The pandemic’s global economic fallout has put every pricing strategy out there through its paces. In these difficult times, we’ve seen how software technology is and will continue to be the best ally to push those sales numbers back up. The proof is right in front of us. Whether you are working from home or not, I am 100% sure your workflow would not be nearly as efficient without conferencing platforms, email, or (god forbid) the internet.
As useful as these are, there is another type of ones-and-zeros that will be the corporate key to push out and through the COVID-19 mayhem: data. Right now, the ability to make data-driven decisions will mark the difference between successful and unsuccessful pricing strategies. With the help of Artificial intelligence (AI), you could start stabilizing your sales margins today.
The Light at the End of the Tunnel
We’ve all wished to know the future at some point in our lives. While that remains impossible to this day, using AI to analyze data is the next best thing—especially in our current pandemic context. Just a few days ago a friend of mine called data the “best anti-panic remedy” for businesses losing their minds in this crisis. And I completely agree with her.
It is not difficult to see how this perspective applies today. We have all heard of companies from virtually every industry trying to do their best to survive the economical chaos of COVID-19. This has not only led to worst-case scenario pricing but also to more dramatic (and sometimes necessary) emergency measures. If you have recently dealt with order backlogs, value chain deconstruction, sales pipeline review, or similar negotiations, let me tell you your company is far from being alone in that.
That is why data is the light at the end of the tunnel. Whether we like what it tells us or not, it is the best way we have to understand the market, our consumers, and their insights. It tells us where we are, what we can do with what we have, and gives us a guideline of where to aim at. If you have access to data (which we all have, in some form), decision-making becomes a whole lot easier. And in the case of pricing, it can be the lifesaver you need. Coupled with AI, of course.
Why Use AI in your Pricing Strategy?
There are many ways a business can keep up its profits. Pricing isn’t just one of them, but perhaps the most important one. According to this McKinsey study, for example, a 1% price increase would directly yield a 22% increase in EBITDA margins for most businesses. In comparison, achieving this same result would require a 7.5% reduction in fixed costs.
But just pumping up the prices is never the solution. Doing such a thing now would be plain unethical. The strategy, then, relies on integration. The better integration between your operating processes (aka accounting, production, sales, finance, etc) and data, the better pricing decisions you will be able to make. This is the playing field of AI pricing.
AI pricing is one of the most effective tools when it comes to commercial analytics. What is it, you ask? Well, it is a dynamic pricing model that combines commercial strategy, data, and advanced analytics to automate pricing management. It helps you make data-driven decisions that mitigate risks and demystify uncertain revenue forecasts, which are fairly common in uncertain times.
Using machine learning and predictive analytics, AI pricing can provide accurate and real-time intelligence for any products or services you offer. Think of a software engine that monitors, analyzes, recommends, and even acts upon various types of risks. This includes suppliers’ costs, supply chain delays, unforeseen events, and anything else that impacts revenue. Now imagine having that information on your desk just time to make a decision. That would change a lot, wouldn’t it?
This approach to pricing is critical to preserve profit margins during the pandemic. By integrating with your current ERP or CRM platform, AI pricing is the perfect solution to create smart, dynamic, and personalized pricing strategies that provide more value to your customers and keep your company’s margins where you want them.
It’s time to get in the game
There’s no denying it: implementing AI pricing across your organization is not as easy as installing a magical piece of software and letting it run everything for you. It requires a lot of analysis and commitment across departments, from top management to the sales force on the frontlines. Everyone must understand the insights revealed by the AI and use them accordingly for the goals of their positions. Remember, it is not about how much data we have, but how we use it.
However, I can say with full confidence that AI pricing will save more companies through this pandemic than any severe cost cut strategy ever will. With the proper integration and with the right talent by your side, it should be a piece of cake. What’s more, the benefits of AI pricing do not expire. It will help your company through this rocky economy, boost it once everything is better, and prepare you for any upcoming crisis in the future.