Ongoing economic volatility and inflation amplify retailers’ pressure to optimize pricing and maximize customer loyalty. A recent report from Coresight Research outlines the measurable advantages for retailers of utilizing AI for pricing solutions and how the technology can benefit pricing overall.
Historically, large teams have made incremental price adjustment decisions using spreadsheets, data sets, and formulas. However, more retailers realize that AI pricing can mean the difference between millions in profits or losses.
The Future of Pricing: How AI Is Transforming Price Planning in Retail report explores the current level of AI (artificial intelligence) usage in pricing strategies, and the obstacles retailers must overcome to maximize the returns of AI pricing technology investments.
According to the survey, 92% of respondents are using AI pricing today, but integrating data across the enterprise for the most accurate results remains a challenge.
Coresight Research’s analysis found that by using AI-based pricing solutions, retailers across different verticals can increase annual revenues by 10%, on average, and improve margins by as much as 5%. However, retailers need to integrate AI pricing with other systems better to maximize its potential.
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Another recent Coresight Research survey found that more than half (52%) of retailers cannot execute at least 10% of their promotional campaigns properly and are mispricing 10% of their products under any given category in any given selling period.
“The consumer is more price sensitive today than they have been in years, which makes it critical for retailers to have the right insights at the right time to adjust pricing in real-time,” said Coresight Research CEO Deborah Weinswig.
“What we learned from this survey is that while retailers use AI pricing tools, most still have a long way to go to integrate pricing tools with other enterprise technologies and systems to maximize its benefits. The retailers who integrate the fastest will be the companies that we see rising above economic-driven pricing challenges in the months ahead,” Weinswig added.
Investing in AI for Pricing Solutions
The report emphasized that as competition intensifies among retailers due to higher customer acquisition costs, retailers will have to differentiate through continued investing in technology infrastructure (including AI).
Coresight Research’s survey found that 97% of respondents currently using an AI-based pricing solution plan will increase investments in this area over the coming 12 months. This finding reveals that retailers have yet to achieve optimal AI usage levels and strongly intend to upgrade their AI-based pricing solutions soon.
Continued investments will also catalyze retailers to move up the pricing maturity curve in the coming years.
“Recent advancements in machine learning have made sophisticated pricing technology accessible to retailers of all sizes, empowering them to implement complex pricing strategies that deliver optimal prices quickly and efficiently,” said Alex Galkin, Founder and CEO of Competera.
“We’re seeing more investments in solutions that harness the latest deep learning technology, which can process 10x more pricing and non-pricing factors than humanly possible, to calculate billions of price combinations continuously. With the help of these AI tools, pricing becomes a means to stronger profitability and customer loyalty,” Galkin concluded.