{"id":3971,"date":"2023-10-09T16:10:19","date_gmt":"2023-10-09T16:10:19","guid":{"rendered":"https:\/\/solutionsreview.com\/business-process-management\/?p=3971"},"modified":"2023-10-16T16:15:16","modified_gmt":"2023-10-16T16:15:16","slug":"the-price-is-right-how-to-optimize-prices-with-ai","status":"publish","type":"post","link":"https:\/\/solutionsreview.com\/business-process-management\/the-price-is-right-how-to-optimize-prices-with-ai\/","title":{"rendered":"The Price is Right: How to Optimize Prices with AI"},"content":{"rendered":"

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As<\/span><\/span> part of Solutions Review’s Contributed Content Series<\/a>\u2014a collection of articles written by industry thought leaders in maturing software categories\u2014<\/span><\/span>Mitch Lee, a Profit Evangelist at <\/span>Vendavo<\/a>, explains how companies can use artificial intelligence (AI) to optimize prices.<\/span><\/span><\/em><\/strong><\/p>\n

From agriculture to utilities, AI is transforming every industry. When it comes to automating processes, gaining insights, and predicting outcomes, it\u2019s a global game-changer. As <\/span>Accenture researchers point out<\/span><\/a>, AI is reinventing work and every role has the potential for disruption.<\/span>\u00a0<\/span><\/p>\n

Pricing is an important commercial process within every industry and AI is impacting the strategies pricers use to boost organizations\u2019 profitability and enhance customer experiences. The <\/span>Pricing Excellence Report and 2024 Outlook<\/span><\/i><\/a> from Vendavo found 51 percent use AI in their pricing processes to some degree today or they have plans to implement it in the next 12 months. The persistent question is, how?<\/span>\u00a0<\/span><\/p>\n

AI-Fueled Innovation <\/span><\/b>\u00a0<\/span><\/h3>\n

As outlined in <\/span>The Value in Optimized Pricing (and How to Achieve It)<\/span><\/a>, optimized pricing is the process of finding the right price for the right customer at the right time. It identifies a customer\u2019s willingness to pay for a product or service: not so high that you risk losing that customer\u2019s business, but not so low that you sacrifice margin. <\/span>\u00a0<\/span><\/p>\n

From compiling price data from the web to making pricing recommendations that factor in business rules, changing competitor actions, and market trends, AI is powering timely, informed decision-making with greater efficiency. It is also upleveling professional pricers\u2019 output by eliminating the need to conduct repetitive, manual tasks.\u00a0<\/span>\u00a0<\/span><\/p>\n

Within pricing, AI offers immense potential for innovation:\u00a0<\/span>\u00a0<\/span><\/p>\n

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  1. Analyze data.<\/span><\/b> AI can analyze vast volumes of data quickly and accurately, removing the otherwise time-consuming, error-prone, manual processes pricers typically wade through to compile market trends, historical transactions, product preferences, and competitor actions.\u00a0<\/span>\u00a0<\/span><\/li>\n
  2. Predict customer behavior.<\/span><\/b> AI algorithms can discover patterns across various data sets and help pricing teams create appropriate personalized discounts, promotions, or bundles.\u00a0<\/span>\u00a0<\/span><\/li>\n
  3. Monitor competitors\u2019 pricing<\/span><\/b>. AI-powered pricing continuously monitors competitors\u2019 pricing and gives organizations an opportunity to respond to those price strategies in real-time. If competitors are dropping their prices, your organization can make a thoughtful decision to match those low prices or stay the course because you\u2019re going for a separate audience that has a higher willingness to pay threshold.<\/span>\u00a0<\/span><\/li>\n
  4. Improve forecasting<\/span><\/b>. AI\u2019s predictive capabilities extend to demand forecasting, helping organizations anticipate future market trends and customer preferences. By accurately predicting demand, businesses can optimize inventory management, reduce overstocking or understocking, and ensure they have the right products and the right time.\u00a0<\/span>\u00a0<\/span><\/li>\n
  5. Enhance customer experiences.<\/span><\/b> AI delivers enormous value to the business but also to customers by improving their experience. AI can help ensure prices are reflective of market conditions; personalized offers and even discounts create a sense of value and loyalty. <\/span>\u00a0<\/span><\/li>\n<\/ol>\n

    If you think these innovations sound pretty rooted in data, you\u2019re right. AI is a master at compiling data and identifying trends but for that data to be actionable, its formation and use require guidance from the right people. Which is why organizations are looking to add data analysis skills to their teams. The Pricing Excellence report found data analytics is the most sought-after skill for pricing professionals (75 percent).<\/span>\u00a0<\/span><\/p>\n

    Explainable AI<\/span><\/b>\u00a0<\/span><\/h3>\n

    For AI to truly work in any commercial setting, but especially for product and service pricing, it must be explainable. Explainable AI is guidance that builds confidence because all the stakeholders involved understand the inputs or what went into arriving at \u2018the right price.\u2019 Stakeholders can then trust the recommendations that the AI-powered system provides.<\/span>\u00a0<\/span><\/p>\n

    When incorporating AI in pricing processes, be sure to ask:\u00a0<\/span>\u00a0<\/span><\/p>\n