AI Pricing for Wholesale

January 23, 2021

The challenge

Applying a good pricing strategy is one of the most important things to be successful as a wholesaler. Many wholesalers determine their prices mainly on the basis of costs and not on the basis of competition, willingness to pay or value added. This wholesaler, which sells technical irrigation systems, now mainly prices its products on the basis of discounts, whereby an optimal discount is determined for each customer. This discount is usually volume-driven, with the sales managers still free to make adjustments.

The management believed that intelligent pricing would be of great benefit to stay competitive in the future and solve two core problems: overcome emotional driven pricing by their sales managers and increase the pricing process.

“The single most important decision in evaluating a business is pricing power.” 

Warren Buffett, CEO Berkshire Hathaway

The solution

The SYMSON team kicked the project off with a brainstorm in which the current and future pricing strategies of the company were discussed. Three pricing strategies were defined: 

  • A key value item strategy where several key items were defined that acted as “traffic generators” for their business. 
  • A geographical pricing strategy where exceptions were possible among countries in Europe. 
  • A rule based pricing where prices were given certain limitations to optimize.

The team started with analyzing which key product could be defined in the assortment and what business rules should be included in the pricing. 

Furthermore, SYMSON was engaged to connect the customers data into the pricing engine in SYMSON, with predicting the optimal prices for maximizing gross profit for each product given the constraints of the strategies.  Starting with a single country, the SYMSON team worked to include various data points such as customer groups, discount groups, seasonality effects, price elasticity and the pricing business rules. 

Pricing is a particularly powerful tool for wholesale businesses, because the pricing environment allows for  access to a plethora of data and data streams – fantastic for some of the data hungry algorithms in SYMSON. In the case of this customer, a combination of quality data, powerful technology, and a strong project team produced the accuracy results that the client needed to succeed.

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