Rule-based pricing is the most widely used and most conventional way of pricing. This pricing strategy uses static pricing rules to add constraints to the pricing process. These pricing rules can also be seen as “if-then” statements. If a certain event happens, a certain action will always follow. Typical pricing rules could be to round prices, to end on either .09 or .05, to always be 5% cheaper than a certain selected competitor or to always have a minimum profit margin of 10%. Rule-based pricing is often used in dynamic pricing as a tool for pricing managers to implement prior pricing knowledge into the price optimisation process.
To know more, you can head over to our pricing strategy guide where we took an in-depth explanation approach.
You can use rule-based pricing in several ways. This really depends on your use case. Let's give you some examples of how you could use rule-based pricing.
A lot of businesses in this segment use static business rules to automatically adjust pricing when external factors change. For example, most e-commerce websites do not want to sell their product for a loss. Therefore, a wide variety of these businesses have a pricing rule in place that states that products should always be sold with a minimum profit margin percentage.
This store uses static business rules to always offer a product for the cheapest price possible in comparison to their closest competitors. MediaMarkt even states on their website that they will offer the cheapest price possible if they will not sell the product for a loss. Thus, next to having a business rule that states to offer the cheapest price in comparison to their competitors, they also have a business rule that states that they will not sell a product for a loss. This can also be seen as a “safety” pricing business rule.
These businesses typically have a pricing rule in place that states that they are not going to have a “sale”. For example, high-fashion stores do not offer a discount on products because that will hurt the image of their brand. They would rather throw away the product than lower their pricing.
Rule-based pricing can be implemented without much work. It can automate your tasks, make your pricing more effective and reduce errors. Most importantly the pricing knowledge of a manager can be implemented in the price optimization process. In order for the process to be effective, we recommend the following steps:
SYMSON is a dynamic pricing software tool, that uses AI and smart algorithms, to optimize pricing, and increase revenues and profit. With the SYMSON software businesses can use the 9 smart pre-programmed pricing strategies or create their own pricing with the pricing strategy builder. In both cases, the software will suggest optimal price points taking multiple factors into account. To incorporate the internal pricing knowledge of the company in SYMSON, one can take the following steps: