Everyone says they are data driven, until the data differs from their gut feel

Do you believe gut feel has a place in setting prices?

Pricing is both an art and a science – the science is based on the analysis; whereas the art is primarily about the context. Over the past few years we have adapted and developed several pricing and yield approaches to meet the specific needs of clients. Regardless of approach, we have identified a few common theme that link gut instinct to data

1. Data is never as good as you would like it to be – we have seen all sorts when it comes to the state or availability of data. However many clients are incredibly embarrassed about data, delaying the project as they try to tidy it up (or hide the worst of it).?Invariably we have to strip it back and start again, often using judgement to make the data 'good enough'.?Let the experts take the raw data and strip out the anomalies, identify where there are gaps and interpolate work arounds.
2. Competitor insight can be incredibly powerful – although there is a massive risk of following competitor prices, judgement is required to understand the impact of competitor price strategies. There is so much more to glean from competitors that when consistently transformed into structured insights become the basis of a holistic pricing approach. Getting an understanding of product similarity, new product launches, availability, lead times and…pricing can allow you to understand product and pricing strategy of competitors and to respond appropriately
3. When the number of pricing combinations explodes (Examples: Client 1, a distributor with 400k SKUs, each with 4-6 price points for OEMs, trade, retail; Client 2, a holiday park business operating 200 sites, with >10 accommodation grades and 1000s of date combinations) then manual and gut feel pricing decisions are not tenable. Invariably prices remain fixed or there are blanket price adjustments across the portfolio - neither approach creating additional value (generally destroying value). You really have to use data and automation to extract value.
4. However Black Box pricing solutions need to be highly configurable and explainable – don’t believe anyone telling you that their black box (AI-powered blah blah) solution will transform your pricing performance in the long term. Every business is different so solutions need to be able to represent that; furthermore pricing/commercial teams need to be able to understand ‘why?’. We increasingly see these black box solutions become obsolete as they never adapt to changing business needs and hitherto become ignored.
5. Measuring pricing performance can be incredibly tricky, but so worthwhile.?Recently we have been surprised by several clients who haven’t really wanted to measure performance (we don’t know whether they were scared of the results or because they were unaware of some of the techniques to do so).