Part 1: Introduction to Pricing engines

What is a pricing engine?

A pricing engine is a type of software used by retailers to process pricing and non-pricing data to craft optimal value offering on the portfolio level. It is an effective practical means used by retailers to upgrade their pricing policies.

Dynamic pricing models powering the pricing engines help to build a highly personalized shopping experience as pricing is diversified based on market trends, demand fluctuations, as well as customer behavior, and purchasing power.

According to McKinsey, retailers tend to reprice the top-selling products three-four times per day, sometimes up to 12 times daily. Obviously, making repricing manually is not only time-consuming but also inefficient and vulnerable to mistakes.

To manage pricing sustainably, retailers try various approaches from developing advanced math models in traditional spreadsheets to building complex in-house tech solutions.

A recent study by Capgemini shows that retail executives expect AI to save as much as 340$ billion annually and advanced pricing software is among the most powerful sources of profit increase. After we’ve explained how the pricing engine works, you might reasonably ask for real-life proof and numbers.

Here they are: a leading Eastern European apparel retailer Intertop reached the point of 10.3% gross profit saving along with 200 BPS of profit margin saving after only 6 weeks of using a pricing engine[1].

Retailers using traditional and market-driven approaches to pricing are already facing substantial problems in keeping up with the competition. The future belongs to proactive rule-based pricing and comprehensive price optimization. The latter means shifting to portfolio-level pricing with goal-driven scenarios based on ML/AI models and automated pricing.

Pricing engine software brings sustainability to retailers of any size, maturity, or industry. Try our market test to find what benefits can optimal prices bring to your business!

How to build a pricing engine from scratch (part 2)

References

1. https://competera.net/resources/articles/pricing-engine#:~:text=Pricing%20engine%20is%20a%20type,to%20upgrade%20their%20pricing%20policy.

Please Note: The content in this post heavily uses the content from the references, adjusted in a few places for generalizing. In a way, it is an abridged version of the reference post.