Retail – Price Optimization

Industry: Retail

Pricing has been and will continue to be an important key value lever for retailers. Retailers sets their price such that customer finds value in their purchase as well as retailers make profit.

Abzooba price optimization solution helped retailers in setting up the right prices to keep the retailer competitive and profitable.

OBJECTIVE

To develop a decentralized data driven price recommendation engine that provides price recommendation based on

  • Product price elasticity
  • Organization product objective – Sales Maximization / Profit Maximization
  • Pricing business constraints

ABZOOBA’S SOLUTION

Abzooba segmented all products within product sub-category into different tiers based on product price, brand and product movement rate. Product objective is set at the tier level.

Price elasticity of demand for each item is determine based on historical sales of the item across geographies. Variance in demand is explained by pricing and non-pricing attributes. Demand = f ( π‘·π’“π’Šπ’„π’†, 𝑺𝒕𝒐𝒓𝒆 π’‚π’•π’•π’“π’Šπ’ƒπ’–π’•π’†π’”, π‘«π’†π’Žπ’π’ˆπ’“π’‚π’‘π’‰π’š π’‚π’•π’•π’“π’Šπ’ƒπ’–π’•π’†π’”, π‘·π’“π’π’Žπ’π’•π’Šπ’π’π’”, π‘ͺπ’π’Žπ’‘π’†π’•π’Šπ’•π’Šπ’π’)

Based on business objective and pricing constraints, optimized price is calculated. For each product, business objectives are one of the two as below –

  • Sales maximization
  • Profit maximization

BUSINESS IMPACT / BENEFITS

  • Decentralized price recommendation engine helped store directors in setting the right price while maintaining full pricing autonomy for store directors, resulting in an 18% increase in profit.