Dynamic Pricing

Pricing rules and recommendations that never stop learning

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It’s back to school time! Everyone is getting on-board with the school schedule, packing lunches, and getting on that bus. The kids are so excited about having a new teacher and meeting new friends. What if back to school time was easier? What if, it used Artificial Intelligence? What if, after 1st grade, your kids knew what needed to be done so each year they got better at it?

If only I could apply Dynamic Pricing’s AI capabilities to my kids – Then going back to school would be easy as Pi, 3.1415926535..!

Let me explain how Dynamic Pricing’s AI capabilities can continuously help you improve your pricing recommendations. Dynamic Pricing is an AI solution that automatically assimilates new data and improves itself without requiring any human intervention. Advanced mathematical models glean insights from new data to continuously improve pricing recommendations and drive more intelligent pricing decisions.

See Dynamic Pricing in action with the free 30-day trial.

So how does Dynamic Pricing assimilate new data? Easy, our data scientists created a modeling tool. When you configure the system, you set up data feeds. Data feeds might contain pricing history or product purchase information and inventory levels. Then our data model consumes this data and learns and adjusts the model automatically. This all happens in the background for all your products! You create your own strategies based on your business goals. With the data model and prioritized rules in the strategies, you get pricing recommendations.

Here’s an example. Suppose your company sells school supplies. You have a few key competitors. One of your business goals is to keep your prices competitive with your top competitor. You need to be competitive, but you also need to maintain your gross margins. In this example, let’s look at colored makers in a 12-pack. You currently sell the national brand and store brand markers. Here’s last year’s pricing information:historical pricing chartYour competitors are pricing the national brand 12-packs at $1.49 and their private label at $1.19 cents. This is the biggest quarter of the year for marker sales, so you must get it right. Your margin goals this year are the same as last year. To make your margin goals and out price the competitors, you utilize Dynamic Pricing to create a strategy for the color marker 12-packs. You add two rules:

  • Rule number 1: Use a “Competitor” rule to price your national brand makers to be within +/- 5 % of your competitor.
  • Rule number 2: Use a “Brand” rule to ensure the pricing of your store brand markers to be at least 10% lower than your competitor’s private label markers.

Dynamic pricing does the crunching. It uses the science and then looks at the rules you specified and comes back with some recommending pricing:

pricing recommendations

You review the pricing recommendations and decide that the 34.75% margin for 12-pack of national brand markers is great. You approve this pricing recommendation. But you decide that you want to price the store brand markers at 1.09 cents so you override the $1.07 and put in $1.09 and you see that your margin is now 24.77%.

National Brand Store Brand
pricing changes pricing changes

In this new era of online retail and quick market changes, you need insight and analytics to keep up to make effective pricing decisions driving to your business goals.

IBM Dynamic Pricing is a cloud-based offering that helps online retailers automatically respond in real time to changes in competitive prices, product demand and market conditions. With AI capabilities and an intuitive UI, IBM Dynamic Pricing empowers online merchants to sense and respond in real time to out-price the competition, bringing together online and offline pricing decisions in an omni-channel environment that business goals and improving customer loyalty.

Start your free trial today to experience how Dynamic Pricing can help you.

Information Design, Getting Started, IBM Watson Customer Engagement

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