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Challenges of Pricing

Roshni Mohandas


July 1, 2021

Pricing remains a complex problem with many variables impacting the process. Most of the companies make pricing decisions by adding margins to cost while also taking into account the micro and macro economics factors. But this is highly challenging. Even after setting a price they believe is right, they are still not sure of the prices that customers are actually paying.

Today with the increasing ecommerce purchases, price is the main factor in purchase decisions. For example when you search for a product on amazon, you will surely go for the lowest price if there is no difference in offering between two products. Of course you will be looking at the rating of the sellers etc.

In addition to comparison of prices of products online , consumers are also aware of alternative brands in other websites or stores. Let's assume that the price difference between products in two different websites is negligible and equal to 10 cents. So the hassle of doing research and buying the cheaper product doesn’t make sense. In this case, the consumer might buy the first option or whatever is easily accessible to him.

What makes pricing challenging is the consumers' use for the product change over time depending on many factors such as economic climate, trends, seasons etc. We also don't have the capabilities to create personalised recommendations yet due to lack of personal level data or due to restrictions on personal data usage.

We will discuss about pricing analytics and how to formulate pricing problems in the upcoming blogs