Price and Assortment Optimization

Challenge

Retail and online sellers are dealing with a complex environment of competition while at the same time managing their own multi-channel environment. These companies are already lean so there is not much room to cut costs. Therefore, the ability to increase revenue and improve margins through a more advanced pricing and assortment process can make a huge difference in their business. 

Solution

New analytics technologies are enabling an innovative approach to price and assortment optimization. First, the ability to predict price to volume relationship by leveraging both internal and external data, using a variety of machine learning techniques. Secondly, using the predicted price-volume curves as an input into a price optimization model to maximizing profit or revenue while meeting volume and margin targets. Finally, companies need to facilitate effective change management, by leading with a detailed current state assessment. 

Example

Rue La La implemented a new analytic method for pricing that involved machine learning and optimization. This resulted in a 10% increase in revenue. Read the story here.