{"id":5614,"date":"2021-02-23T02:22:20","date_gmt":"2021-02-22T20:52:20","guid":{"rendered":"https:\/\/www.intelligencenode.com\/blog\/?p=5614"},"modified":"2026-03-26T18:13:06","modified_gmt":"2026-03-26T12:43:06","slug":"4-keys-to-powerful-price-management-for-online-retailers","status":"publish","type":"post","link":"https:\/\/www.intelligencenode.com\/blog\/4-keys-to-powerful-price-management-for-online-retailers\/","title":{"rendered":"4 Keys to Powerful Price Management with Machine Learning"},"content":{"rendered":"\n

And Why You Need Machine Learning To Tie Them All Together<\/em><\/p>\n\n\n\n

We all know how important competitive pricing is in the online retail sphere. After all, the pricing successes of giants like Walmart, Target, and Best Buy has been documented time and time again.<\/p>\n\n\n\n

And while lesser retailers strive for the same success, they rarely invest as much in price management solutions. Instead, they opt for the \u201ctried and true\u201d methodologies of yesteryear. A.k.a. Adhering to long standing traditions and unproven discounts.<\/p>\n\n\n\n

\u2026 Hardly a formula for success.<\/p>\n\n\n\n

However, Walmart didn\u2019t arrive at the peak of the retail industry by guessing and checking. They arrived with a comprehensive price management strategy that enables dynamic pricing<\/a>.<\/p>\n\n\n\n

But you don\u2019t need to be as big as Walmart to benefit from price management software<\/a>. One study of thousands of Australian companies found that a proper price management infrastructure could increase long-term profits tenfold<\/a>. And beyond the dollar signs, these businesses put themselves in a more flexible, agile position to deal with market turmoil and other risks.<\/p>\n\n\n\n

In order to reap these benefits yourself, you need a pricing model that looks beyond the price. Here, we\u2019ll discuss four major tenets of effective price management.<\/p>\n\n\n\n

1. Covering all your costs\u2026 And then some<\/strong><\/h2>\n\n\n\n

Let\u2019s imagine you\u2019re launching a new product and working to pinpoint a worthy price. Your first inclination, naturally, is to weigh it against your costs: The price has to cover the product\u2019s cost and bring in a profit on top of that.<\/p>\n\n\n\n

But the reality is that there\u2019s a laundry list of factors contributing to a product\u2019s true cost. Production and manufacturing headline this list, followed closely by distribution. Then we also have to ask: What\u2019s the cost of marketing this product? Or conducting ongoing research and development?<\/p>\n\n\n\n

And the considerations keep going. For instance, what is the product\u2019s \u201ccost\u201d in terms of how it affects other existing products? Does it eat into their share of sales? Does it have a widespread impact on current inventory turns? Or, on the flip side, will it relieve some of the marketing investment you put into those products?<\/p>\n\n\n\n

Suddenly, we\u2019re not dealing with a straightforward equation of \u201cPrice > Cost\u201d anymore. As one article from the Harvard Business Review<\/a> notes, \u201cthis is a circular problem that in theory can only be solved by simultaneous equations.<\/em>\u201d<\/p>\n\n\n\n

And that\u2019s precisely where price management tools come into play: To solve these simultaneous equations down to the decimal. They provide price management big data that allows us to predict costs with a high degree of certainty. That\u2019s how we establish desired margins and realistic profit targets.<\/p>\n\n\n\n

Naturally, though, your company\u2019s products and internal operations aren\u2019t the only concern…<\/p>\n\n\n\n

2. Keeping an eye on your competitors and feel for your market<\/strong><\/h2>\n\n\n\n

We\u2019ve written at length about the importance of competitor price monitoring<\/a> (and the value of our competitive benchmarking tool<\/a>)… And with good reason! Having accurate analyses of other brands in your field is a necessity for keeping up with your market.<\/p>\n\n\n\n

That said, the issue of competitive price<\/a> management is more nuanced than simply tracking and beating their prices.<\/p>\n\n\n\n

You have to consider the inevitable fluctuation of demand: What\u2019s a reasonable expectation of sales return for your product? How might different price ranges and pricing patterns optimize this return? For instance, a segmented strategy that offers distinct prices to different target audiences may be your best shot at competitive differentiation.<\/p>\n\n\n\n

The small problem with competitive differentiation, though, is that your competitors are also working to gain it. Whatever measures you take, you can expect them to counteract. Meaning that in this constant pursuit of differentiation, you have to work to compete while weighing the risk of possible price wars (and the lose-lose race to the bottom they entail).<\/p>\n\n\n\n

Plus, it\u2019s not just your direct product competitors that you have to worry about; more indirect product substitutes are also trying to gain their market share. They may be even trickier to fend off, as the impacts of their pricing maneuvers often aren\u2019t quite as immediately obvious.<\/p>\n\n\n\n

Ultimately, it\u2019s a continuous battle. You\u2019re playing a chess game with countless players and with no bound to the possible number of moves. That\u2019s why we like to think of price management AI solutions as your proverbial Queen \u2014 helping you move across your market chessboard with ease.<\/p>\n\n\n\n

\"Eye<\/figure>\n\n\n\n\"New<\/a><\/span>