The price you choose is the ultimate determining factor in your position, profit and popularity in the market. Have you ever wondered what sets successful pricing strategies apart in today’s versatile business landscape?
Achieving the optimal price hinges on a perfect balance between two key metrics.
The Role of AI & Data Richness:
In the age of artificial intelligence, ‘data richness’ refers to the wealth of information that is available for a comprehensive analysis. In the context of pricing, it encompasses various factors including market trends, consumer behaviour, and competitive intelligence. Leveraging AI is crucial in harnessing this data effectively and staying ahead of the market curve.
The Need for Speed:
In the current pricing landscape, speed is of the essence. The market has evolved in such a way that time represents money and a lost opportunity leads to potential loss in revenue. With markets changing rapidly and competition intensifying, pricing decisions must be made quickly as well as accurately to capitalize on profit opportunities.
This necessity of rapid decision-making is a reflection of the evolution of pricing strategies over the years.
Reflecting on history, the traditional ways of pricing, though effective then, are now rudimentary and static, primarily grounded in human judgement and decision-making.
Manual Pricing (M)
In the past, many companies relied on manual pricing methods. People were hired to change prices based on their limited knowledge and experience.
Manual pricing suffers from inefficiency, inconsistency, and limited data analysis, and therefore struggles to adapt to dynamic market conditions. It can be error-prone, and inefficient in adjusting to changes in supply, demand, or even competition. Moreover, it can lead to potential bias in pricing decisions and place businesses at a competitive disadvantage in today’s fast-paced markets. Even some of the most sophisticated have adopted this method only to discover negative financial impact.
While this approach had its limitations, it was the norm for a long time.
Read how incorrect pricing can lead to brand dilution.
Expert Intervention (I)
Some companies began to seek expertise in pricing. Expert data scientists are skilled at handling data, which reduces the likelihood of errors in pricing calculations. While pricing decisions were still made manually, these data science experts brought more knowledge and insights into the process. The cost was much higher than ordinary individuals without specialised training in pricing.
However, speed was still a key factor that was severely lacking here.
Rule-Based Pricing (R)
In the early 2000s, with the advent of technology, companies started looking for ways to streamline the pricing process. Rule-based pricing was one of the first steps to automate pricing. Usually, the system implements internal rules to determine pricing. For example, when inventory levels dropped below a certain threshold, a predefined rule would trigger a price change.
This method automated pricing to some extent but lacked sophistication.
Combining Expertise and Rules (I + R)
Subsequently, companies adopted a combination approach, fusing the expertise of professionals with rule-based systems (I + R). Although, this method offers a more sophisticated pricing strategy, incorporating pricing experts into these rule-based software solutions comes at a significant cost.
Yet, these systems lacked the flexibility to adapt to the fast-paced and data-driven dynamics of the modern market.
Fortunately, formula-based pricing closed the door to static pricing methods and introduced dynamic pricing as the new standard.
Formula-Based Pricing (F)
This pricing strategy incorporates mathematical formulas, often driven by algorithms to determine the optimal prices. These formulas considered various data points to set prices dynamically. They are typically based on specific variables and data inputs, which can vary depending on the pricing scenario.
Formula-based pricing systems are more adaptable to changing conditions, as the formulas can be adjusted to include different variables. They allow for a more data-driven approach towards pricing. Nevertheless, the most important trade-off here is speed, as these systems are not agile enough to make pricing decisions in real-time.
One small step, one giant leap for pricing!
By embracing AI, dynamic pricing has revolutionised the way pricing works. Through Software as a Service (Saas), businesses can dynamically adjust prices by responding to real-time market conditions. The level of data and leverage of AI is high enough to generate substantial insights.
Current pricing engines (C)
However, it’s worth noting that although current pricing engines are undeniably powerful, they often lack the desired level of sophistication. In order to enhance the quality of data, many pricing engines buy their competition intelligence and integrate it with their software. On the other hand, their speed, though commendable, still falls short when it comes to keeping up with the dynamism, speed and complexity of today’s markets.
That’s where Sciative comes in:
Sciative (S): Your Solution.
At Sciative, we have harnessed authentic and rich data to craft the most concise competition intelligence.
Our all-encompassing modules have got you covered from every angle.
From precision to predictive insights to valuable recommendations, we are at the top of our game. But what truly sets us apart? The ability to change your prices with just one click on all your listed marketplaces simultaneously! And to sweeten the deal, we are more affordable than the majority of the pricing engines in the market. The future of pricing will likely be marked by an even greater reliance on data, real-time adjustments, and an emphasis on speed in making pricing decisions.
Businesses that successfully embrace these trends will find themselves at the forefront of pricing innovation and profitability.
See how our AI-powered dynamic pricing tool BRIO, can help you with that
Book a free demo of our automated retail solutions or contact our optimization experts at info@sciative.com.
To learn more about our AI-powered dynamic pricing tool VIAJE.ai, reach out to us.
