You may be frustrated trying to manage prices for thousands of SKUs and be wondering, is there a better way? Well, welcome to the world of pricing optimization.
Here is a general introduction to what pricing optimization software is, what it does, and what to expect when you use it.
Pricing Optimization Software Explained
Pricing optimization at a high level is simply the process of finding the optimal price for your business, or maximizing price based on multiple factors to improve gross margin or reduce inventory. Retailers can commit a large amount of resources on price optimization to make sure their products will sell while simultaneously reaching various goals. These goals could be improving profit margin, gaining market share with aggressive pricing or moving inventory and improving turns.
Simply put, if a product is priced too high, it may not sell. On the other hand, if the price is too low, the retailer’s gross margin will suffer. Finding that perfect balance between selling price and cost is basically what price optimization is about.
Price optimization software has complex mathematical programs that take into account various types of data to calculate and forecast results at different price levels. The output data is combined with information on cost, historical demand, on-hand inventory, and even competitor information to recommend new prices that will improve a retailer’s profits.
SaaS price optimization
Price optimization software can be a complex program installed on a retailer’s server or, as with PRICEXPERT software from Advanced Pricing Logic, it can be delivered as Software as a Service (SaaS) platform.
One benefit of a SaaS platform is continuous updates and improvements automatically flow into the system for instant use by managers that use the software.
Benefits of Pricing Optimization Software
When running pricing optimization software, you have many benefits available to your company. For example, you can navigate multiple price lists and cascade several fields of prices at once, while analyzing inventory by looking at pricing, gross margins, and in-stock ratios.
You can capture total product values and aggregate what’s in or out of stock and expand pricing intelligence to broad ranges of product types and categories.
Pricing optimization software gives you flexibility and new options with your inventory management, too: you can isolate and discount overstocked products or do a separate analysis of unwanted items from your price routine. You can mark down slow movers, or mark up fast movers up, and manipulate prices from known costs. You can control kit and bundle costs and prices instantly.
Pricing software also lets you apply methodology that can be repeated, over and over, along with hundreds of other options that allow you to take the work out of repricing.