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The Big Red Flag in Segmentation Based AI Pricing Solutions

One of the great things about pricing with the most innovative AI technology is that your solution doesn’t require constant vendor engagement to keep it running. After all, is the AI really doing what it should if the vendor’s customer engagement manager is required to review all pricing outputs and give constant feedback to the pricing and sales organizations after the fact where unnecessary discounts were given?

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If you’re in the market for a pricing solution, here are 3 tips to keep in mind:

Tip #1: Don’t fall for sales gimmicks that promise constant engagement dedication to an account. This is nothing more than covering up for a solution that simply can’t drive the precision, speed, and scalability demanded in today’s dynamic marketplace.

Tip #2: Pricing solutions that still use decision tree and fixed or manually run segmentation processes are unable to respond dynamically. These legacy solutions require extensive intervention, support, and manual human guardrails and adjustments to try and stay reasonably relevant.

Tip #3: Innovation makes all the difference to how well the solution is adopted. On the other hand, adoption rates of AI price recommendations are significantly higher when businesses leverage the latest in patented neural network deep learning for their price recommendations.

What you need to know about neural network-based AI vs. legacy micro-segmentation:

  • Neural network-driven AI pricing is far superior to the old micro-segmentation process because it allows businesses to maximize 100% of their dataset to find all correlations in willingness-to-pay at the customer-SKU level.
  • As factors like demand, markets, customer dynamics, seasonality, costs, and inventory fluctuate, legacy systems that use micro-segmentation must be manually re-run, which can take valuable time and significant resources. And when complete, the process still puts customers in micro-segments, limiting the data available to calculate the precision needed in pricing. This results in substandard results.
  • If the micro-segment the customer is put in does not have enough transaction history, the customer or product is forced into a higher-level segment, which results in an average of an average of price calculation. For example, take a $0.30 BIC blue ballpoint pen priced at 10% margin. Next, take a $299.99 Mont Blanc blue ballpoint pen at 100% margin. Data sparsity could incorrectly force these two SKUs into the same cluster, resulting in pricing errors for both SKUs. The BIC would be overpriced and the Mont Blanc would be underpriced.
  • With micro-segmentation, businesses are forced to rely on their pricing vendor to babysit the prices being consumed or rejected by the sales force. This lowers adoption and makes reporting irrelevant due to failed adoption to the price envelope. What happens when that customer support person leaves? The business is stuck re-training another support person, someone who doesn’t know their business, strategy, or value. Adoption rates further fall, leaving the sales organization frustrated and not utilizing the price outputs at all.

Only a fully integrated pricing platform can give you the precision pricing to drive profitable growth in today’s dynamic market.

The PROS Difference: AI-powered pricing strategies using neural networks.

Leveraging PROS AI neural network pricing eliminates the need for micro-segmentation and ensures 100% of your dataset is used every time to make sure you’re optimizing revenue and profit.

With PROS, you get:

  • Precision and scalable pricing without the need for constant human intervention.
  • Dynamic segmentation which adjusts in real time to changing market and customer conditions.
  • Comprehensive scalable reporting that tracks performance, adoption, opportunities, whitespace, and other key business demands.
  • A results-driven approach with a customer success manager as a single point of contact to ensure the solution delivers the results and ROI your business expects.
  • A strategic partnership focused on driving deeper penetration within your customer base, capturing more market share, and maximizing every buying transaction.
  • A solution that helps you value sell, so your business is competitive in all the different markets you serve while addressing your customers with a pricing structure that captures the value you bring to them.

With all the advancements in digital technology, it is important to ensure you select a pricing vendor that will help you enable and maximize the value of your pricing solution, rather than becoming dependent on vendors and a whole team to constantly adjust, correct, and fix inaccurate pricing.

About the Author

Joshua Bardell, Pricing Principal at PROS, has spent the past four years working closely with prospects and customers to ensure each platform and implementation are successfully matched to provide optimal customer value. Joshua has focused his career on strategic pricing initiatives to drive margin dollars. He has worked in the airline industry, retail, and distribution industries. Joshua has seen the pricing world from a number of different angles, having led pricing teams, selecting and implementing pricing systems as well as selling pricing software.

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