AI-based pricing models help determine how much a customer will pay at the point of checkout for a variety of products and services. Then, it helps orchestrate the timing of these price adjustments so that sales happen at or just below the peak engagement point and outside of the seasonal sales period. Our AI-based pricing calculators can estimate costs across a range of products and services and suggest the best price-range breakpoints to incorporate with a particular campaign to maximize revenue.
Several factors affect how much a customer will pay for a product or service. The factors are based on factors such as product features, competitive prices, as well as the cost of living, where a customer lives, nearby geographic and seasonal discounts, and demand from previous customers.
With these factors in mind, different AI models can build upon each other to reduce costs, maximize profits, and stand out from the competition. During the checkout process, you can compare the estimated cost of the product to the estimated cost of competitors’ products and services. With an increased revenue number, our pricing services let you take steps to optimize the form, size, and duration of discounts.
AI applications have the potential to improve daily operations by batching pricing decisions for operations or products, thereby allowing the behaviors of individual shoppers to optimize our pricing strategies.
How to use price optimization for your business?
First, you need to find out what price your competitors are using. You can do this by searching for your keywords in Google and seeing what results show up. For example, if you’re looking for a cheap and reliable web hosting service, you can search for “cheap web hosting” and see what results show up.
Next, you’ll see a few results with prices ranging from $0.43 to $84.99 and decide if you want to lower or raise your price. To optimize pricing, we can apply these exploratory prices to our inventory. To find this, we use two methods. First, we can chart the statistical relationship between a percentage price change and revenue relative to a theoretical sales price of zero. Then, we can compare this with the corresponding sales price and find out the maximum price we should target. This method also rewards retailers that stay within a pricing band, which keeps them in the game while allowing them to make small, incremental price changes.
To apply our pricing knowledge, we take purchased inventory and examine every price point within the range and calculate the marginal revenue for each. Finally, we create a plan of markdowns that gives the retailer the greatest opportunity for sales and profitability.
When looking at the pricing of your inventory, remember that tools like SurveyMonkey Statistics Premium give you tables that show different data points for every product. This 10-shelf version of the software gives you a great starting point for quality-controlled data but won’t tell you how well your offer will do during a promotion. It also won’t show you the inherent margins of different products.
Once you’ve chosen your product and price points, explore sales and profitability from here. You need to take data from previous price points and compare them to today’s and look at the lines of best value (the positive numbers) and worst value (the negative numbers). That way, you can find what is the minimum and maximum price points that your discount can take.
What are the tools that you need to do price optimization?
Price optimization is the process of changing the price of your products to get more revenue than you would have if you’d left the price the same. You can use tools like Google Analytics and Google Adwords to use data on your website to figure out what the optimal price is for your products. Using special machine learning algorithms, you can compile a list of available prices and make a tool recommendation based on your site traffic.
Collaborative filtering is an integral part of the retail pricing process. You can use collaborative filtering algorithms like collaborative filtering bots to find the best possible price for an item by asking a set of friends or people you follow who have the same interests as you. Bots can also help you find the best time to sell an item by leveraging cross-site chatter from your followers. You can run a collaborative filtering bot by using GroupMe or Facebook Messenger.
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- To optimize your sales and profitability, you should keep a check on all the latest deals the market is offering.
- You can check and pay attention to any aggression in price that your competitors are applying, and you can implement these tactics to boost sales growth and profits:
- Take advantage of in-store promotions by understanding the triggers that make people take advantage of them.
- Use big data and machine learning to find out which promotions are relevant for your storefront, and set up triggers for when they should end.
- Track your customer purchases and use reviews as a vital part of effective customer engagement — an essential part of holiday shopping.
- To interface with your clients and keep the customer relationship healthy, you should keep an eye on service and promptness to accommodate your clients’ needs. You can do this by utilizing the insights gained from customer reviews.
Customer data plays a crucial role in the long-term success of your business.