Our experts introduce sophisticated AI pricing techniques to uplift your revenue and maximize your margins. Learn more about how to master market volatility within the wholesale industry through advanced AI technologies.
Against a backdrop of disruptive events like global conflicts, pandemics, and inflation, market volatility is increasing. AI has emerged as a top contender for wholesalers to protect margins thanks to its ability to respond more quickly to market shifts. That’s why many large wholesalers and marketplaces are already taking a step forward and launching their own AI initiatives – especially in core functions such as pricing, supply chain optimization, and inventory management.
AI pricing case studies: How to increase profitability
At Simon-Kucher, we have helped our clients achieve astonishing results through AI-supported pricing. For example:
8% revenue uplift: We helped one client develop a differentiated discounting strategy by using a machine learning model that maximizes revenues
5-11% margin uplift: We helped another client implement an AI-driven price optimization model, allowing for more accurate pricing tailored to different customer segments
2-3% margin uplift: We helped our client implement a sophisticated AI-powered price optimization logic through shortlisting price value drivers and finding the optimal price point in line with market demand and competition.
Wholesalers are facing multiple pricing challenges. Is AI the answer?
Adopting new AI technology from scratch can be tough. However, in the current wholesale landscape, doing business is already becoming increasingly complex with or without AI, especially around pricing. Until now, many wholesalers have relied on manual pricing strategies such as cost-plus without realizing these cut significantly into their margins. However, such strategies are becoming increasingly difficult to maintain, and for several reasons:
Increasing complexity: Product portfolios are growing, and the size of the customer base is constantly increasing. This leads to huge complexity and makes it hard to find the right price for each transaction
Varying customer requirements: Changing customer needs, including logistics services, contract terms, and packaging, require flexible and tailored pricing strategies
Individual sales experiences: Heterogeneous sales expertise requires systematic price guidance to ensure consistent pricing towards customers. Failure to do so can result in lower customer satisfaction or even lost business.
For companies that do want to integrate AI, outdated business processes, complex technology stacks, and legacy systems can act as a hurdle. For example, updating prices in real-time requires data on value drivers, transparency over competitor prices, as well as up-to-date cost data for products and services. However, with the right workflows and some creative workarounds, AI might just be the perfect solution for your pricing challenges.
It’s not easy, but worth it! Take pricing to the next level with AI
AI-driven pricing empowers you to set optimal prices by analyzing vast, real-time data, adapting to demand, and personalizing offers. It goes beyond traditional methods, offering flexibility, accuracy, and a competitive edge.
With AI, you can respond instantly to challenging market conditions, enhancing profitability while meeting customer needs more effectively. Here are some examples of how AI can transform pricing into a smarter, dynamic strategy for success:
Customer and product segmentation: AI ensures tailored pricing strategies by analyzing various customer and product segments, leading to more differentiated and consistent pricing decisions.
Value driver verification: AI helps to identify the most relevant value drivers that impact willingness to pay and to calibrate their weighting (e.g. weight, material, size, etc.)
Price sensitivity: AI and machine learning models can help you understand how price changes impact sales volumes across key segments, allowing for smarter, data-driven pricing adjustments and dynamic pricing strategies
RFQ automation: AI and especially GenAI can help to automatically review incoming RFQs to distill relevant information, such as the required items, and to generate automated price quotes, significantly reducing manual effort and the time to market
Our proven three-step approach to make the most out of AI
Partner with Simon-Kucher to identify the most relevant use cases for your situation and develop AI-driven solutions. We typically utilize a three-step approach:
Laying the strategic foundation for AI pricing
Building an AI-driven pricing engine
Integrating the right solution into your AI pricing workflows
The first step: Laying the strategic foundation for AI pricing
Key question: What are the goals and strategic cornerstones of AI-driven pricing solutions?
To tackle this question, our experts first set out to understand your strategic pricing objectives and establish clear business guardrails, governance plans, and a unified solution implementation strategy.
With thousands of SKUs in wholesale, this can become a complicated endeavour. That’s why we keep these four essential pillars of a successful AI pricing strategy in mind.
The four pillars of a successful AI strategy
The second step: Building an AI-driven pricing engine
Key questions: What are the relevant value drivers for product and customer segments? What are the relevant features to calculate price forecasts and elasticities?
We develop an AI-based pricing engine that always delivers. After identifying your business’s most crucial metrics, we build a fully automated data pipeline. We then define an accurate data plan to ensure all necessary data is consistently captured and reflected in future pricing models.
From this point, we create predictive models to quantify the relationship between price and volume, enabling a granular analysis of price elasticity across customer and product segments (such as size, industry, and geography) as well as taking in competitor information to ensure competitive pricing.
Finally, we apply price optimization models that use established price-volume relationships to target specific business objectives, such as maximizing profit or margins, while respecting key business constraints.
Our AI-based pricing algorithms consider all relevant drivers and identify an optimal price corridor for each product and customer group
The third step: Integrating the right solution into your pricing workflows
Key question: What features are needed to support data-driven decisions, and how can you integrate these with your existing applications?
At Simon-Kucher, we provide you with custom reporting through steering dashboards – ensuring full integration of AI solutions and machine learning algorithms into your business workflows. This enables you to monitor and adjust pricing processes effectively.
In addition, we ensure our solutions integrate seamlessly into any existing data and MLOps workflows, carrying out automated updates and guaranteeing that the models remain effective in the future.
Example of an integrated AI pricing workflow
Summary: Reach new growth opportunities with AI pricing
Wholesalers are facing complex challenges – from limited market data to varying customer requirements. But with targeted AI pricing initiatives, you can overcome even the most complex challenges. Our proven three-step approach has successfully helped numerous wholesalers integrate AI systems into their technical and business environments.
It helps you maximize margins and tap into new growth opportunities.
Solve your biggest challenges in wholesale and increase your market share
No other consultancy knows more about (digital) growth than we do. We live, breathe, and drive tangible growth, running over 1,500 projects every year.
Our digital practice Simon-Kucher Elevate provides true digital experts. We leverage data analysis, technology, and design to drive digital marketing and sales excellence, helping you find the price optimization approach that fits your company's individual needs.
Track record of achieving (digital) growth for companies across all sectors and industries
Large set of proven measures to be tested in your organization
Experience in establishing optimal AI-based pricing strategies in organizations of all maturity levels
Want to know more? Reach out to our team to learn how we take your AI price optimization strategy to new heights. It's time to join the tech revolution – with Simon-Kucher Elevate!
