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The ultimate objective of price optimization is to enable an organization to identify the perfect balance between business rules, numerous KPIs, price value drivers, pricing strategies and your pricing stages.
Optimization History
The concepts of price optimization isn’t new and has been part of the marketplace since the very beginning. For as long as there have been marketplaces for trading and selling goods, the strategy of pricing has been at the forefront. Our predecessors have known about pricing based on demand, but the major difference is that they didn’t have the capacity to analyze all of the variables that impact prices.
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EXAMPLE: A retailer offering 1,000 products per season, will end up making hundreds of thousands of pricing decisions in a single year. Then consider this, a leading multi-channel retailer with 30,000 products being sold in 10 countries using three distribution channels with list prices and quarterly promotions will end up making millions of pricing decisions a year. |
Evolution of Optimization
A major evolution of the decision-making process includes the concept of price differentiation, because the optimal price is unique to an individual customer transaction, many sellers will differentiate their offers and their prices.
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