Price, Important But Least Understood (Until Now)

The invention of currency by society is as important as the spread of organized religion.  Unlike religion, we have yet to fully grasp the power of price.

Yet for something so important, most companies do not understand the power of price. Firms know how to price items, but pricing strategies are largely built on one of three, arguably flawed, methodologies:

  • Legacy Pricing:  We always priced our product like this.
  • Cost plus: We need to make a specific margin to cover labor/inventory costs.
  • Referencing competition: This is what the key competitors charge, we must charge the same.

Each method is flawed to some degree, and invariably means firms  either leaving money on the table, or do not maximize sales in a competitive context.

Knowledge Leaps has created an algorithm to estimate the optimum pricing based on consumer demand. The platform can evaluate price in different contexts (peak vs. off-peak seasons, stand-alone pricing Vs competitive context pricing, test vs. control stores, and by different audiences).

Using our algorithm we can quickly evaluate multiple items across multiple store groups in multiple territories/countries to identify optimum price zones.

Overlaying machine learning the KL platform will identify how a retailer can increase profit at a transaction level and then test it in the market place to explore any unintended consequences of price changes.

Chart Showing Demand Pricing Output Examples