Strategic Pricing Unleashed: How AI/ ML Empowers C-Level and Pricing Managers

The integration of AI/ML pricing solutions has emerged as a game-changer, particularly in the strategic collaboration between C-level managers and pricing professionals.?

As the CEO of Competera, my insights from industry events like FMI, NRF, and Shoptalk highlight the growing significance of AI/ML in shaping modern pricing strategies.?

Let's explore how AI empowers C-level and pricing managers, steering them towards strategic excellence.

Evolution? of AI/ML Pricing Solutions

In the early 2010s, the advent of AI-driven pricing tools marked a transformative departure from manual modeling and basic pricing rules, liberating retailers from labor-intensive consultation hours.?

While this first-generation AI brought agility to elasticity recalculations during repricing cycles, challenges persisted, with a dependence on clean historical data limiting effectiveness, particularly for products with lower sales volume.?

The static nature of elasticity in pricing rules underscored the need for a more advanced and adaptable solution.?

Fast forward to 2018, the second-generation AI/ML pricing solutions emerged, powered by neural networks and deep learning, reshaping our understanding of pricing dynamics. These solutions, requiring less guidance, harnessed the power of deep learning to fathom intricate relationships between pricing factors and customer behavior, ushering in a new era of strategic insight, adaptability to changing market dynamics, and resilience to sparse data. Why it took AI so long to begin this revolution in pricing? Only in the late 2010s did pricing solutions based on deep learning become affordable to retailers. To go deep into the history behind the AI pricing revolution, read my article.

From C-level’s Desk to Pricing Manager’s Arena

Working together is super important when it comes to pricing strategies. I’d like to highlight how C-level managers and pricing managers need to team up for successful discussions and planning. Pricing isn't just about numbers; it's a big deal for making money and growing the business. Sometimes, other leaders like CFOs or marketing directors are worried about pricing instead of the main stakeholders. That's where a special role like the Pricing Architect comes in to help everyone understand each other and helping to align the goals and make the right step forward. Using smart tools like AI makes everything even more connected. It's like a team game where everyone plays a part – C-level managers and Pricing Managers working together to make as optimal a move as possible with continuing and revision targets during the year.

Agile Decision-Making with AI

The essence of AI's impact lies in its ability to facilitate agile and informed decision-making. Unlike traditional pricing approaches, AI brings real-time insights into the pricing landscape, enabling C-level managers to respond swiftly to market dynamics and play with a comparison of different pricing scenarios to find an optimal one . Armed with AI-driven tools, Pricing managers can execute strategic decisions with precision, enhancing the overall responsiveness of the organization.

Precision in Pricing Strategies

AI acts as a strategic ally in formulating and executing pricing strategies. The sophisticated algorithms of AI delve into complex data sets, allowing C-level executives and pricing managers to optimize prices based on changing demand trends. This precision ensures that pricing decisions align with market realities, maximizing profitability and competitiveness.

When it comes to groundbreaking pricing solutions, the new strategies unveiled on the Competera platform are making waves among both top executives and pricing managers. Take a deeper dive into the offerings of the Competera pricing platform by exploring the Retail Excellence pricing solution designed specifically for C-level decision-makers . To explore the full spectrum of offerings tailored for pricing professionals, take a closer look at the pricing solution crafted for Pricing Managers on the Competera platform.

Competitor Insights and Market Dynamics

One of the notable advantages AI offers is the ability to analyze competitors' pricing strategies and factor in market dynamics. C-level managers gain a comprehensive understanding of the competitive landscape and most importantly accurate understanding of competitors' pressure on their sales and how to react (or don't), empowering them to make strategic decisions that set their organization apart. Armed with AI insights, Pricing managers can align their pricing tactics with real-time market conditions, moving to a proactive rather than a reactive approach.

One of the recent examples is how businesses, by leveraging "rule-based" data on a day-to-day basis, try to understand which competitor price movements they should react to.?

Typically, for Key Value Items (KVIs), this reaction is almost "hard-coded": if someone changes the price of my KVI, I'll do the same within the next 20-60 minutes.?

However, if after this change, your competitor goes out of stock in the next 2-3 days (which usually happens), you can't increase your price. Doing so would almost immediately hurt your Price Perception Index, and retailers often decide to stick with the previous price as a "last optimal".

With AI, we can identify such historical behaviors. More often, our models recommend maintaining a certain price position, even when a "more competitive" price appears on the market.?

This is just one small example of leveraging the power of advanced "demand-based" pricing approaches rather than rule-based reactive ones.

Strategic Alignment and Streamlined Communication

The synergy between C-level executives and pricing managers is enhanced through AI-driven insights. The role of a Pricing Architect, empowered by AI, ensures strategic alignment between high-level business goals and day-to-day pricing tactics. This alignment streamlines communication, providing a unified vision across the organization and facilitating quicker, more decisive actions.

Adaptability to Market Changes

In the ever-evolving retail landscape, adaptability is key. AI equips C-level and pricing managers with the tools to navigate market changes seamlessly. Whether facing new competitors or undergoing business restructuring, AI-driven solutions provide insights and recommendations that adapt to dynamic market conditions. This adaptability ensures pricing strategies remain effective and aligned with overarching business goals.

Efficiency in Resource Utilization

AI-driven tools enhance the efficiency of pricing managers by automating routine tasks and providing data-driven insights. This efficiency allows C-level managers to optimize resource allocation, ensuring that the organization's pricing strategies are executed with maximum impact and minimal resource wastage.

Conclusion: Empowering Strategic Excellence

Agile decision-making, precision in pricing strategies, competitor insights, strategic alignment, adaptability to market changes, and efficiency in resource utilization collectively elevate the organization's pricing capabilities. Embracing AI isn't just about adopting new technology; it's about unlocking the full potential of strategic decision-making in the fast-paced world of retail.