AI Price Optimization for retailers

What is Price Optimization?

Price optimization is a powerful strategy used by retailers to set the most advantageous price for their products. This intricate process leverages advanced mathematical techniques and deep learning algorithms to analyze a myriad of pricing scenarios. It considers not just the competition but also factors like demand patterns, products cross-impact, and other pricing and non-pricing elements. The ultimate goal of price optimization is to ensure that every product, not just Key Value Items (KVIs), performs at its maximum, contributing to the business's strategic goals.

Competera's Price Optimization Software is designed to help businesses achieve this. As a retail pricing solution, it employs portfolio-level pricing and elasticity-based price setting to help businesses transition from mere competition-based pricing. This ensures sustainable growth in key metrics even as they expand to new markets.

How to Use Price Optimization to Generate More Revenue

To effectively leverage price optimization for revenue generation, there are three key areas that companies need to optimize:

1. Starting prices: The initial price point for a product is crucial. It determines how the product is perceived in the market and influences demand. Competera's retail pricing software considers factors like demand elasticity and cross-elasticities between products to recommend optimal starting prices.
2. Discounted prices: Strategic discounting can drive sales and increase revenue. However, it must be done carefully to avoid undermining the value perception of the product or service. By analyzing more than 20 pricing and non-pricing factors, Competera's price optimization solution helps businesses set discounts that maximize margins.
3. Promotional prices: Promotions are an effective method to increase sales volumes and clear stock. However, determining the right promotional price requires a thorough understanding of demand patterns and product cross-impacts. This is where Competera's retail price optimization comes in. It provides accurate short-term forecasts, allowing businesses to set promotional prices that hit their targets.

Why Many Companies Fail at Price Optimisation

Price optimization is a complex process. It involves analyzing vast amounts of data, understanding customer behavior, and responding effectively to market changes. Without the right tools or expertise, many companies fail to fully leverage the benefits of this strategy.

A common pitfall is the reliance on competition-based pricing, which often proves insufficient for sustainable growth as businesses expand. Competera's retail pricing optimization software, however, helps businesses avoid this. By shifting to a portfolio pricing approach, it enables businesses to manage categories of products and hit their business goals. Moreover, it offers the capability to generate extra margin from the long-tail assortment and run different pricing strategies.

Features to Look for in Pricing Optimization Software

A robust pricing optimization tool, like Competera's Price Optimization Software, should offer the following features:

1. Demand Elasticity Analysis: The software should be able to provide price recommendations based on demand elasticity. This ensures that pricing strategies respond effectively to market demand.
2. Cross-Elasticities Analysis: The software should consider the cross-impact between different products when determining optimal prices.
3. Dual-Target Optimization: The software should allow businesses to set prices to hit two targets simultaneously – one to grow and one to protect.
4. Accurate Forecasting: Accurate short-term forecasts are crucial for making informed pricing decisions.

Competera's Price Optimization Software ticks all these boxes, ensuring that retailers have a comprehensive, industry-leading solution for their pricing needs. With a time-to-value of just six weeks, it offers an unparalleled advantage in the world of retail price optimization.