What is AI-pricing?
To kick things of what is AI-pricing exactly? In recent years, artificial intelligence (AI) has enabled pricing solutions to track buying trends and to monitor competitor prices. While in the past, prices were mostly static, now you see the implementation of dynamic pricing (When prices are adjusted constantly based on external factors and the buying behaviour of individuals). Many online retailers such as Amazon are already using AI to power their dynamic pricing and to optimize their revenue and margins.
In the past decades, training AI models was very expensive and only possible for companies with a big budget. The last few years training costs for AI have dropped roughly 10x per year (ark invest source). Therefore, AI pricing has become available for much more companies as well. But what will it cost for you?
To be honest, it depends. The cost of AI-pricing varies, since the development, implementation and maintenance of AI-pricing software is driven by various factors, and this can only be evaluated on a case-by-case basis. However, in this article you will get to know what AI-pricing is, what factors determine the costs and how you will get the most value for your money.
The costs of AI-pricing will vary based on by whom it will implemented. Will you make the AI-pricing software inhouse or will you hire an outside party to do it for you? Here are the costs per different solution:
Inhouse – It is possible to develop AI-pricing inhouse, if you have the right people, time and knowledge. However, if you do not have this, it will be very costly to set up. Hiring the right people with the correct knowledge is costly and can take up a lot of time. Costs can vary from 50.000 – 500.000 euros.
Hiring Freelancers – It is possible to hire freelancers that will make the pricing software for your company. You will be able to have a fully customized software product, but this will become at a great expense. Pricing software is very complex. You will need software engineers, data scientists and pricing experts to make a good product. Their price ranges can vary from 50 – 700 euros per hour (Upwork). Hiring so many freelancers is rather expensive. But the software will also likely not be built overnight and may cost you up to a year to develop. This makes freelancers also a rather expensive option.
Existing solutions – The cheapest and most effective alternative for implementing AI-pricing is to get software from another party, such as SYMSON. This way, you do not need to hire anyone to build the software for you, but you will still be able to implement dynamic prices. Prices of existing solutions usually start from 500 euros per month. To see what different AI-pricing software programs there are, you can take a look at this article, in which SYMSON is compared to its closest competitors.
How do you implement it?
Now that you know the costs, it is also relevant to know what you need to fully capture the potential of AI-pricing. First of all, you need the right data. AI-pricing uses machine learning algorithms to generate the optimal prices for your products. This cannot be done without the right data.
Second, you need the right visualization tools and dashboard for your pricing performance. Only when you visualize the data and monitor the results in a coherent way, you are able to see how your AI-pricing is performing in comparison to your pricing in past.
Last, you need to monitor your results and tweak your pricing where necessary. To optimize further and get the best results possible. P.S. Read here how to implement a new pricing strategy with only four simple steps!
Is AI-pricing worth it?
Although investing in AI-pricing costs a lot of money – whether it be hiring your own team, freelancers or pre-built software – it is worth the price for the right companies, depending on size, goals and requirements.
According to McKinsey, a 1% price increase can already lead to a profit increase of 8%! By having the optimal prices for your product, you can earn a lot in return, especially if you have a large, wide and diversified product portfolio. Next to this, retail is one of the sectors that is adopting the use of AI the fastest according to PwC. Retail is now using it for pricing, demand forecasting and product recommendations for example.
Companies should be aware that investing in AI Pricing is not a one-off investment, but a recurring investment that grows if you want to take it to a next level. Partnering with AI-software that has a proven track record within your market, can save many hours of time and costs to accelerate the onboarding.
As an early rather than a late adopter, the benefits of AI are still rather easy to capitalize on, like by using dynamic pricing for your products to boost revenue and margin.
Do you want a free demo to try how SYMSON can help your business with margin improvement or pricing management? Do you want to learn more? Schedule a call with a consultant and book a 20 minute brainstorm session!