When thinking about optimization there are several different paths to choose from:

Traditional

In a traditional price optimization application, the use of sophisticated mathematical analysis is used as a means to predict customer behavior based on historical transaction data. As an example, we might use a regression analysis, which is the measuring of impact of one variable on others, to determine the overall impact of competitor price changes on your company’s sales.  

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This analysis can be tailored to different customer segments by simulating how targeted customers will respond to price changes. Working in this way can provide multiple data-driven scenarios that provide in-depth forecasting through different channels. 

Cost-

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Based

Manufacturers most commonly use this method of pricing, since it generally will require the least amount of information about customers and consumers. Overall, this is a simpler method that will consist of using the cost of creating the product plus the percent markup that is necessary.

Competitive

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Pricing

The competitive model is most often used in online retail scenarios, in this situation companies monitoring their competitor’s prices and then will generate their own price setting using all of the information gathered. Typically, this pricing method uses various pricing rules to ensure that the company’s price for a certain product reaches a certain position in the market (e.g. being the cheapest available).

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