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Optimization: How Pricefx Pricing Software Can Help

October 17th, 2023 | 10 min. read

By Iain Lewis

Struggling to pinpoint optimal prices for your products? It’s a common challenge affecting many organizations’ profitability. Consider a scenario: your company manufactures car spare parts on a global scale. Determining the right prices across diverse markets becomes intricate. Undercharging means lost profits, while overcharging hampers sales and customer satisfaction. Enter price optimization, a data-driven strategy for finding the ideal price points. It considers factors like demand, competition, and production costs to maximize profitability and market competitiveness, translating into higher sales and better customer experience. 

In the realm of price optimization, Pricefx boasts over 12 years of experience, offering a comprehensive pricing software solution tailored to large scale companies. This includes cutting-edge price optimization technology, condemning manual pricing in Excel to history (for enterprise-level businesses like yours) and leading the way to enhanced pricing strategies. Combining award-winning 360-degree pricing solutions, our approach ensures optimal pricing for every product and customer. 

Let’s embark on this journey by first understanding what price optimization truly entails. We’ll delve into its mechanics, why automated price optimization is superior to manual processes and introduce you to Optian – Pricefx’s optimization solution – and why and how it sets Pricefx apart.  


Price Optimization: The Definition & Why it is Important 

Price optimization is a strategic approach that might initially seem counterintuitive, but it’s all about finding that sweet spot – the optimal price – where your product or service’s value meets customer expectations. It is the ultimate balance between profit and customer satisfaction. Now, reaching this optimal price is not simply a one-size-fits-all formula; it is a process that considers several factors, and that’s where technology comes in. 

Enter AI (Artificial Intelligence) and machine learning techniques, the driving forces behind modern price optimization. They analyze a multitude of data points to identify the perfect price point for each product and customer. But let’s break it down further.  

Imagine you have two customers, one a farmer from the agricultural sector and another a businessperson. Both require a tractor, but for different reasons.


They are both interested in the same product, but their perception of value is different. The farmer might view it as a business necessity with a higher value, while the businessperson who needs it sees it as a tool for their weekend hobby farm. This means that the optimal price for each customer will vary.


Here is the catch: guessing or assuming an average price will not cut it. 


Set it too low for the agricultural customer, and you’re missing out on potential revenue. 


Set it too high for the automotive customer, and you risk losing the sale.


Price optimization takes the guesswork out of this equation. It empowers you to tailor your pricing strategy to match the unique value perception of each customer segment, ensuring you’re not leaving money on the table and that you’re not driving customers away with sticker shock.

In essence, price optimization ensures that your pricing strategy is fine-tuned to your customers’ diverse perceptions of value.  

It is a blend of data, technology, and strategy that results in not just higher profits but also happier customers who feel they are getting exactly what they are willing to pay for. To deep dive further into how price optimization works, check out this handy article below from my colleague, Sara-Marie Gansert: 


Why Automated Price Optimization is Superior to Manual Processes  

Imagine you’re running a business that deals with a manageable number of products and customers. In this scenario, using manual methods like Excel might be perfectly sufficient for determining prices and automated optimization software is simply superfluous to your business needs. 

However, the story changes drastically when your company operates on a larger scale. As your business scales, relying on Excel or manual calculations becomes an exercise in futility. The sheer volume of data and the rapidly changing market dynamics render these methods inadequate. Think about those enterprises with tens or hundreds of thousands of products catering to a diverse customer base that all value these products differently. This is where the limitations of manual processes become glaringly obvious. 

Consider the factors that come into play when establishing the right price: customer segmentation based on industries, purchase frequency, product range, day of the week, and even weather conditions. As your product range grows and customer segments expand, the complexity of finding optimal prices for each transaction multiplies exponentially. And that is without even accounting for the volatile market dynamics we face today, from cost fluctuations to supply chain disruptions and customer behavior shifts. 

What’s more, price optimization software offers a comprehensive solution that streamlines your entire pricing landscape.


Whether dealing with list prices, on-invoice discounts, customer contracts, or rebates, this software can effectively optimize all these diverse price points to align with your strategic business objectives.


By doing so, it simplifies the intricate complexities inherent in the pricing domain, transforming it into an easily manageable process.

This simplified approach empowers you with a user-friendly and intuitive goal-setting capability, ensuring that your pricing strategy remains aligned with your business goals while effectively handling the intricacies of different pricing elements. 


The Pricefx Edge – What Makes Optian Price Optimization Unique 

In today’s ever-changing market, businesses are realizing that the conventional approaches to pricing optimization are no longer enough. With market volatility becoming the norm, the need for agile and responsive pricing strategies is paramount.  

This is where Pricefx’s Optian solution stands out, redefining how businesses approach price optimization: 

1. Dynamic Segmentation for Swift Adaptation  

In the era of rapid market shifts, the ability to swiftly adapt your segmentation strategy is crucial.  

Traditional static segmentation models fall short in this regard, often taking weeks or even months to incorporate new data attributes or respond to changing market dynamics.


Pricefx’s solution empowers pricing managers to drive dynamisms within their segmentation tree. Adding new data attributes, testing segmentation models, and deriving optimized prices can now be achieved in hours, even minutes.

This dynamic segmentation capability ensures that your pricing strategy remains agile and aligned with the ever-evolving market conditions. 

2. Ownership and Control Restored  

Unlike traditional first-generation pricing software providers, where implementing changes involves convoluted processes, Pricefx puts the power back in your hands.  

With other solutions, even testing a single data attribute requires weeks of coordination, data scientists’ involvement, and additional costs. 

Pricefx changes the game – you become the master of your pricing destiny.


You can test, modify, and optimize your segmentation and pricing models autonomously, minimizing delays and avoiding unnecessary expenditures.


This self-sufficiency in pricing adjustments ensures that your strategies remain relevant and responsive, driving continuous growth.

This self-sufficiency in pricing adjustments ensures that your strategies remain relevant and responsive, driving continuous growth. 

3. Empowering Business Objectives  

Price optimization isn’t only about adjusting numbers; it’s about achieving business objectives. This is where Pricefx’s goal-seeking capability shines.  

While traditional methods involve trial and error to find the right settings for your business goals, Pricefx’s solution streamlines the process. By setting your objectives – whether it’s increased margin in Germany, higher volume in France, or enhanced revenue in the UK – the software does the heavy lifting.  

In a matter of minutes or hours, not weeks or months, you can identify the optimal price points that align with your unique business objectives. This innovation reduces complexity, making your pricing strategy more transparent and effective. 

4. A Leap Toward Simplicity 

Price optimization often grapples with complexities arising from various pricing components, from list prices to customer contracts and rebates. Pricefx simplifies this complexity with its goal-setting feature.  

You can now tackle intricate pricing landscapes with ease, achieving business objectives across diverse pricing elements in a single, efficient run. This simplicity isn’t just a convenience; it is a game-changer, transforming arduous tasks into streamlined actions. 


Navigating the Optian Optimization Journey: Unveiling the 5-Step Experience 

In the intricate realm of pricing optimization, a seamless and comprehensive process can spell the difference between mere strategies and remarkable outcomes. Optian is a dynamic five-step journey that empowers businesses to shape their pricing strategies with precision and efficacy. Let’s explore each step that crafts the optimal pricing landscape: 


Step 1: Definition – Setting the Compass  

The journey begins with clarity – defining your objectives and charting the course. What is the end goal you aim to achieve? Here, you set the intent for the optimization model, providing the North Star that guides subsequent steps. This foundational phase also involves selecting the data source. It’s here that you can tailor the information flow, adjusting elements of data to ensure relevance and accuracy. 

Step 2: Analysis – The Illuminating Probe 

Once your intent is clear and data sources are set, it’s time to delve into the analysis. This step is like a probing light that unveils insights hidden within the data. Rigorous testing and examination determine the data’s relevance in constructing the optimal offer through price optimization. These tests allow you to identify the vital price drivers that will fuel your strategy. 

Step 3: Configuration – Sculpting the Blueprint 

As the analysis sheds light on price drivers, you move into the configuration phase. Here, the nuances come to life. Choosing the attributes that align with your objectives, you mold the segmentation model. These attributes breathe life into your strategy – they define your market segments, products, and customers. The model’s limits are defined, ensuring robust and representative data within each segment. 

Step 4: Segmentation – Visualizing Your Strategy’s Canvas 

With attributes configured, you journey into the realm of segmentation – a visual manifestation of your strategy. This step’s outcome is more than mere visualization; it’s a dynamic representation of your strategy’s potential. Visual outputs display the evolving segmentation tree, accompanied by a wealth of analytical insights and indicators. This insight-rich canvas becomes your strategic reference point, evolving as you fine-tune your approach. 

Step 5: Results – Unveiling the Price Optimization Symphony 

The climactic step brings us to the culmination of your Optian journey – the results. This is where the magic happens. Multiple scenarios and versions of your strategy are unleashed, highlighting varying impacts on your business. What were once complex iterations become comprehensible insights, empowering you to make informed decisions. Recommendations and price guidance are revealed, painting a vivid picture of your strategy’s orchestration. 

What Else Does Pricefx Do? 

Now you’ve learnt that the Optian price optimization experience is a paradigm shift, propelling businesses from static strategies to dynamic pricing mastery. Unlike traditional methods, the reins are in your hands, untangling complexity and fostering autonomy. Each step, carefully crafted, empowers you to harness data’s potential and shape it into profitable strategies.  

By harnessing these unique capabilities, businesses gain not just an edge, but a dramatic evolution in how they approach pricing optimization. 

But remember, there is a lot more to Pricefx than price optimization alone. Check out the handy article below to learn more about the pricing solutions that Pricefx can offer your business:


Meanwhile, Happy Pricing! 

Iain Lewis

Senior Solutions Strategist , Pricefx

Iain Lewis has worked in pricing as a practitioner for 27 years working at Automotive, industrial goods, business services and Distribution companies. Iain brings his unique perspective to each engagement to guide companies through complex buying decisions and has helped companies throughout Europe and South-East Asia continue to improve their pricing approach.