Intelligent pricing refers to a tailored approach that determines willingness to pay based on multiple factors such as time of day, location, real-time demand for products and even a customer’s purchasing history. It’s data-driven, not just rules-driven, using algorithms and customer intelligence to deliver instant pricing that is increasingly contextualized or even customized.
An example: When available stock is high, a company might decide to decrease prices, win new customers and boost sales while easing working capital by reducing warehouse use. The next day, a predictive algorithm might alert the company that web traffic for a specific product is high, meriting a slight price increase to boost margins. Both strategies help companies to increase profitability and grow the top line.
Intelligent pricing represents the most sophisticated end of a spectrum of pricing approaches that have evolved over the years—from a mostly manual and generalized set of prices based on static rules to an analytics-based approach where prices can be tailored in real time based on multiple, contextual variables such as demand, competition and customers’ individual willingness to pay—all run by advanced algorithms and artificial intelligence.