Artificial intelligence packs a powerful punch when it comes to pricing strategies
Everybody’s talking about artificial intelligence (AI) these days. From chatbots to Uber rides, machine learning (ML) tools have become a daily part of our lives.
As a manufacturer, you can put AI and ML to work in your business in a multitude of ways—from predicting equipment malfunctions and downtime to streamlining energy use. But the real superpower is price optimization.
It all starts with your data. Predictive modeling, prescriptive analytics, and machine learning rely on historical data to discern the behavioral patterns and affinities of distributors and products, so data hygiene is key. And what if you don’t have all the data you need? Consider using your rebate programs to gather intelligence. Instead of giving across-the-board discounts to your distributors, why not develop rebate programs that require them to supply data about what they sold, to whom and at what price. (Some distributors may feel threatened at first, but once they know you don’t plan on stealing their customers, they’ll be much more willing to share information.)
Getting the Price Right
Once you have good clean data, algorithms are put to work, crawling through the ever-growing data sets to identify trends. They work even more powerfully when fed histories on the products and the quoting and buying behaviors of the distributors or vendors who bought them.
Manufacturers can also rely on ML to help them understand how their customers will react to varied pricing strategies, and then identify the best prices based on their goals. Knowing the potential impact of sales promotions or rebates, competitors, weather conditions, seasonal sales forecasts, economic conditions, operating costs, and regional demand all play into formulating pricing guidance:
One manufacturer using ML to optimize pricing and provide real-time price intelligence to its sales reps reported 35% of the ML-recommended prices were adopted. This manufacturer realized a $1.3 million revenue increase and a 10% win-rate increase!
AI can quickly provide key insights that identify business risks and opportunities with greater ease and efficiency. Manufacturers can learn distributor and customer behaviors—including purchasing patterns, claims accuracy, and promotional effectiveness.
For manufacturers, predictive analytics can be a true force multiplier when it comes to pricing. Armed with the power of this detailed information, profitability and growth are inherent.
Download the eBook, The Price is Right: Going from Reactionary to Strategic Pricing. Learn how AI-powered price optimization can add up to a strategic market advantage.