A GUIDE FOR PRICING STRATEGIES

Rule-based Pricing

What is it?

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.

How to use it?

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.

Make your pricing more effective
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Automate some manual tasks
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Quickly respond to changes in supply and demand
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THE GAINS

Benefits of rule-based Pricing

1

Pricing managers can implement their own expertise

Pricing managers often have a lot of internal knowledge about their business and industry. By using their knowledge of business rules, you can optimize the pricing process.
2

Reduce errors in the pricing process

Applying rule-based pricing to dynamic pricing strategies ensures that certain criteria are met for every price so that your pricing stays consistent and fewer errors occur.
3

Simple to implement

Rule-based pricing is very simple to implement, by using knowledge to assign certain rules to your pricing, you do not need to perform very complicated calculations or analyse.
INDUSTRY TRENDS

Who is using it?

E-commerce businesses

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.

MediaMarkt

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.

Premium brands

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.

HOW TO HANDLE THE CHALLENGES OF RULE-BASED PRICING

The most common challenges pricing managers face today

  • Are you offering a lot of products that all require different specifics in pricing? Is the process of updating your prices time-consuming?  A Rule-based pricing strategy enables you to automate changes in your pricing such as a minimum margin, price rounding and more! Pricing automation software such as SYMSON gives the ability to automate different strategies along with specific rules for all your needs.
  • Are you experiencing reduced profit due to lower or negative margins on some of your products? Is your current pricing process complex and hard to keep track of? The pricing rules available in Price Management solutions such as SYMSON can simplify your pricing process. With it, you can automate your process, stabilise your margins and reduce errors in your pricing.
THE DISADVANTAGES

Disadvantages and how to handle them

Static pricing

Business rules are static and do not change automatically. This can lead to business rules that are getting outdated. To prevent this from happening one should often check if the business rules are still relevant or not.

Based upon a few factors only

Mostly, business rules are related to a certain “if” or event. When it doesn’t take multiple factors into account, the results may not be optimal. To prevent this, one can best use business rules in combination with dynamic pricing.

Cannot learn from new data

Business rules initiate an action when a certain event happens, but the business rule itself doesn’t learn from all the data. This leads to valuable knowledge being lost. To prevent this, one should also consider pricing practices that can learn from new data.
HOW TO SET IT UP

How to implement rule-based pricing?

In your organisation

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:

Create product groups according to the different specifics of your pricing
Select the pricing rules needed for each of the product groups
Implement the rules in your pricing management software
Edit the rules for each of the groups and apply them
Analyse the results and optimise group by group

In SYMSON

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:

Make a secure data connection with your chosen systems to continuously update prices
Create strategy boxes for the different product groups
Configure the desired specifics of the strategies
Add the business rules you want to incorporate your internal knowledge
Assign the Pricing Strategies and automate your process
Analyse the results using the Ingishts & Learn module in SYMSON
Improve your pricing using the new knowledge gained
THE KEY IS A COMBINATION OF STRATEGIES

How to combine with other pricing strategies?

Rule-based pricing can be combined with other pricing strategies such as a competitor-based pricing strategy, a dynamic pricing strategy or a key-value item strategy. While your pricing strategy can entirely be based upon business rules, this is not recommended, as this pricing is very static and does not inherently take changes in the market into account. Only when changes in the market are effectively monitored, the business rules can be changed manually to respond to changes in the market. However, this is time-consuming and combining dynamic pricing with manual business rules can lead to much better business results.
GET A DEMO

How to use Rule-based Pricing in SYMSON

How it works
How to combine different pricing strategies
How to get recommendations for the perfect pricing
How to track competitors

Summary

  • 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.
  • Rule-based pricing is easy to implement, limits unnecessary price changes and allows pricing managers to apply their own pricing knowledge to the pricing process.
  • Rule-based pricing performs best when it is combined with other pricing strategies such as competitor-based pricing, dynamic pricing or key-value item pricing.

The SYMSON Solution

The framework of the Machine Learning and AI module in SYMSON

Smart Algorithms

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