Price optimisation essentially is the practice of creating the best price possible for a company to charge for its products or services based on a multitude of factors. These factors include market value, economic factors, negotiation dynamics, and predictive algorithms which can forecast customer needs and market fluctuations, all to determine the best price for a company to charge.

When it comes down to it, price optimisation is actually a simple equation: it pits the demand curve, and the cost function against costs. But looking at it quite this simplistically makes it possible to miss pricing opportunities, which is where pricing optimisation solutions come in useful – they’re able to calculate the optimal price range based on a much more complex range of factors.

This is an extremely helpful tool both for larger businesses looking to maximise their customer base with the ideal pricing range and, especially, to newer businesses who need to balance their prices with their costs, appealing to their target demographic without overcharging the customers or undercharging their services.

Price optimisation is an ongoing activity that a company should be prepared to re-evaluate based on statistical analysis;this is a data driven activity which is constantly evolving and responding to changes in the market and economic conditions. Obviously, refrain from changing your prices by a few cents every five minutes – but be sure to revisit trends and data analytics each quarter to make sure you’re still charging the best prices you can.

Revenue and Price Optimization

Every business is obviously out to increase their revenue, and price optimisation is just another tool that can help a business to do that successfully. Price Optimization can really help to increase your revenue. While it might seem to make sense to just charge the highest prices you can for your products or services, this often serves to get you fewer customers – while the ones you do have are paying through the nose, you end up making less than you would if you charged a competitive price for your markets and demographic, which would have a wider appeal. So, though it may seem counterintuitive – trust the maths!

Being savvy with your data is a much bigger part of business than many realise, and that doesn’t change when it comes to pricing – using price optimisation software to analyse market trends, product availability and demographic spending habits can allow you to increase your revenue whilst offering truly competitive prices and attract a bigger customer base.