The Next Evolutionary Step in Price Optimization: Market Simulation
Elevate pricing from the tactical to the strategic with a sandbox – a digital twin marketplace for you to play pricing war games in and where you can truly understand the impact a price will have on your business.
If market simulation is new to you, and you want to know more, then you've come to the right spot. Find out how the Bijou's upgrade can help you to get even more strategic so you win bigger.
What is market simulation?
Market Simulation enables price optimization in the complete context of your product portfolio as well as competition. It simulates the real impact of simulated strategies on customer purchasing behavior.
Bijou uses our Next Gen AI-based technology and enables you to allow your profits to grow faster. With market simulation you can make business decisions that are designed with a positive, predicted impact in mind.
How is market simulation different from price optimization?
Competitive solutions often use just price elasticity to optimize prices. Unfortunately, price elasticity has many shortcomings. Price elasticity models cannot predict cannibalization. They cannot calculate the total impact of a price change across an entire product category. They cannot anticipate competitor reaction. They cannot handle simultaneous price changes. They require lots and lots of transactions data. And price elasticity models are invalidated after a single use.
Market Simulation doesn't suffer from any of these problems. Market Simulation focuses on customer behavior - not product transactions. This means it can predict how the whole market will be impacted by a price change. And because it reproduces the dynamics of a market, any type of market data can be used to generate a more realistic model.
What happens when companies use old technology for price optimization?
Old algorithms pretend that changing the price of one product won't impact the sales of any other product. But cannibalization is the biggest hidden challenge companies are facing.
Here's the problem. A company might Gen 1 technology to find an "optimal" discount for product A that promises to lift profitability for that product by 10%.
At the same time, the company finds an "optimal" discount for product B that offers the same promise. So the company discounts both A and B expecting to increase profitability by sum of both effects.
But guess what? Profitability doesn't change or may even decline. What happened? Product A's 10% lift was calculated at the expense of product B. And Product B's 10% lift was calculated at the expense of product A. Put them together and your profit lift is zero.
Can market simulation help my business?
Market Simulation helps those companies who advertise public prices. Hence all B2C and eCommerce companies will benefit. B2B companies that have public prices and a wide range of customers are also good candidates.
Why would I or my company want Next Gen price optimization?
Market Simulation identifies a wide range of profit, revenue, and volume maximizing prices for single product pricing, multi-product pricing, and portfolio pricing. But that's not all. Market Simulation will also calculate:
a company's best response to a competitor's price change,
seasonal and markdown prices,
optimal product assortments and inventory risk, and
the impact of new product entries.
When I run a simulation, what can I expect?
In addition to the many price recommendations, Market Simulation generates three types of output:
demand curve predictions: how will the demand for my products change with price?
change impact predictions: what will be the total impact to my sales across all products in my category?
customer flow predictions: where will customers go when there is a change in the market?
Sounds exciting, but how long will it take to implement?
The results dashboard and simulation sandbox are standard features of the Market Simulation offering and require little configuration. However, tuning the company's model will take time and a pricing scientist. Luckily, data can be used to tune a model. It just needs to fit into a tuning algorithm. Expect that to take approx. a month.
Not as long as you thought, right?
Do I need to work with one of your partners to implement Pricefx solutions?
You don’t need to, but we love working with our Pricefx Advantage partners to make your project a success! You can find a full list of our integration partners here.
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