5 Harvard-Recommended Ways to Improve Data Management for Your Business
If you've ever spent time mulling over whether or not to pay for a flight, a Christmas present for someone you're not actually that keen on, a bestselling book – pretty much any online purchase – then you will probably be familiar with the fact that the prices change as often as your socks do. This is so much so that customers today will each have little tips and tricks to swerve the changing prices. "Always book holidays on a Tuesday!", they exclaim. "It's far cheaper than on a Friday!" This new era of ever-changing prices is with thanks to artificial intelligence (AI)-driven dynamic pricing. This method is the now and the future of retail and e-commerce, spurred on by the synergy between digital transformation and AI. Like every other industry, retail is undergoing a digital transformation to get the most value out of the technologies available to businesses now. AI – arguably the most disruptive of these technologies – is paving the way for powerful dynamic pricing and for businesses to position themselves better than ever.
Dynamic pricing as a concept isn't new. Over the last few decades at least, consumers have become familiar with price hikes during periods of demand. For example, hotels are famously more expensive on in-demand nights of the year, such as New Year's Eve or Valentine's Day. When retailers embrace AI as part of their dynamic pricing strategy, it enables them to price services and products perfectly for even narrower time slots. Today, companies can respond to happenings and changes quickly to determine optimum prices. The external factors are limitless. For instance, amid the coronavirus outbreak, some airlines in China have slashed flight prices due to lower demand. On the other hand, if you're looking to book an Uber in Central London on a Friday night, you'll find it's a lot pricier than 10:30am on a Tuesday. Weather also influences pricing, as well as competition. AI enables these businesses to change their prices in minutes, making them more competitive than ever. In being more receptive to trends and changes, companies may never miss a window of opportunity again. To make this possible, organisations need to leverage their data. Increasingly so, companies are taking real-time approaches to their data, as well as more personalised. Now, customers with different traits, such as city or loyalty, may see different prices at the same time. This is because businesses are leveraging the information that is unique to the consumer. For example, factors that might influence what one person sees could be how long they spent looking at an item or what other items they are looking at.
To better demonstrate how businesses can get the best out of their data and AI for dynamic pricing, we will use MarketRedesign as an example. The company's offering delivers actionable insights derived from collected data to automatically set intelligent prices in turn. In particular, it provides price recommendations using clever algorithms that predict customer willingness to pay. Furthermore, it takes transactional sales data and reliable external market data into consideration, as well as market demand and supply dynamics. One of the obvious perks of automating pricing strategies is that it saves significant time. To remain competitive, businesses must instantaneously respond with market changes. MarketRedesign enables exactly this, while also giving businesses the opportunity to set pricing rules. Thus, you have parameters in which you are free to get creative with your prices at the drop of a hat. As well as this, MarketRedesign's automation capabilities allows companies to take a backseat while it calculates optimal prices for the business. Furthermore, MarketRedesign enables price elasticity. Their solution uses algorithms to calculate the sensitivity for prices changes to the sales volume. Demonstrably, the MarketRedesign solutions has capabilities where humans do not. Traditionally, employees would have to stare market information and make an educated guess. AI is putting the 'intelligence' in pricing, leveraging the most valuable asset a company has to do so: data. If the option is there to embrace technology to better strategies, naturally, businesses should take it. Otherwise, they will most certainly fall behind.