How To: Use AI price optimization for an engaging client experience

Customer preferences change by the second. Getting into the buyer’s good graces once does not ensure lifelong devotion. That is why retailers will try anything to entice customers. Even something as self-destructive as setting the lowest possible pricing that they cannot afford to keep. AI-powered pricing analytics software and other tools assist firms in developing pricing strategies that allow them to retain clients while maintaining margins.

The lowest pricing in the market do not work unless you are Walmart or Amazon, which have fantastic vendor terms and spend millions on marketing. In most situations, smaller retailers cannot continue to lower prices and are forced to exit the market. Worse, by engaging in pricing wars, they drive themselves and other enterprises to the lowest possible price. Recovery from selling below price floors might take several months for everyone in the market. Thus, it may no longer be an option.

It’s all about price balance.
Indeed, the price of a product is the most essential element in determining a purchase choice. However, it is critical for retailers to understand where they should fight till the end and where it is wiser and safer to give up, raise prices, and make money. It all comes down to striking the right balance. There are three types of products that should be priced differently in order to maximize profitability across the entire selection. Crafting the proper rates for two of these categories necessitates the use of AI-powered price analysis technologies. Retailers must process massive volumes of data to make such decisions, which no other system can do.

Here’s how shops should organize their products:

• Items that should have the market’s lowest prices. These are the products you share with your competitors and for which customers anticipate the lowest pricing. That’s where a product’s pricing is the only differentiation. To price such products, retailers typically use competitive price monitoring and rule-based pricing.
• Products that can be sold at higher prices. These are your private label or exclusive items, for which determining the appropriate costs is difficult. That is where retailers typically apply AI-powered pricing optimization, as algorithms consider demand and price elasticity to recommend optimal prices that will generate the most income.
• Items with variable prices based on the power of your brand. Your competitors sell similar products, but customers choose to buy them from you because of your brand reputation. It’s recommended that you use AI to calculate how much you can boost pricing based on your brand’s popularity.

What is the power of AI?
Self-learning algorithms search through large amounts of data at significantly quicker speed than managers, revealing patterns that people cannot see. The algorithms consider a variety of aspects, including your company objectives and constraints, and recommend the optimal possibilities whenever necessary. Furthermore, the longer you use them, the more accurate and effective they become.

However, numbers speak louder than words. When it comes to algorithm-based price optimization, it can produce significant outcomes such as a 16% revenue gain and a 24.7% sales increase across a variety of retail sectors, including consumer electronics, FMCG, and giftware.

However, AI cannot answer all of your inquiries. Before moving forward, retailers should determine their business goals and continue to address what needs to be fixed without AI. Once this is completed, AI can demonstrate exceptional performance. “The good news is there’s real ROI,” Scott Emmons, CTO at Current Global, said at the Interactive Customer Experience Summit in Dallas earlier this year about using AI in retail.

With AI, retailers have a new opportunity to fine-tune their pricing strategies to the point where they know the ideal rates (whether normal or promotional) for every product in their portfolio — and find out how to make each item contribute to luring people and optimizing overall income.