Beckway Insights: Pricing Strategy
Pricing strategy plays a critical role in the success of any business in today’s competitive market. It is crucial to implement pricing modifications quickly and accurately to keep up with rapid changes in supply and freight costs, inflation, and competitor pricing. Beckway has extensive real-world experience in pricing strategy and implementation, including highly practical and impactful applications of machine learning techniques in specialty distribution, manufacturing, and services industries.
Using machine learning to augment traditional techniques in pricing optimization has many significant benefits including:
- Handling complexity: Machine learning algorithms, such as K-Means, can handle data sets with more variables and more rows, including product type, customer purchase behavior, geography, and seasonality. This makes it easier for companies to develop pricing strategies that reflect the complexity of their business and the market.
- Deeper learning: Machine learning algorithms, such as Random Forrest, can adjust pricing based on complex relationships in a large set of variables that can easily include historical sales, customer segments, competitor pricing, and market trends. This enables businesses to identify patterns and opportunities that would be difficult or impossible to detect manually, which in turn produces pricing models that better match buyer behavior.
- Faster optimization: Machine learning algorithms can repeatedly test and optimize pricing, while traditional techniques require ongoing and repetitive review and adjustment. This enables businesses to adjust prices based on the market and competitor pricing changes faster and with less support overhead. Businesses can build a competitive advantage or increase margins by reacting faster to markets and competitors.
For a specialty distributor, we recently applied machine learning to identify and correct mispricing in their extensive product catalog, improving margins by 10% without volume impact. This included:
- Compiling a multi-source data set on 20,000+ active products
- Combining operators’ business insight with statistical techniques to decide on price drivers
- Training machine learning models on millions of transactions to identify underpricing and recommend corrections at category and SKU levels
Beckway’s expertise in traditional pricing strategy and implementation, combined with our use of machine learning techniques, provides businesses with practical approaches to increase profits. Our process knowledge ensures that pricing strategy is followed in the field and at time of sale, while our psychographic insights help us roll out new pricing to both employees and customers with a minimum of disruption. Machine learning is now an essential component of the pricing value chain, and every business should consider using it to stay ahead of the curve in ever-changing markets.
For more information, contact Jon Mollenhauer at firstname.lastname@example.org.