Price Optimization
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Price optimization techniques focus on finding the price that maximizes a defined cost function (or company’s margin), considering many factors like flexibity of prices, location of the customer, seasonal effects, special events and competitor pricing.
Price automation without machine learning is based on pre-defined pricing rules, while with machine learning implies training a model capable of automatically pricing items adapting to changes in the environment in a much richer and dynamic way.
Benefits for the company
Selling a product at the right price is not just for the customer but also for the retailer or manufacturer is an important task. The price must not only include the costs to make the product but also should also take into account the ability of a customer to pay for that product while keeping in mind competitor prices as well in order to drive profits.
Feasability
Medium
Type of expertise/ AI domain
Bayesian Approach, Price Elasticity, Market basket Penetration and Reinforcement Learning Model
Internal data required
Pricing History, Purchases
Pricing of products can impact a business in many ways when it comes to market share, revenues and profits. A key for retailers is to be able to figure out the right price and with big data analytics, they are not only able to determine that number for the market in general but also calculate it with some precision for individual customers.