hotel industries. These industries use VPP to adjust their prices based on the current demand. For more information on variable price policy, please visit: Investopedia: Variable PricingBusiness News Daily: What Is Variable Pricing?