As a pricing manager, you may find yourself wrestling with data-heavy spreadsheets and working on tedious processes that aren’t impactful enough in maximising margins. Soon, you may find yourself relying on inaccurate information unknowingly. So, the resulting prices won’t make any difference to your revenue or profits. One way to get around this is to recognise and understand one single factor can help us reach our goal.

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A study by McKinsey shows that there are multiple factors that we can fine-tune to maximise margins: cost, sales volume, and price. If we change any one of these variables by 1%, profitability can shoot up or down.

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The study demonstrates that reducing 1% cost boosts profitability by 3.5 %, and increasing sales volume likewise helps profitability to rise by an average of 4.5%. But, if you raise your price by 1%, profitability shoots up by 8%!

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Instead of leaving money behind, dynamic pricing takes care of your scalability and charges customers correctly. Let’s take a look at your pricing process and check if it’s time for an upgrade.

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1. Impressive sales numbers don’t reflect in your profits

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If you recorded great sales or exceeded the targets in a quarter or a year but the profit margin says otherwise, you may need to take a closer look at the processes involved to attain those targets. It may be due to the increase in your costs, while the prices remained stagnant.

To identify this, take a step back and check what happened: did more employees join? Did a packaging change need some expenditure? Were there any other expenses made?

Another reason could be the disproportionate balance between the amount of work done and the price(s) charged, that is, you/your team worked for more hours but are charging the same price.

A deep dive into this case will expose whether the extra hours were impactful enough for a higher price or efficient enough to complete it at the same price. This will help you gauge clarity and refine the process going forward.

Third, these cost changes may be the result of your company's inevitable cost increases. It may occur due to unforeseen changes or volatile markets. And as a consequence, your business might face multiple challenges in determining the right product prices.

Regardless of the reasons, one powerful way is to leverage AI to predict optimal product prices. It helps you:

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• Incorporate cost price changes into your sales prices.
• Consider multiple built-in pricing strategies to be implemented.
• Apply your business KPIs as rules for pricing strategies.
• React to events through notifications.

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2. Inability to identify the product elasticity

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When prices change, the product demand may change as well. It depends on the product and the economy to determine the price sensitivity. In a stagnant economy, demand is highly sensitive to price. With luxury goods, for example, a slight price change can dramatically change the product demand.

So, as a pricing manager, you may need to manually sit through all economic and commodity factors, from the macro to micro, to come to an optimal price point. But human errors and inaccurate data sources could leave you needing to double check, even triple check! Even if everything falls into place, you may come to realize that you need to raise your prices. But to what extent? And how do you come to a conclusion about the right price in the current market scenario?

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To combat such follies while doing mundane tasks, dynamic pricing automation helps you gain answers in dramatically less time. The changing economic or geographical context won’t hurt your products as dynamic pricing systems automatically find the right price. With the right tool, you will be able to:

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• Get recommendations for areas of improvement,
• Marry data and experience to enhance your pricing, and
• Take the first steps in machine learning pricing thereby increasing your profit margins.

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3. Competitors are charging differently

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“Lowering prices is easy. Being able to afford to lower prices is hard.” - Jeff Bezos.

If competitors’ pricings are higher for similar or fewer products, you may lose profits to them if you fail to optimise prices and your value proposition on time. It’s crucial to act dynamically on changing prices.

Now, the next step might seem to be relooking at product messaging to set your business apart from the competition. Before this, we need to understand a sustainable approach for the long-term edge. So, the solution is to study the daily market prices of key competitors and to keep track of any new players joining the market.

But doing this manually may get tedious and birth inaccuracy. This is why today’s businesses are moving to smart automation: to deeply identify the practical scope for price optimisation and maintain a competitive edge in the market.

Such dynamic pricing tools let you:

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• Act dynamically on price changes.
• Decide your price positioning.
• Benchmark against competitors’ product prices.
• Build a dynamic pricing strategy that echoes your business.

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4. Complex & unorganised data affairs delay meaningful insights

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As a pricing manager, you may have multiple spreadsheets with different data sets. But understanding historical data and deriving meaningful insights aren’t easy for you? That’s due to unorganised information spread across documents. And this may hint at finding a new organised way of again arranging data sets in spreadsheets- investing time and energy, thereby slowly budding frustration.

It’s safe to say that spreadsheets and ERP systems are turning into obsolete ways to record data and use them for analysis. They are subject to human error, tough to consolidate, lack real-time visibility, reduce productivity significantly, and so on.

Today, businesses are leveraging AI to derive meaningful insights from heavy data sets in no time. By capturing all possible values, comprehensive pricing strategy and more, AI-enabled pricing tools help optimise margins and automate tedious tasks. Using smart algorithms also ensures:

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• Supporting heavy data easily for advanced pricing strategies.
• Automate pricing strategies as there’s no manual work involved like importing data.
• Real-time visibility.
• Accuracy of data for a comprehensive pricing strategy.

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5. You attract bargain hunters

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“Perhaps the reason price is all your customers care about is because you haven’t given them anything else to care about.” - Seth Godin in his book All Marketers are Liars, 2005.

Pers Sjofors, otherwise known as “The Price Whisperer” said that setting low prices appeals to price-sensitive customers. And such customers deal with the company solely because of low prices. For them, the product/service value doesn’t matter as much. Therefore, your business ends up facing limitations in scaling itself in the long term.

Moreover, Sjofors also mentions how a Los Angeles-based company’s sales volume shot up by 25% as they quadrupled their prices, got rid of low-paying customers and found a new set of high-paying, low-maintenance buyers.

While it’s crucial to reposition your product/service to new customers, the catch is to see the operations from a slightly higher level to meet profitability and scalability.

So, you can face a plethora of negative impacts without dynamic pricing like - exhaustion from tedious and repetitive human actions, unimpactful task execution, shrinking profit margins and the like. And with the right elements for price optimisation, you combat such reactions through AI-suggested proactive steps. You can read more about how Symson helps find the optimal price for you while counting your unique KPIs too.

Also, feel free to book a time with a consultant for further clarity. Better yet, you can request a free demo to get your hands on Symson.

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