Market-based price optimization system
View Patent ↗Disclosed is a market-based software system that will help user-retailers manage price and inventories more effectively. The system will take advantage of available price and sales data to provide pricing recommendations that will achieve a retail user's objectives. The system will offer a solution that will allow for pricing improvement shortly after installation by utilizing data that is readily available. The system will recommend price changes that help a user achieve specified objectives such as contribution, sales volume, desired margins, and the like. The system can also collect and process price and sales data on an ongoing basis, which can enable improved estimates of customer price sensitivity and performance on a category-by-category basis. This data can be used to improve further pricing decisions.
1. An electronic price optimization system for recommending product price changes to a user, the electronic price optimization system comprising:
at least one computer processor and storage;
the storage storing a plurality of analytic modules that include software for calculating price recommendations for a product, the analytic modules including analytic modules functioning on baseline demand, sales promotion, volume margin, current competitor price, brand equity, category margin, and price per unit;
the at least one computer processor configured to execute program code, the program code instructing the processor to perform operations comprising:
executing the software of a first one of the analytic modules to calculate a first price recommendation for the product specific to the first analytic module;
executing the software of a second one of the analytic modules to calculate a second price recommendation for the product specific to the second analytic module;
determining a first loss value that associates a first loss with a deviation of the first price recommendation from a potential final recommended price for the product provided by the electronic price optimization system;
determining a second loss value that associates a second loss with a deviation of the second price recommendation from the potential final recommended price;
computing a sum of the first and second loss values; and
calculating a final recommended price for the product that minimizes the sum of the first and second loss values.
2. The electronic price optimization system as claimed in claim 1 wherein the second price recommendation is generated independently from the first price recommendation.
3. The electronic price optimization system as claimed in claim 1 wherein the user defines a first tolerance range for the first analytic module and a second tolerance range for the second analytic module, the first tolerance range specifying a first acceptable price distance between the potential final recommended price and the first price recommendation, and the second tolerance range specifying a second acceptable price distance between the potential final recommended price and the first price recommendation, wherein:
the program code instructs the processor to determine the first loss value as a function of the first tolerance range; and
the program code instructs the processor to determine the second loss value as a function of the second tolerance range.
4. The electronic price optimization system as claimed in claim 3 wherein the second tolerance range differs from the first tolerance range.
5. The electronic price optimization system as claimed in claim 3 wherein:
the first loss value increases when the deviation of the first price recommendation from the potential final recommended price exceeds the first acceptable price distance; and
the second loss value increases when the deviation of the second price recommendation from the potential final recommended price exceeds the second acceptable price distance.
6. The electronic price optimization system as claimed in claim 1 wherein the user defines a first loss exponent for the first analytic module and a second loss exponent for the second analytic module, the first loss exponent specifying a first relative importance of the first price recommendation specific to the first analytic module, and the second loss exponent specifying a second relative importance of the second price recommendation specific to the second analytic module, wherein
the program code instructs the processor to determine the first loss value as a function of the first loss exponent; and
the program code instructs the processor to determine the second loss value as a function of the second loss exponent.
7. The electronic price optimization system as claimed in claim 6 wherein the second loss exponent differs from the first loss exponent.
8. The electronic price optimization system as claimed in claim 1 wherein the program code instructs the processor to perform further operations comprising:
executing the software of each of the analytic modules to calculate multiple product price recommendations for the product, one each the multiple price recommendations being specific to one each of the analytic modules, the first and second price recommendations being included in the multiple price recommendations; and
determining multiple loss values, each of the multiple loss values associating a specific loss with a deviation of one of the multiple price recommendations from the potential final recommended price for the product, the first and second loss values being included in the multiple loss values, wherein:
the computing operation computes the sum of the multiple loss values; and
the calculating operation calculates the final recommended price for the product that minimizes the sum of the multiple loss values.
9. A price optimization method comprising:
using at least one computer processor and storage, the storage storing a plurality of analytic modules that include software for calculating price recommendations for a product, the analytic modules including analytic modules functioning on baseline demand, sales promotion, volume margin, current competitor price, brand equity, category margin, and price per unit;
executing the software of a first one of the analytic modules to calculate a first price recommendation for the product specific to the first analytic module;
executing the software of a second one of the analytic modules to calculate a second price recommendation for the product specific to the second analytic module;
determining a first loss value that associates a first loss with a deviation of the first price recommendation from a potential final recommended price for the product provided by the computer processor;
determining a second loss value that associates a second loss with a deviation of the second price recommendation from the potential final recommended price;
computing a sum of the first and second loss values; and
calculating a final recommended price for the product that minimizes the sum of the first and second loss values.
10. The method as claimed in claim 9 wherein the second price recommendation is generated independently from the first price recommendation.
11. The method as claimed in claim 9 wherein a user defines a first tolerance range for the first analytic module and a second tolerance range for the second analytic module, the first tolerance range specifying a first acceptable price distance between the potential final recommended price and the first price recommendation, and the second tolerance range specifying a second acceptable price distance between the potential final recommended price and the first price recommendation, and the method further comprises:
determining the first loss value as a function of the first tolerance range; and
determining the second loss value as a function of the second tolerance range.
12. The method as claimed in claim 10 wherein:
the first loss value increases when the deviation of the first price recommendation from the potential final recommended price exceeds the first acceptable price distance; and
the second loss value increases when the deviation of the second price recommendation from the potential final recommended price exceeds the second acceptable price distance.
13. The method as claimed in claim 9 wherein a user defines a first loss exponent for the first analytic module and a second loss exponent for the second analytic module, the first loss exponent specifying a first relative importance of the first price recommendation specific to the first analytic module, and the second loss exponent specifying a second relative importance of the second price recommendation specific to the second analytic module, and the method further comprises:
determining the first loss value as a function of the first loss exponent; and
determining the second loss value as a function of the second loss exponent.
14. The method as claimed in claim 9 further comprising:
executing the software of each of the analytic modules to calculate multiple product price recommendations for the product, one each the multiple price recommendations being specific to one each of the analytic modules, the first and second price recommendations being included in the multiple price recommendations; and
determining multiple loss values, each of the multiple loss values associating a specific loss with a deviation of one of the multiple price recommendations from the potential final recommended price for the product, the first and second loss values being included in the multiple loss values, wherein:
the computing operation computes the sum of the multiple loss values; and
the calculating operation calculates the final recommended price for the product that minimizes the sum of the multiple loss values.
15. A non-transitory computer-readable storage device containing a computer program for recommending product price changes to a user comprising:
storage for storing a plurality of analytic modules that include software for calculating price recommendations for a product, the analytic modules including analytic modules functioning on baseline demand, sales promotion, volume margin, current competitor price, brand equity, category margin, and price per unit;
executable code for instructing one or more processors to calculate a final recommended price for a product, the executable code instructing the one or more processors to perform operations comprising:
executing the software of a first one of the analytic modules to calculate a first price recommendation for the product specific to the first analytic module;
executing the software of a second one of the analytic modules to calculate a second price recommendation for the product specific to the second analytic module;
determining a first loss value that associates a first loss with a deviation of the first price recommendation from a potential final recommended price for the product provided by the electronic price optimization system;
determining a second loss value that associates a second loss with a deviation of the second price recommendation from the potential final recommended price;
computing a sum of the first and second loss values; and
calculating a final recommended price for the product that minimizes the sum of the first and second loss values.
16. The non-transitory computer-readable storage device as claimed in claim 15 wherein the second price recommendation is generated independently from the first price recommendation.
17. The non-transitory computer-readable storage device as claimed in claim 15 wherein the user defines a first tolerance range for the first analytic module and a second tolerance range for the second analytic module, the first tolerance range specifying a first acceptable price distance between the potential final recommended price and the first price recommendation, and the second tolerance range specifying a second acceptable price distance between the potential final recommended price and the first price recommendation, wherein the executable code instructs the one or more processors to perform further operations comprising:
determining the first loss value as a function of the first tolerance range; and
determining the second loss value as a function of the second tolerance range.
18. The non-transitory computer-readable storage device as claimed in claim 15 wherein the user defines a first loss exponent for the first analytic module and a second loss exponent for the second analytic module, the first loss exponent specifying a first relative importance of the first price recommendation specific to the first analytic module, and the second loss exponent specifying a second relative importance of the second price recommendation specific to the second analytic module, and the executable code instructs the one or more processors to perform further operations comprising:
determining the first loss value as a function of the first loss exponent; and
determining the second loss value as a function of the second loss exponent.
19. The non-transitory computer-readable storage device as claimed in claim 15 wherein the executable code instructs the one or more processors to perform further operations comprising:
executing the software of each of the analytic modules to calculate multiple product price recommendations for the product, one each the multiple price recommendations being specific to one each of the analytic modules, the first and second price recommendations being included in the multiple price recommendations; and
determining multiple loss values, each of the multiple loss values associating a specific loss with a deviation of one of the multiple price recommendations from the potential final recommended price for the product, the first and second loss values being included in the multiple loss values, wherein:
the computing operation computes the sum of the multiple loss values; and
the calculating operation calculates the final recommended price for the product that minimizes the sum of the multiple loss values.