What does a pricing tool do?
A pricing tool like Pricimetrics finds the optimal, or profit maximizing price, for your products. That price might be higher, or it might be lower than what you are currently charging for any given SKU. It depends on how the price change affects total sales. In general:
Small price decrease → Large sales increase → Profits rise
Small price decrease → Small sales increase → Profits fall
Large price increase → Large sales decrease → Profits fall
Large price increase → Small sales decrease → Profits rise
Pricimetrics analyzes your transaction data to model how your customers react to price changes. Pricimetrics uses that to generate estimates of the prices most likely to maximize profits.
Does Pricimetrics do anything other than tell me what prices to charge?
Because Pricimetrics is able to determine the potential profitability of any given SKU, it can help you optimize your product screen. It can identify which products are making money or can make money, and which products shouldn’t be in your line-up.
Don’t you need competitor data?
Pricimetrics doesn’t require data on competitor prices to produce its recommendations. It can, however, take your competition’s behavior into account if that data is available.
How does Pricimetrics Work?
Pricimetrics is designed to tackle pricing problems the same way a human expert would. In fact, it was modeled on the behavior of a Senior Executive with two decades of experience in Pricing and Analytics.
The core engine of Pricimetrics performs a number of steps. Pricimetrics begins by uploading your data and processing it, trying to identify patterns in the data, and equally important, looking for anomalies and random events. Perhaps volume at a store fell because of a broken water main down the street, or sales an online store were up because a competitor’s site crashed. Pricimetrics may not understand precisely what happened, but it will identify data points that must be treated with care.
Once patterns in the data are identified, Pricimetrics begins to map the observed relationship between prices and profits. The shape of this relationship can be complex, and it can be affected by other factors, many of which Pricimetrics can take into account. For example, Pricimetrics is able to incorporate competitor behavior, inflation, tariffs, etc. Once Pricimetrics has mapped a relationship between price and profit, however complex, it seeks out the price associated with the highest probable profit.
Because every step described so far is backward looking – the proverbial equivalent of steering a car by looking through the rearview mirror – Pricimetrics takes one final step, which is to analyze the data one more time to try to determine whether the road ahead is likely to lead to the optimal price increasing, decreasing, or staying the same, and it uses that insight to make its final recommendation.